Minimum wage defaulter list highlights risk from dress codes and uniform policies
13th March 2018
A newly published list of recent minimum wage defaulters suggests many employers remain unaware of how their established workplace practices make them vulnerable to inadvertent breaches of the rules.
A straightforward principle?
News reports have focussed on two large employers who both appear to have been caught out by difficult to apply rules affecting dress codes and uniform policies. In essence the regulations provide that if a worker is obliged by their employer to incur expenditure to do their job, they cannot be expected to cover those costs out of minimum wage pay; instead the employer has to reimburse the expenses on top of paying the minimum wage. This may sound like a straightforward principle but it is one that catches a lot of employers out because it is not always easy to apply in practice. If, for example, an employer’s dress code requires staff to wear black shoes, HMRC’s minimum wage enforcement officers usually take the view that the cost of buying black shoes is something the employer should be paying for on top of the minimum wage, notwithstanding any protestations that workers are already likely to own a pair of black shoes.
Rising minimum wage rates and stepped up enforcement means more employers are likely to be caught out by HMRC.
There is then the practical difficulty for employers of knowing exactly which of their employees have had to buy shoes to do their job, when, how much they spent and, if the cost seems excessively high, whether there are any limits on how much the employer is expected to pay. HMRC’s answer to these issues may be to take a broad brush approach, identifying an amount that it thinks represents what the average worker is likely to have spent. Employers can feel under pressure to accept an enforcement notice on that basis – and their inevitable inclusion in the government’s defaulter list – rather than challenge HMRC’s stance in Employment Tribunal proceedings.
There are cases making their way through the employment tribunal system that may well, in due course, clarify minimum wage rules on expenditure. In the meantime, rising minimum wage rates and stepped up enforcement mean more employers are likely to be caught out by HMRC. Even those whose basic rates of pay are comfortably above minimum wage rates are at risk. To help employers better understand those risks, and what they can do to avoid them, we are currently running a series of half-day briefings, details of which can be found here.
For more information please contact Simon Rice-Birchall.