The legal risks of failing to pay the minimum wage

WH Smith, Marks & Spencer and Argos are among more than 200 companies who have recently been named and shamed as falling foul of National Minimum Wage legislation. This large list of companies have been called out by the Department for Business and Trade for failing to pay the minimum wage, with breaches dating as far back as 2017. The companies face penalties of nearly £7 million, and must reimburse all affected employees.

WH Smith, being the worst offender, blamed its breach on an error in its uniform policy. The retailer said that it had misinterpreted how the legislation applied to the uniform policy, and had asked staff to wear specific trousers, skirts and shoes, without reimbursing them for the cost.

Failure to account for deductions or payments for uniforms is a common cause of minimum wage underpayment. Employers must account for the cost of compliance with uniform requirements when determining whether they are paying the minimum wage. This is because any deductions or payments due from workers for uniform is classed as expenditure in connection with the employment, which reduces minimum wage pay.

A breach of National Minimum Wage legislation can result in a penalty of up to 200% of the underpayment, as well as the reputational damage of being named and shamed. Employers should therefore review their existing policies to evaluate any potential risk of non-compliance, and if necessary, consider how to swiftly resolve any underpayments.

If you would like any advice on matters contained in this note, or in relation to employment law generally, please do not hesitate to contact a member of our Employment team.

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