Much has been reported on Friday about employers in the retail and leisure sector falling foul of technical breaches of the National Minimum Wage rules by the HMRC.
In fact I was advised by an employment solicitor that the care sector was being so targeted that HMRC was told to back off the sector by the Government for risk of the care sector failing because of it, apparently the Government has no such regard for restaurant chains like Wagamana.
What’s the National Minimum Wage Regulations?
The National Minimum Wage Regulations 2015 (the ‘Regulations’) came into force in April 2015 and consolidated and restructured all the previous regulations governing the NMW with the aim of making the legislation in this area easier to understand.
However, navigating the methods of calculation can still be a minefield for the unwary and getting it wrong, even if this is totally unintentional, is still a breach of the Regulations, resulting in significant back pay and fines having to be paid and a business being labelled as ‘non-compliant’ – with associated damage to reputation.
HMRC has the power to conduct audits of employers’ records and to investigate generally whether workers are being paid the NMW.
So what exactly has happened?
Following a NMW inspection by HMRC Wagamama, had to repay £133,212 to 2,630 workers, making it the worst offender in the latest naming and shaming list, and said that there had been an “inadvertent misunderstanding” of how minimum wage regulations applied to uniforms.
“In the past we didn’t realise that asking our front-of-house staff to wear casual black jeans or a skirt, with their Wagamama branded top, was considered as asking them to buy a form of uniform and so we should have paid them for it. Lots of other businesses were also unaware of this regulation around casual wear,” a spokesperson.
What is the problem (as far as we understand it)?
Any requirements for employees to purchase their work clothes from their employer (even at a discount) will be counted as a deduction that reduces the average rate of pay.
HMRC is now targeting businesses that require only a simple uniform (e.g. black trousers and white shirt) which can be purchased from any retailer and is applying notional deductions from salary.
For example, on commencement it may be said that the employee will need to purchase appropriate clothing at a cost of £X.
For the purposes of calculating the NMW, those theoretical clothing costs would be deducted from the wages received during the first reference period and, if the average rate falls below the prescribed minimum, a breach may be said to have occurred.
By asking staff to wear black trousers and in the case of Wagamana, black shoes the employer is imposing a uniform for which the employee is not receiving the money for.
It would be the same if the employer required them to buy tools, or make it compulsory to purchase something else.
As the employee is on the National Minimum Wage, the employee’s expense in purchasing those items in that pay period took them below the minimum wage.
What would be a solution?
Where you employ staff on or near the National Minimum Wage, not specifying what staff should wear to accompany your items or providing trousers/skirts/etc as part of the uniform you purchase.
If you offered a “uniform allowance”; to anyone who has to otherwise but black trousers and/or black shoes. Such an allowance could be as low as what you can find such items on a website such as tesco.com, if the employee then chooses to use that allowance ‘towards’ a more expensive pair, then that is their choice.
Who is responsible for paying for uniforms?
There is no legal obligation imposed on employers to pay for their employees’ uniform but the problem lies when the employee earns on or near the National Minimum Wage.
You can only make an employee pay for their uniform if such a provision is included in their contract of employment and they earn more than the National Minimum Wage.
Remember that if you ask your staff to pay for the uniform, it will become their property and if they leave the organisation, they can take it with them.
This may be a concern to you because you have no control over how your brand is being portrayed or whether it is being associated with something which is incompatible or detrimental to your organisation.
What about PPE?
An employer is not permitted by law to charge an employee for any clothing that constitutes personal protective equipment (PPE) such as safety shoes, ear defenders, aprons, safety glasses etc.
What about tax relief on uniform items?
If you wear a recognisable uniform that shows you’ve got a certain job and your employer requires you to wear it while you’re working, you have to wash it yourself, and you’ve paid income tax in the year you are claiming for you can claim tax relief on the uniform.