Mistake 1: Failing to Reimburse Staff for Uniform
You must not deduct sums that workers spend ‘in connection with’ their job from their pay if this would take them below the minimum wage (either the National Living Wage for over 25s or National Minimum Wage for younger workers). Wagamama supplied its front-of-house staff with a branded top but required them to wear this with black jeans or a black skirt, which it did not supply. TGI Fridays expected staff to wear black shoes while Karen Millen required staff to wear discounted clothes from its range. HMRC found that the companies should have reimbursed staff for these items to ensure that they received enough pay.
To comply with the legislation, follow these 4 pointers:
- If you require workers to wear a specific colour or type of clothing, be aware this counts as uniform, even if it’s not branded. If staff buy such items themselves, check this won’t take their pay below the minimum wage in that pay period or you’ll be committing an offence.
- Look carefully at casual and part-time workers: if you expect them to buy the same uniform as full-time staff, this may well put them below the legal pay threshold.
- A compulsory item of clothing still counts as uniform even if workers can also wear it in their own time, so reimburse them if necessary.
- If a worker buys two pieces of clothing when you only required them to buy one, you don’t have to reimburse them for the extra item.
If you’ve been doing this wrong, it’s important to correct any underpayment before HMRC investigate you. Try and establish:
- How often you’ve been requiring staff to replace items of clothing or how often they are likely to have replaced them.
- Whether staff have bought something new for the job.
- How much the underpayment was (as you don’t have pay for the entire uniform, just reimburse the shortfall).
- What amount it’s reasonable to pay if there are no receipts.
To avoid future problems, it would be worth considering whether it’s necessary to retain specific clothing requirements.
Mistake 2: Understating Hours Worked
HMRC has uncovered various examples of a failure to pay staff who were actually working, which took their average hourly pay below the minimum wage. Avoid doing any of the following as
they could all lead to penalties for underpayment:
- Not paying staff to attend briefings, meetings or training.
- Requiring staff to undergo security checks outside working hours.
- Forcing staff to take an extended unpaid break or telling them to come in later than their scheduled start time if you don’t have any customers.
- Requiring staff to arrive early for their shift.
- Not paying staff for travelling time between assignments (for example, in the care sector).
- Not paying carers when they are sleeping at a client’s home.
Mistake 3: Counting Extra Payments as Wages
When calculating whether you pay someone the minimum wage, you must exclude any customer tips or any share of a service charge. Unsocial hours payments also do not count towards wages.
Mistake 4: Not Paying Interns
The Government has recently asked HMRC to take enforcement action against employers who fail to pay interns. Unless an individual is a student doing a work placement as part of their course, a school pupil on work experience, a genuine volunteer or is only shadowing an employee, you must pay them. They must receive at least the minimum wage, even if there’s no written contract, the internship is very short or they are very inexperienced. You also can’t avoid your responsibilities by drawing up a contract saying the person is a volunteer – unless they are truly free to come and go, a tribunal would find they were a worker.
Mistake 5: Not Paying for Trial Shifts
A recent Private Member’s Bill which sought to ban unpaid trial work periods has failed to make progress in Parliament but it has highlighted a practice (common in the hospitality sector) which many commentators say is exploitative. It’s a grey area but it’s unlikely new legislation is, in fact, required: if you ask prospective employees to do the same work as your existing staff, on the basis that this may or may not lead to a job, it’s probable that the minimum wage rules already oblige you to pay them. Calling it a ‘trial’ doesn’t stop it being work and individuals may well be able to make a successful complaint to HMRC if you do not pay them this.