July 1, 2021

Companies that missed minimum wage legislation and how to avoid their mistakes 

It’s not just the big players who have failed to pay their employees basic minimum wage. Here’s how you can avoid their mistakes. 

Who was impacted?

In December 2020 the government released a list of almost 140 firms who failed to pay their employees basic minimum wage. That totted up to £6.7m in missing employee wages, impacting over 95,000 workers. This is up from the 180 employers underpaying minimum wage workers by £1.1m in 2018. As well as being forced to repay missing wages, the government also fined the employers a total of £1.3 million in penalties 

Those on the ‘named and shamed’ list ranged from companies with just one employee, to big name brands like Tesco, Costco and Superdrug. It’s thought that the most prolific offending sectors were retailers, hospitality businesses and hairdressers. 

How did this happen?

While we may think of national minimum wage breaches happening in ‘off-the-books’ cash in hand establishments, the recent bout of law breachers shows that this can impact all businesses, big and small. The question is, how did this happen?  

It’s thought one of the main causes of minimum wage breaches was low-paid employees being made to cover work costs, which includes things like uniform, training or parking fees. All of which meant their pay packet took a hefty beating.

Another factor that impacted some larger brands in particular was the failure to raise pay after birthdays. As younger minimum wage employees reach birthday milestones, they then qualify for different national minimum wage brackets under new legislation. With some companies not factoring this change in, they fell victim to underpaying some of their youngest staff. 

The main causes of minimum wage breaches were employees covering work-related costs, and missing payrise milestones.

Unsurprisingly, large brands blamed mispayment on technical issues. Tesco said: “In 2017 we identified a technical issue that meant some colleagues’ pay inadvertently fell below the national minimum wage.” Adding to this “We are very sorry this happened and reported it at the time to HMRC.” 

“All colleagues were reimbursed in full, in most cases £10 or less, and we immediately changed our policies to prevent a recurrence. 

How can I make sure this doesn’t happen to my employees?

As the department for Business, Energy and Industrial Strategy said in response to the national minimum wage scandal“It is the responsibility of all employers to ensure they are following the law.” Essentially, break the rules and it’s your fault. So, where should you be paying close attention so you don’t end up on the named and shamed list? 

Employee ages 

How old is your workforce? Are they fast approach a birthday milestone that means you need to organise a cake and bump up their pay? It’s worth having a system in place to keep track of these changes and make sure someone is responsible for monitoring this. 

Covering work costs

It’s important to consider the costs that come along with working. Are you deducting things like uniform and car parking directly from pay? If this is the case, you could be dragging member of your team below minimum wage. Carefully consider this before making applications to payroll. 

Part time workers & benefits

Do you offer your employees a belting employee benefits package? Good for you. However, it’s important to consider salary sacrifice benefits, especially when it comes to low paid and part time employees. Is paying for this benefit directly from pay impacting those low paid employees and if so, how do you plan to tackle it moving forward?  

Looking for payroll software the auto-applies age banding to pay? Check out our payroll software solutions.

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About the author

Diane Thames

About the author

Diane Thames

Diane Thames is a Payroll Team Manager here at Moorepay. She has been with Moorepay for over 20 years helping our customers with their payroll, and as such is a seasoned expert on everything payroll: from complicated calculations to the latest legislation.

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