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A frosty time ahead for National Minimum Wage enquiries

A frosty time ahead for National Minimum Wage enquiries
Paul Chappell
Written by
Monday, 07 January 2019 11:11

There has been much publicity recently regarding HMRC’s National Minimum Wage enquiry at Iceland Foods Ltd.

Iceland staff can participate in a voluntary savings scheme and put money aside. The money is deposited into a separate bank account, held by the company but administered by independent trustees. The company therefore have no say on how and when money can be drawn out of the account.

Employees can withdraw money on demand, typically at Christmas or to pay for a holiday.

How does HMRC see this as a breach of NMW?

HMRC consider that the deductions from wages breach the National Minimum Wage regulations because the pay ‘technically’ has fallen below the NMW rate. This is despite the fact that the payments can be requested and returned to the employees at any time.

What has not come out of the publicity is whether these deductions are from Gross Pay or Net Pay, however the fact that the deductions affect the employees NMW rate suggested the deductions are from Gross.

Had the deductions been taken from net, NMW rates would not have been affected. There is a lesson here, ensure any deductions are taken from net pay.

Iceland are challenging HMRC’s stance in this respect on the basis that the deductions are returned to employees on demand through the payroll. Any NMW underpayments are, as HMRC have indicated to the company, ‘technical’.

Common sense should prevail, but when has common sense ever been considered when HMRC consider there is an underpayment?

HMRC also challenging clothing policy in relation to NMW

This is not the only issue to arise from the Iceland case. The company’s guidance on clothing states that employees wear ‘sensible’ shoes. We all wear shoes for work, so what is HMRC’s gripe this time?

Well it is the fact that the company is dictating to the employees and employees must choose to buy their own shoes. Buying their own shoes would drop some employees pay below the NMW rate.

My issue with this is exclusivity. The employees will wear such ‘sensible’ outside of work. Where does this all end?

The Iceland case highlights HMRC's apparent change of tack with regards to NMW reviews and more particularly the challenge to what most employers would consider are in no way a NMW issue.

For more information or questions please contact Paul Chappell at Dataplan Payroll Ltd on 03331 123456

Paul Chappell

Paul joined Dataplan from HM Revenue and Customs in 2007 and runs our PAYE compliance and investigation services.

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