Low paid workers to get £2m in backpay

Posted by Tim Forer on
The Department for Business, Energy and Industrial Strategy has published a list of employers who have not been paying their staff the National Living Wage and National Minimum Wage. Tim Forer, partner in our employment team, discusses the most recent round of the naming and shaming scheme and explains some of the reasons why employers don't meet the NLW and NMW. 

Does this mean the government scheme has worked or is this just the tip of the iceberg?

The recent round of naming and shaming employers for not paying the national minimum wage and national living wage has resulted in a record £2 million in back pay for workers as well as a record £1.9 million in fines.

This is the 12th "naming round" since the scheme was set up in 2013 and they always attract a great deal of media interest, drawing attention to the high street chains or local restaurants that have failed to comply with the national minimum wage legislation. The success of the scheme is evident from these record sums for back pay and fines.

In 2017/18 the government plans to spend £25.3 million on minimum wage enforcement, up from £20 million in 2016/17 so perhaps we can expect even more successful enforcement action in the months ahead.

Discovering the true extent of the problem of workers not being paid the national minimum wage/living wage is extremely difficult however. Many workers may be unaware of their rights or fearful of enforcing them but there is no doubting the government's commitment in this area.       

How do firms typically fail in their obligation to pay national minimum/living wage and how might they avoid any pitfalls?

In April 2017, the government revised its guidance on how to calculate the national minimum wage and national living wage and it runs to 52 pages! This shows how complicated the issue is and how many employers, sometimes unintentionally, fail in their obligations to pay the national minimum wage/living wage.

The difficulty is that pay, for minimum wage purposes, must be calculated in a particular way and some elements of pay do not count towards the minimum wage while others do. Also, some deductions from pay reduce pay for minimum wage purposes and others don't.

Some of the common mistakes made by employers include making deductions from pay for uniforms and failing to account for overtime. It could even be paying the wrong rates of pay. For instance, if an employer fails to set up a system to alert them once a member of staff reaches 25, the age when the higher national living wage is payable, they will be paying only the current adult rate of £7.05 an hour instead of £7.50. Particular complications arise when staff are on-call or there are sleep-in arrangements. For example, depending on the circumstances, somebody may be "working" even if they are asleep if they still have work-related responsibilities. There is plenty of guidance available for employers and the ACAS website even includes a national minimum wage calculator.      

 Additional thoughts

Interestingly, the success of the naming and shaming scheme was specifically mentioned in the recently published Taylor Review on Modern Working Practices.

Matthew Taylor is concerned at the high number of Employment Tribunal awards that go unpaid (an estimated 34% in England and Wales and 46% in Scotland).

He recommends that the government should set up a similar naming and shaming scheme for employers who do not pay Employment Tribunal awards within a reasonable time.    

This article was first published on Lexis®PSL on 17 August 2017 and is reproduced with permission. Read the original article on Lexis®PSL.

About the Author

Tim is highly experienced in employment law and specialises in advocacy. He also provides practical, commercial advice to organisations.

Tim Forer
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