Search

How can we help?

Icon

Minimum wage: Don’t get caught out

Government consultation on Labour Market Enforcement strategy for 2020/2021 is open until 24 January 2020.  At the same time, a report by the Resolution Foundation released this month shows that, as legal minimum wage rates have risen, so has non-compliance.

Based on survey data collected by the Office for National Statistics, it is estimated that of the of the 1.4 million workers aged 25 and over in Great Britain paid at or very close to the wage floor in 2019, more than 25% were unlawfully underpaid.

The report makes the case that more active enforcement by the state agencies with such powers would be the most effective deterrent to unlawful underpayment. The report also points out that there is no clear dividing line between inadvertent and deliberate underpayment. However, both are equally unlawful and, where enforcement action is taken, will result in orders to pay the shortfall and fines of up to 200%.

One problem for businesses who have no intention of failing to comply with minimum wage law is that the law is highly complex, so it is often difficult to calculate what constitutes a lawful deduction or what offsets are allowed. This means there is plenty of scope for employers to simply get things wrong.

Based on survey data collected by the Office for National Statistics, it is estimated that of the of the 1.4 million workers aged 25 and over in Great Britain paid at or very close to the wage floor in 2019, more than 25% were unlawfully underpaid.

Many businesses also fall foul of minimum wage law because it only considers pay received in each pay period and does not take into account whether aggregate pay over a longer period would be above the legal minimum. For example, if an employee’s pay is at the legal minimum wage rate for their age, a £50 deduction in March for uniform would be in breach of minimum wage law even if the employee had received an annual bonus of £1000 in January.

In our view, removing anomalous outcomes like this as part of making minimum wage law more straightforward would result in more employees receiving their legal entitlements. The current consultation gives businesses the opportunity to make representations of this kind to the government.

With the significant rises to the legal minimum pay rates coming into effect from 6 April 2020, it is all the more important that businesses get this right. For advice on minimum wage compliance and enforcement, please contact our employment team.

About this article

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

art
  • 19 June 2024
  • Employment

Are your employee benefits attracting and retaining top talent

The country’s economic outlook continues to improve, but many companies and employees are still under pressure due to high inflation and the resulting cost of living crisis.

art
  • 18 June 2024
  • Employment

Clarkslegal representing UK employers on the global stage

I recently returned from the 112th Session of the International Labour Organisation’s International Labour Conference (ILC) in Geneva, which I had the privilege of attending with the Confederation of British Industry (CBI), in order to represent UK employers on this global stage.

art
  • 17 June 2024
  • Employment

Pride Month

June has been a month of dreary wet weather.  Luckily, the vibrant colours and messages of acceptance for the LGBTQ+ community have been something to celebrate, despite the weather!

art
  • 12 June 2024
  • Privacy and Data Protection

UK data protection: Important basics

Sometimes, data protection can seem like unhelpful red tape. At other times, it is critical to cultivating a trustworthy reputation.

art
  • 11 June 2024
  • Immigration

UK Immigration Roundup – May to June 2024

As the UK approaches the upcoming general election, immigration remains a focal issue in political discussions. The Conservative party’s recent proposal to cap visas for skilled migrant workers has alarmed various industries who are concerned that a limit to migration could harm vital sectors of the UK economy.

Pub
  • 06 June 2024
  • Employment

Talking Employment Law: What does the new Worker Protection Act 2023 mean for employers?

In this podcast, Lucy Densham Brown and Shauna Jones, members of the employment team, will review the new Worker Protection Act 2023 and provide some guidance on how employers should review their policies in preparation for October.