Be aware of National Minimum Wage and deductions from payroll

Recent publicity has named and shamed well-known retailers for breaching National Minimum Wage requirements. A list published by the Department for Business and Trade has detailed 202 employers who have failed to pay National Minimum Wage with total underpayments slightly less than £5 million. Although the employers have since repaid what was owed, they faced fines totalling around £7 million.

It is a legal requirement to pay the national minimum wage and employers should ensure that any deductions that are made from an employee’s wage does not result in them receiving less than the national minimum wage payments. This includes deducting staff purchases – so it is easy to see how unwitting employers might fall foul of the legislation!

Any deduction other than national insurance, tax and pensions which are statutory requirements should not be made without the explicit consent of the employee.  Any overpayment of salary or deduction for things such as training costs should be contained within an employee’s contract of employment or there should be a separate agreement in place.  Failure to do this poses the risk of a claim being submitted for unlawful deduction of wages and may result in the employee faling below the threshold for national minimum wage.

There is also the possibility that an employer may not be aware of increases in national minimum wage if they have failed to note when staff reach the age of 21, for example. This also can result in an employee being paid below the national minimum wage. Regular payroll audits should be done to ensure that staff receive increases when due, and that deductions are authorised correctly

Should you have any questions around national minimum wage please contact us on 0800 995 121 to discuss.

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