Why it pays to know the price of the minimum wage

14th June 2017

Why it pays to know the price of the minimum wage

Question: how much is the National Minimum Wage?*

If you own or run a business, you should know the answer. But the question becomes more complex when you add in unusual circumstances – like pay for employees required to sleep over or for those who are on call.

And the bad news for employers is there isn’t a simple answer to the payroll puzzle.

Recently, unintentional underpayments in staff pay packets have affected major retailers like John Lewis and Tesco, while other organisations have been waiting for an employment tribunal decision to decide if and when sleeping night shift workers are eligible for the National Minimum Wage (NMW).

‘Never knowingly underpaid’

At John Lewis, a staff-friendly policy of aggregated wages to provide regular monthly income resulted in the company having to provision £36m for underpayments over a six-year period.

Staff wages were smoothed out over the year so employees received the same amount each month, rather than being paid for the exact hours worked. The problem arose when individuals worked extra hours in a month and the aggregate monthly payment fell short under NMW regulations.

Meanwhile, Argos and Tesco have made similar payroll mistakes. Tesco is having to compensate 14,000 staff – at a cost of £10m – who had made salary contributions to pensions, childcare and other schemes which resulted in their pay falling below the National Living Wage level.

Another thorny area for employers is payment for staff who sleep overnight in the workplace or are on call. Previously, these workers were often paid a flat rate for the period they were asleep and their normal hourly rate when they were required to attend to their duties.

However, this approach was challenged on the basis that it did not comply with the NMW regulations. Three such cases were recently heard together by the Employment Appeal Tribunal: Focus Care Agency Ltd v Roberts, Frudd v The Partington Group Ltd and Royal Mencap Society v Tomlinson-Blake.

For employers hoping for certainty on the issue there has been frustration, with the tribunal saying that there is no ‘bright line’ and that businesses must conduct a ‘multifactorial evaluation’.

The tribunal found there were considerations to determine, including the level of responsibility and any restrictions on a worker’s activities.

“The tribunal’s decision highlights just how tricky this area of the law can be, but compliance is a serious business,” said Andrew West, Gotelee Employment Partner.

“It’s sometimes difficult to understand what’s right and what’s wrong, and borderline cases will be difficult to decide, but if there’s any doubt it pays to investigate further as getting it wrong may mean a company faces claims for back-pay, which can go back six years.

“As well as the financial costs, there may be enforcement action by HMRC, and reputational damage.”

How can our employment law lawyers help?

Employers, more than ever before, need sound and clear employment law advice to help them to protect their employees when things are going well and to protect themselves when relations break down.

When grievances and disputes with staff happen they take priority, regardless of the distraction this may cause you, and, if you don’t handle them correctly, there’s a real risk that you will end up in the Employment Tribunal.

Our specialist solicitors in Ipswich, Hadleigh, Felixstowe, Woodbridge and Melton act for businesses large and small in Suffolk, Essex and further afield and can guide you with a minimum of fuss and expense.

To find out how Gotelee can help your organisation, call Andrew West, Employment Partner, on 01473 298102 or email andrew.west@gotelee.co.uk.

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