Ensure your workers are paid the National Minimum Wage

The Law

Employers should be aware of their ongoing obligation to pay the National Minimum Wage under the National Minimum Wage Act 1998 and should make sure that workers are being paid at least the national minimum wage that applies to them.

The national living wage (the highest band of the national minimum wage) increased to £8.91 per hour on 1 April 2021. In addition, the age threshold for the national living wage is amended so that it applies to 23 and 24 year-old workers from 1 April 2021. Previously, the national living wage was available only to those aged 25 and over.

Other national minimum wage rates also increased on 1 April 2021, with hourly rates rising to £8.36 for workers aged 21 and 22, to £6.56 for workers aged 18 to 20 and to £4.62 for workers aged 16 and 17.

Whether a worker has received the National Minimum Wage will depend on their average hourly pay rate and is calculated on the basis of the total remuneration earned over the relevant pay reference period, divided by the total number of hours worked over that same period.

Common Issues for Employers

Whilst Employers don’t intend to fall foul of their obligations under the National Minimum Wage Act 1998, a non-exhaustive list of the most common errors relating to failure to pay National Minimum Wage can be seen below:

• Failing to account for overtime;
• Not paying apprentices correctly;
• Making deductions for uniform costs from pay;
• Not providing sufficient rest breaks;
• Making excessive deductions for accommodation;
• Failure to classify workers correctly and treating them as interns, volunteers or self- employed individuals instead;
• Not including the full amount of time an individual actually works, for example, time spent on extra training courses and the induction process.

In order to avoid prospective claims being brought by a worker, Employers should consider their workers lifecycles and identify where errors or risks might arise. They should also consider implementing a system whereby the Employer is able to identify risk areas having regard to well-maintained records of each worker.

Prospective Claims for Failure to Pay the National Minimum Wage

A worker who contends that they have not been paid the National Minimum Wage during their employment may bring a claim of Unlawful Deductions from Wages in the Employment Tribunal or a Breach of Contract claim in either the Employment Tribunal or County Court.

In all cases, it will be presumed by the presiding court or tribunal that worker has not been paid the National Minimum Wage unless the employer can prove to the contrary. Therefore it is imperative that Employers keep records of hours worked by their employees and the rate of pay their employees have received as remuneration.

Employer should also be aware that Section 31 of the National Minimum Wage Act 1998 makes it a criminal offence to:

• Refuse or wilfully neglect to pay the NMW.
• Failure to keep the required records.
• Keep false records.
• Provide false records or information.
• Intentionally obstruct or delay an enforcement officer.
• Refuse or neglect to answer questions or provide information to an enforcement officer.

Consequences of Failure to Pay National Minimum Wage

Should a worker claim that they have not received the National Minimum Wage during their employment, an Employer will need to carefully consider the implications it could have on their business as a whole, which could include:

• Financial penalties of up to £20,000 per underpaid worker;
• An order for underpayment of the National Minimum Wage that must be paid to affected workers;
• Public naming and shaming.

Next Steps

If you require any legal advice in respect of the issues raised in this article or any aspect of employment law, please contact a member of the Employment Team at Machins Solicitors.