Technical Breaches of National Minimum Wage

26 Feb

Business secretary Greg Clark has confirmed that he is considering making changes to the National Minimum Wage (NMW) Regulations in the light of potential technical breaches by some major retailers.

One such retailer is frozen food giant, Iceland Foods, which could be facing a bill of at least £21m of underpaid wages because it may have broken the minimum wage threshold with its Christmas Club Scheme.

The scheme, which is entirely voluntary, allows employees to save towards the cost of Christmas. Employees put aside money from their wages, which is kept in a ring-fenced bank account. They can reclaim their cash at any time, but do so, typically at Christmas.

HMRC are suggesting that this could amount to underpayment if employees’ pay was pushed below the minimum wage after the deductions.

In total, the firm said it had saved and repaid more than £3.7m of wages in the year to November 2018.

This case indicates that even technical breaches of NMW are at risk of being pursued by HMRC. Employers would be wise to strictly apply the NMW requirements to avoid potentially expensive legal action and penalties.

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