The number of whistleblower reports to HMRC over suspected underpayment of the national minimum wage more than doubled in 2017 as growing numbers of workers fell within its scope.
The introduction of the national living wage in 2016 raised pay from £6.70 to £7.20 per hour for employees aged 25 and over, increasing last year to £7.50, and extended the number of workers covered from one million to 1.6 million.
From April this year, those over 25 will receive a minimum of £7.83, with increases also planned for those under 25, those aged 21 to 24, 18 to 20 and apprentices.
With wages being squeezed by the effects of inflation, workers are also more likely to be scrutinising pay packets.
But employers are also being caught out by the complexities of the rules, warns law firm Pinsent Mason, which cited the £1.5m fine on Argos last year for failing to take into account staff obligations including security checks and briefings before they clocked on when calculating pay. The retailer had to pay out a further £2.4m to correct staff wages.
Other common errors include deducting money from pay for uniforms, paying apprentice rates to workers, and failure to properly account for overtime and mistakes can affect salaried workers as well as hourly paid ones.
“This is a significant rise in whistle-blowing over the national minimum wage in just one year,” says Paul Noble, head of tax investigations at Pinsent Masons. “Employees are now increasingly knowledgeable about their rights and they’re ready to take action if they don’t think they’re being paid correctly for their time.”
Penalties for national minimum wage underpayments of up to 200 per cent of the arrears owed can now be levied, up to a cap of £20,000 per worker. Potentially more damaging for the business, the employer will be “named and shamed” for failing to pay its employees properly.
The Government has committed £25.3m for minimum wage enforcement in 2017/18, as well as launching a £1.7m awareness campaign earlier this year.
“The rising number of employers found to be paying staff lower than the minimum wage is either indicative of a severe lack of understanding of the current law or an attempt to cut costs through underhanded means,” says Jason Searle, barrister and head of employment law at St John’s Buildings.
“Cases I have seen over the years range from companies failing to include work undertaken outside of contracted hours through to intentional exploitation of illegal immigrants.”
Others blame confusion surrounding minimum wage rules. “While there are no doubt businesses out there deliberately flouting the law, I think there is a genuine misinterpretation among businesses about what is and is not included,” says Kerren Daly, employment law specialist at Browne Jacobson.
“The complexity of calculating national minimum wage continues to cause difficulties for employers, with employment tribunals acknowledging that there is not just one answer to every case. The HMRC has also taken a more active approach to naming and shaming offenders, targeting sectors such as retail, hospitality and production with the most prolific offenders.”
Employees should never simply assume their salary complies, adds Jo Sellick of recruitment specialist Sellick Partnership.
“Job seekers and employees need to ensure they educate themselves on current legislation rather that depending on employers to be offering the national minimum wage from the offset.
“There is a common misconception that the national minimum wage includes premiums, tips, bonuses and shift supplements – but this is not the case. Minimum wage is based on basic pay alone, and candidates and employees should be aware of this before any contract is signed.
“If more job seekers and employees were aware of this I believe the number of employers not offering the national minimum wage could be drastically reduced.”
If you believe you are being underpaid, the advice is to raise it with your employer in the first instance, however daunting.
Companies are obliged to provide staff members with both wage slips and time sheets, so it should be straightforward to work out whether pay falls above or below the minimum wage threshold.
If this approach fails, the Advisory, Conciliation and Arbitration Service (Acas) is the government-run mediation body for employment disputes. The case would proceed to an employment tribunal to confirm any compensation.
The abolition of the £1,200 employment tribunal fees in June last year has resulted in a significant rise in the number of claims.
“In addition, employees should contact HMRC to ensure a wider investigation against the company is conducted,” adds Searle. “You can guarantee that if this has happened once, there will be further examples.”
Source: Independent Money News