The Department for Business recently named and shamed a list of around 200 employers in the UK who had paid employees less than the minimum or living wage. This included 4 companies in Bristol, 3 of which were small, independently owned businesses who between them had failed to pay employees almost £6,000.
When you hear of employers paying their staff less than the minimum wage, it’s easy to jump to the conclusion that they’ve done so deliberately or unscrupulously – and of course sometimes this is the case – but often such underpayment can occur due to the business’s lack of knowledge of what they should pay, or how different elements of pay can result in them falling foul of their legal requirements.
As an employer, you should be paying an hourly rate that is no less than the rates set out by the Government annually currently:
| YEAR | 25 + | 21 TO 24 | 18 TO 20 | UNDER 18 | APPRENTICE |
|---|---|---|---|---|---|
| 2017 | £7.50 | £7.05 | £5.60 | £4.05 | £3.50 |
But what if the way you pay your staff is made up of a number of elements – which may include a basic salary below the minimum wage, or no basic salary at all – some organisations, particularly those in sales, still want to work on a commission only basis, or as is usual popular in farming or factory work, pay by piece rate.
In order to determine whether you comply with the minimum wage levels, you should use gross pay which would include most financial elements including commission, piece rate, bonuses and incentives. If any individual’s pay for the pay period when divided by the number of hours worked doesn’t equate to an hourly rate at the minimum level or above, this would be in breach of the requirements and you would be required to ‘top-up’ what they are receiving to at least the minimum level. There are elements, however, that you don’t need to include and may make deductions for even if they do take the total pay amount below the minimum rate – these include meal and travel allowances, tips and gratuities, additional shift or overtime allowances and deductions for uniforms.
Enforcement is carried out by HMRC and has become more rigorous in recent years with those found to have breached the requirements being named and shamed, served with enforcement notices to pay the employees the entire value of the underpayment (often running into thousands of pounds) and sometimes an additional fine. It’s therefore worth making regular checks that you are paying staff what you should be and most certainly ensuring that, where any employee raises a concern about their level of pay, you investigate thoroughly. We can undertake an audit of your contracts and records to ensure you are not likely to appear on the list.