Fines for not paying minimum wage – Where do you stand?

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Commission payments overtime and performance related payments should be included when calculating an employee's minimum wage.

Author: Dennis Chapman
Published:
Reading time: 2 minutes

This article is 9 years old.

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Pendragon, the UK’s largest car Dealer has been prosecuted by HMRC and made to pay out compensation totalling £35,000 for underpayment of minimum wage to around 40 members of staff.

The Pendragon case centred upon a salary sacrifice scheme, in which wage deductions were made to cover an employee’s company car. As such this salary sacrifice was seen to be in place for the employers, use and benefit and therefore the deduction made to compensate the employer reduced the employee’s minimum wage rate. Once such deductions where made, it transpired that the employees minimum wage was under the statuary minimum and the sums were to be repaid. 

By ‘Employers Use and Benefit’, it is deemed that if a scheme is in the place to facilitate the working relationship, such as the use of a vehicle to get to and from work, then it will be deductable from the minimum wage rate.

Other items which are covered under this heading include deductions made to cover the cost of items your employer supplied to you that are needed for your job, for example, tools or clothing for uniform. 

Employers need to be profiting from a scheme for it to be deemed for their own use and benefit. As long as the deductions made are for providing it the scheme then it will reduce employee’s minimum wage rate.
Remember, commission payments overtime and performance related payments are all included in the term wages, and therefore are included when calculating an employee’s minimum wage. Advancement of wages are not included in the Minimum Wage Rate, nor do repayment of such advances of wages reduce the minimum wage rate and thus should be excluded from any calculations made. 

We advice all clients look to their payroll to insure that all staff are being paid correctly, in line with the minimum wage rates for each category of employee. Take into consideration that minimum wage increased last October and will again this October, staff that are salaried and work longer hours, must still be paid the minimum wage for their category.

It would not be worth the HMRC fines that you would incur for non compliance!

Dennis Chapman

In remembrance of Dennis Chapman 1951 -2015

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