Consensus HR

Your outsourced HR department.

Underpayment of minimum wage raises its head yet again!

Published in Employment Law

Back in 2015, we wrote three blogs about the underpaying of employees and noted that H&M & Welcome Break Ltd were amongst many on the name & shame list. We are now in 2018 and still many companies are not paying their team members correctly.

Employers need to ensure that they keep on top of what the minimum wage is or in future could face fines of up to 200% of arrears capped at £20,000 per worker. Employers should regularly check the rates they are paying and amend accordingly. We advise our clients to complete a Transfer & Variation Form (T&V) for each employee detailing the changes to their Contract so that they do not have to print an entirely new Contract when such changes happen.

Current rates of pay and those from April 2018 can be seen below:

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2017 (current) £7.50 £7.05 £5.60 £4.05 £3.50
April 2018 £7.83 £7.38 £5.90 £4.20 £3.70

 

 

HMRC investigated over 2,600 organisations in the year to April 2017, uncovering underpayments for over 98,000 workers totalling £10.9 million and has seen complaints increase from 2,513 April 2016 to 5,053 in 2017.

 

Matthew comments: “When employers pay an hourly rate they should ensure that they regularly check with the Government Website what the current pay rate is. There is no excuse in this day and age for not paying the correct amount when all the information is easily available on the internet. Employers also need to check if somebody in on an annual salary that their salary meets the minimum wage for the hours worked especially if it is found that they are working excessive hours. Employees can also immediately go to an Employment Tribunal (ET) if their pay is incorrect and claim ‘unauthorised deduction from wages”

The three previous blogs we wrote on the subject are:

A recent article (6th February 2018 – CIPD) stated that the law firm Pinsent Masons revealed a freedom of information request they submitted to HM Revenue and Customs (HMRC) showed the number of minimum wage underpayment complaints increased to 5,053 in the year to April 2017. This is more than double the number of complaints made in the previous year, where 2,513 complaints were made.

HMRC is responsible for enforcing minimum wage rules, from carrying out investigations in to underpayment complaints to fining organisations who failed to comply with minimum wage legislation. HMRC investigated over 2,600 organisations in the year to April 2017, uncovering underpayments for over 98,000 workers totalling £10.9 million. Workers can now submit an underpayment complaint to HMRC through an online form, making it easier than ever to blow the whistle on their employer’s failure to comply with the law.

Organisations who fail to pay staff correctly can face significant penalties for doing so. Not only will they have to repay the underpayments to workers, organisations can also be subjected to a penalty fine of up to 200 per cent of the arrears capped at £20,000 per worker. The director for the Labour Market Enforcement, the body responsible for co-ordinating the activities of HMRC and other governmental bodies, has previously called for fines to be increased to “five times” the wage arrears to punish organisations.

Alongside financial penalties, organisations may also be publicly named and shamed for their underpayment. The naming and shaming initiative has publicised organisations from Primark to Argos for failing to pay the legal minimum to their workers. This scheme carries a high reputational risk for organisations, especially due to the current focus on worker rights and culture.

Rules around minimum wage payments are complex, with common excuses for underpaying workers including failing to pay for travel time and deducting uniform costs. Concerns regarding underpayments of workers continue, with the government particularly concerned with the exploitation of workers in organisations with complex supply structures, and those within the beauty and care sectors. Organisations will need to increase their awareness of minimum wage laws to avoid having the whistle blown on them. This becomes even more important when minimum wages go up in April 2018, as a failure to pay staff correctly due to an ignorance of the new rates will not be excused