Mid-February, HMRC published the latest list of employers caught not correctly paying staff, and so breaching National Minimum Wage (NMW) legislation. The list is one of the longest ever published, with more than 500 employers named. While some of the underpayments were very small, one employer was found underpaying staff to the tune of £5.1 million.

And, worryingly, of the firms named, there were a number from the trade, including Glevum Heating & Plumbing (dissolved) of Gloucester, which failed to pay £2,051.95 to six workers; Berkshire East Plumbing & Heating, Ascot, which didn’t pay £3,270.25 to two workers; and Putney Plumbers in Wandsworth, which failed to pay £1,990.89 to one worker.

Mark Stevens, a Senior Associate at law firm VWV, explains that the NMW sets the amount of pay due to most workers from school leaver age up to the age of 25, with the National Living Wage (NLW) applying to those aged 25 or over. 

“All workers,” he says, “except those who are genuinely self-employed, are entitled to receive the NMW or NLW.”

He explains that the pay amount is calculated by “including most financial awards or payments, but excluding allowances such as regional or on-call allowances, unsocial hours payments, tips, and gratuities, or any benefits in kind, with the exception of accommodation up to a specified amount.”

Changes from April 2024

“Prior to April 2024,” says Mark, “the NLW applied to those 23 and above. However, from April it expanded to include 21 and 22 year olds.” He continues: “The NLW increased by 9.8% from £10.42 per hour to £11.44 per hour. For a full-time employee working 37.5 hours per week, this equates to a minimum annual salary of £22,308.”

As for younger employees and apprentices, they too saw significant pay increases from April. An 18-20 year old’s hourly pay increased to a minimum of £8.10 per hour. Additionally, 16-17 year olds and apprentices saw their pay increase to a minimum of £6.40 per hour, “which is a huge 21.2% increase from the current minimum in this bracket,” Mark adds.

Enforcement

Like other forms of employment legislation, the NMW is incredibly complex which is why Mark has seen “underpayments being the result of a misunderstanding of the law rather than any deliberate failure by an employer to comply.”

In particular, the status of an employee can create confusion. Where their employment status is misclassified or where a worker is ‘off-payroll’, employers can fail to pay the correct NMW. Then there can be issues over salaried staff who are relatively lowly paid and regularly work long hours. This sometimes results in employers falling short when taking into account hours worked in relation to the rate of NMW.

Another area to keep tabs on is working hours. This may apply if a worker is required to arrive early or stay late for training, debriefing or staff meetings; these hours will constitute ‘working time’ therefore they should be paid at NMW. 

Employers also need to be aware of staff uniforms. Employers who require staff to pay for their own uniforms out of their salary can cause pay to fall below the NMW.
Lastly, employers sometimes slip up where they fail to increase a younger worker’s pay following a birthday that moves them into a new NMW bracket.

Repercussions

Employers found in breach of the legislation may face significant legal repercussions. Here Mark says that “it’s important to remember that underpaid workers can launch formal and/or legal action. Those who think that they have suffered an underpayment of NMW can raise a formal grievance to their employer, complain to HMRC or bring a number of claims against their employers.”

In particular he warns that they can bring a claim for unlawful deduction from wages under section 13 of the Employment Rights Act 1996; a breach of contract, either in the employment tribunal or the County Court; or a claim for unfair dismissal or detriment under the National Minimum Wage Act 1998.

And financial penalties can also be brought to bear. Employers found to have not paid workers the NMW can face substantial fines – currently up to a maximum of £20,000 per underpaid worker.

Next on Mark’s list is the risk of adverse publicity. As he says, “the government’s ‘name and shame’ scheme can put a negative spotlight on employers found to be in breach of the NMW legal requirements.” This could result in significant damage to the employer’s reputation and make it harder to hire staff.

Lastly, for the worst offenders, criminal prosecution is a clear possibility. “This can occur if employers persistently refuse to comply with the law and to co-operate with the compliance officers,” Mark explains.

The National Minimum Wage is nothing new and this year celebrates 25 years of operation. While it’s well known and there are some employers who deliberately seek to underpay staff, the majority just make accidental errors. For these employers, the best advice is to look at the risk factors and seek to deal with them.