National Minimum Wage, Working Time and Holidays - Sue Fisher MCIPP, Assoc.CIPD - The Payroll Centre

National Minimum Wage,
Working Time and Holidays
     Sue Fisher MCIPP, Assoc.CIPD

National Minimum Wage Act 1998

  What is the National Minimum Wage Act 1998?
     •   Legislation that introduced
     •   A minimum wage across the UK
     •   Making it illegal for employers to offer anything less than the current published rates, and
     •   A rate below which an individual may not sell their labour

     • SI.No. 68/2016 National Minimum Wage (Amendment) Regulations 2016
     • Amended regulation 4 (national minimum wage rates) of the NMW Regulations 2015
     • Brought into scope the National Living Wage for those aged 25 and over

     • The Act requires employees records are kept for a period of 3 years, however
     • 6 years is advisable to cover the limitation period.

Requirements of employer

Employers are required to:
   • Hold information on employees
       •   Hours of work and pay relevant to the pay reference period
            •   Weekly, fortnightly, four weekly or monthly
   • Record incidences where pay has been affected
       •   Absence, accommodation provided, business travel etc.

   • Employers must not:
       •   Falsify records of payments to employees.

The rates effective 1 April 2019

  Apprentice rate                                             £3.90
  Workers above compulsory school leaving age, but under 18   £4.35
  Workers aged 18 – 20                                        £6.15
  Workers aged 21 – 24                                        £7.70
  Workers aged 25 and over                                    £8.21
  Accommodation offset (daily rate)                           £7.55

Who is a worker?

Those of school leaving age and above, however

   • Legislation states that
       •   16 – 18 year olds must either
            •   Remain in fulltime education, or
            •   Commence an apprenticeship or traineeship
   • Whilst in part time education or training
       •   Volunteer or work for 20+ hours per week
   • Those who are 25+ are entitled to the
       •   National Living Wage.

Who is a worker?

A worker can be any of the following and entitled to NMW/NLW
   •   Part time
   •   Casual workers / labourers
   •   Agency workers
   •   Workers and home workers paid by the number of items they make
   •   Apprentices
   •   Trainees and workers on probation
   •   Disabled workers
   •   Seafarers
   •   Offshore workers.

Who is not a worker?

Those not considered workers and so not entitled to NMW / NLW are:
   •   Self-employed
   •   Volunteers
   •   Voluntary Workers
   •   Work Experience
   •   Company Directors
   •   Employee living in their employer’s household
   •   Members of the Armed Forces
   •   Share Fishermen
   •   Prisoners
   •   Living in a religious or other form of community.

Who is a worker?

A worker will:
•   Have a contract or other arrangement
     • Written or implied
•   There will be a mutuality of obligation
     • The employer has to provide work for the employee to do for as long as the contract/arrangement
       lasts
     • The employee is required to do the work personally
•   May have limited rights to send someone else to do the work
•   Will have to turn up for work even if they don’t want to.

The worker categories

The different types of workers are:
   •   Hourly paid
        •   Paid number of hours worked determined by the submission of a timesheet
   •   Paid an annual salary
        •   May have a set number of hours per week or year
   •   Output work / Piece work
        •   Paid according to the number of items made or number of bricks laid
   •   Unmeasured work
   •   Paid in other ways, such as
        •   Day rate
        •   Contract rate.

Working time

What is considered time at work?
   •   At work working, or on standby near the workplace
         •   Rest breaks should not be included
   •   Prevented from working due to machinery breakdown, but kept at the workplace
   •   Waiting to collect goods, waiting time – couriers!
   •   Work related travel
         •   Travelling from one work assignment to another, or
         •   From home to a work meeting with a client or site visit
   •   Training or travelling to training
         •   Including apprentices who write up theory work at home or in the workplace
   •   At work, under certain work-related responsibilities even when sleep is permitted.

What is not working time?

Time considered not working is:

•   Home to work travel
•   Annual leave, sickness absence, maternity, adoption leave
•   Industrial action
•   At the workplace but not working
•   At or close to the work place and available for work at a time when sleep is permitted
     •   A place to sleep has been provided.

NMW / NLW – Sleep-In Shifts

Sleep-In shifts have and remain a contentious, however

   • July 2018 saw two cases rejected by the Court of Appeal
   • Mencap v Tomlinson-Blake and Shannon v Rampersad
       •   In the Mencap case it was found that Ms Tomlinson-Blake
       •   Over a 16 month period she was only required to intervene on 6 occasions
   • Mr Shannon on the other hand, was
       •   “very rarely” called upon for assistance
   • In rejecting their claims the Court ruled
       •   “that there was a distinction to be made between their working arrangements – being available for
           work – and actively working”.

What counts as pay?

Payments that are considered relevant when calculating NMW are:

•   Any pay that has been received in the relevant pay reference period
•   Pay that has been earned within the pay reference period, but
     •   Not paid until the next reference period
          • For example Commission
•   When a bonus is paid it will count towards NMW in that pay reference period, however
     •   A proportion may count towards another pay reference period
•   Incentive pay is another element that may count towards NMW
     •   This is only applicable where the pay is associated with the employee’s performance.

What does not counts as pay?

Payments that are not considered for NMW are:

   •   Loans
   •   Advance of wages or salary
   •   Pension Payments, including lump sums when retiring
   •   Redundancy payments
   •   Payment regarding staff suggestion schemes
   •   Tips, gratuities and service charges
   •   Enhanced element of overtime pay and shift premiums.

Deductions and their impact

Deductions that do not affect the NMW rates are:
   •   Tax, NICs and Pension
   •   Salary sacrifice
        •   A basic earnings assessment should be undertaken to ensure compliance, however
             •   Beware! of non-working time within a pay reference period
   •   Workers conduct
        •   Such as till shortfalls, fines and timekeeping
   •   Recovery of advances of wages or salary
   •   Accommodation that does not exceed the daily offset rate.

Deductions and their impact

Deductions that do affect the NMW rates are:
   •   Canteens
        •   If the employee chooses to pay, no impact
        •   No choice and a deduction is made, impact
   •   Uniforms
        •   Wagamama had to repay £133,212 to 2,630 of their workers
   •   Charge for the provision of transport
   •   Charge for accommodation above the prescribed rate
   •   £1 administration charge, legally allowed to be deducted
   •   Deductions that HMRC see as a benefit to the employer may result in non-compliance.

Deductions and Uniforms

Uniforms are a regular cause for non-compliance!

   •   Where an employee is required to purchase a uniform from their employer
        •   A deduction can be made as long as the deduction does not take them below NMW/NLW
   •   Uniform provision is free, or staff choose to purchase from their own money, no impact
   •   A deduction from pay, where the employee wants to buy extra uniforms, impact
   •   A seemingly simple requirement to wear a particular style or colour of clothing, impact
   •   Deductions for wear and tear or repairing uniforms, impact
   •   If a deductions is made where the fault of damage, loss or failure to return, no impact
        •   As long as this is explained within the contract of employment.

Deductions – Middlesborough FC

February 2019
  • Middlesborough FC were found not to have breached national minimum wage
      •   A deduction was set up at the request of the employees
  • Allowing them to spread the cost of their season ticket
      •   Total deduction was approximately £2,000 each
      •   The club saw this as “doing a favour” for their staff
  • HMRC decided the deduction meant staff were being paid less than the NMW, so
      •   Issued a Notice of Underpayment, as they saw it as a breach of the Act
  • On the 5th, the Judge agreed with Middlesborough FC
      •   “It [was] found that the deductions were permitted under the legislation”.

Anniversaries

Do not forget to uplift rates at:
   •   18th, 21st and 25th birthdays
   •   Those who have completed their first year as an apprentice, and
   •   Are over the age of 19.

Holiday Pay and NMW / NLW

Holiday pay is also a compliance issue:

• Initially it is inclusive of all remuneration a worker receives, however
    •   If holiday is taken
          •   Consideration as to whether or not the payment is connected to absence
          •   If it is, then it is discounted for the purpose of calculating NMW / NLW
• Where holiday is not taken
    •   The payment remains part of the pay received for the pay reference period, and
    •   Is included in the calculation of NMW / NLW.

Example:

A worker takes two weeks annual leave and receives:

   • Monthly salary of £1,000 plus £400 holiday pay
       •   Pay for the reference period amounts to £1,400
   • When calculating for NMW / NLW the payment is reduced by £400
       •   As it is a payment connected with absence
   • Therefore, £1,000 will be the worker’s national minimum wage
       •   Where there are active salary sacrifice schemes
       •   It will only be the pay associated with working time in the calculation for NMW
   • If the worker has no time off, the national minimum wage is then £1,400.

NMW / NLW - Penalties

Penalties for non-compliance that can be imposed following a Notice of
Underpayment are:

   •   200% of all monies owed
   •   Maximum of £20,000 per employee
   •   Entry onto the Named and Shamed List for non-compliance.

Penalties - TUPE

Effective 2 July 2018

• HMRC updated the way in which National Minimum Wage penalties applied to employers, where
    •   Staff were transferred under a TUPE arrangement
• NMW liabilities and the full penalty amount are now applied to the new employer
    •   Previously it was the old employer who was held accountable.

Thank You! - Any Questions?