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 2021, more than 200 employers were named and shamed by government for failing to pay their lowest paid staff the minimum wage.
The 208 employers failed to pay their workers £1.2 million in a clear breach of National Minimum Wage (NMW) law, leaving roughly 12,000 workers underpaid.
Companies named include multinational businesses and large high street names, SMEs and sole traders – it’s a clear message that no employer is exempt from paying their workers the statutory minimum wage.
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 breaches 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 is low-paid employees being made to cover work costs, which includes things like uniform, training or parking fees. All of which means their pay packet takes a hefty beating.
Another factor that often impacts larger companies in particular, is 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 the new legislation. With some companies not factoring this change in, they fall 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 tend to blame mispayment on technical issues. When Tesco missed NMW back in 2020, they 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 last national minimum wage scandal in 2020: “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?
How old is your workforce? Are they fast approaching 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 members 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?