What type of deduction might affect the NMW paid to employees?

There has been much publicity recently relating to deductions from pay, resulting in failure to pay the National Minimum Wage (NMW), according to HMRC.

If deductions are made from a worker’s pay they will reduce the national minimum wage (“NMW”) pay if they are made “in connection with the employment”. These amounts must be deducted by an employer when calculating whether NMW has been paid.

In a recent case involving a taxi driver the claimant paid £160 per week to his employer in fees for equipment which was required to enable him to carry out his job.  He rented a car from a company associated with the employer and repaid the cost of insurance, fuel and cleaning costs.  He also hired a uniform in order to be able to undertake additional jobs as a “gold driver”.

The claimant brought a claim to the employment tribunal that he had not been paid the NMW and the employer disputed that the deductions should be counted in the NMW calculation.  The employment tribunal found the fees, insurance, fuel and cleaning costs should be deducted, but decided the car hire and uniform hire were optional expenses and therefore did not take them into account when calculating NMW.

The claimant appealed to the Employment Appeal Tribunal who felt that that both the car and uniform hire should indeed have been included in the deductions as these deductions had been made “in connection with employment”.

This is a stark reminder to employers to be aware that any costs incurred by an employee that are “in connection with employment” must be deducted when calculating NMW, even if the costs are incurred by the employee by choice.

 

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