National Minimum Wage – guidance for UK businesses

The National Minimum Wage (NMW) is the set minimum hourly rate of pay which employers are required to pay their workers. The rates typically change on an annual basis, in April every year. The rates for 2023 are as follows:

*Note that apprentices are entitled to the minimum wage for their age if they are both aged 19 or over and have completed the first year of their apprenticeship.

Failure to comply with the National Minimum Wage

To assess compliance with the NMW Regulations, you should calculate the number of hours a worker has worked (or is deemed to work under the terms of their employment) by the pay that they have received. This should identify how much the worker has been paid by the hour, which should be no less than that rate of pay applicable to that individual (in line with the guidance above for rates of pay).

Records of this data should be retained in line with the NMW regulations, and available for inspection by the HMRC if requested.

Whilst the enforcement of NMW is primarily a responsibility of HMRC, workers who do not receive the minimum entitlements may also bring claims in the Employment Tribunal for Unlawful Deductions to Wages or Breach of Contract.

Deductions to be mindful of

Subject to the nature of the work, some workers may be required to wear uniforms. In those circumstances, and where an employer requires a worker to wear and pay for specific clothing in order to carry out their role, it is likely that the HMRC will consider payments (at the expenses of the worker) for such items to be a deduction to wages. This poses risks to employers where they are paying said workers NMW (or close to this rate), as the deduction may therefore cause the pay to fall below the minimum rates for that employee.

Specifically, the HMRC say:

“… if the employer requires the worker to purchase specific items, such as overalls, then any deductions made from pay or payments made to the employer in respect of those items will always reduce National Minimum Wage pay.

If a worker makes a payment to a third party for required uniforms the payment will also reduce National Minimum Wage pay since it is expenditure incurred in connection with the worker’s employment”.

In circumstances where the HMRC assess that an employer has failed to pay a worker the NMW relevant to them, they may face the below potential penalties:

• Service of notices of underpayment
• Civil penalties
• Naming and shaming
• Recovery of underpayments through tribunals or civil courts
• Criminal prosecution

It is advisable therefore that employers keep this under careful review, particularly in circumstances where their workers are subject to uniform deductions from their pay or where they are expected to incur the costs to source uniform themselves in order to fulfil their role.

If you have questions about your uniform policy or the National Minimum Wage more generally please contact our employment law & HR support team.

Original source: National Minimum Wage – Guidance For UK Businesses – Stephensons Solicitors LLP

Author, Terri Li