The National Minimum Wage (NWM) was introduced in 1999, so it has been around for more than 20 years and at that time an adult aged 22 or over was entitled to £3.60 an hour. There is an annual rate change, which used to take place in October but now changes in April.
There is also a separate living wage, set by the Living Wage Foundation, with a rate of the £11.05 an hour in London and £9.90 an hour outside London. This, however, is entirely voluntary.
Salon owners need to consider the negative publicity and damage to reputation that could be caused by an article in the press reporting that they don’t pay staff minimum wage.
The current position
The naming and shaming of employers gets national and local publicity every year. The underpayment could be as little as a penny an hour.
It’s important to know how “pay” is defined and the expectations if you’re selected for an inspection or an employee reports you to the low pay body.
• If you require staff to report to work 15 minutes before their start time, for example, and they’re not paid for these 15 minutes, this could mean you’re not paying them enough to meet the minimum wage.
• The inspectors assess compliance over a pay period, which can be weekly, four-weekly or monthly. Commission earned in period one but paid in period two can still be counted for period one.
• An annual bonus, e.g. for attendance, only counts for one pay period; it can’t be spread over a year.
• You can’t count tips as contributing to the NMW, however they are paid.
• If you pay a higher rate for weekend or bank holidays then the enhancement doesn’t count for payment of the minimum wage.
• Anyone on a registered apprenticeship that has a college study requirement should be paid for the hours they are studying or attending college, even if this is an evening class.
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A NMW inspection
If you are selected or possibly targeted because of a call from an employee or former employee, the process can be very time consuming. Typically you’re asked to provide:
• Copy payslips covering three separate months over the previous six months
• Individual timesheets or copies of the rota for those months
• Signed copies of the employees’ contract
• A handwritten record of training courses or events attended by workers over the past three years (to demonstrate and check employees were paid for attendance unless it was genuinely voluntary).
• Contact numbers for your workers for them to complete questionnaires.
You can appreciate this isn’t a simple process and can be stressful, even if you are convinced you have not done anything wrong. Check your contracts. If staff don’t have contracts or they haven’t been signed and returned, rectify it immediately.
The NMW rates are well publicised and most often it is an ignorance of the rules that trips employers up. However, ignorance of the rules isn’t a defence.
It isn’t difficult for an employee to make a claim – there is a ACAS helpline or the employee can complain directly to HMRC. If HMRC find against the employer, they send them a notice for the arrears together with a fine. If the employer still refuses to pay then HMRC can take them to court.
Finally, an employee can of course take their claim directly to an employment tribunal.
What not to do
In August, it was reported that 191 named companies failed to pay £2 million to more than 34,000 workers. It is worth looking at where employers got it wrong:
• 47% wrongly deducted pay from workers’ wages, including for uniform and expenses.
• 30% failed to pay workers for all the time they had worked, such as when they worked overtime.
• 19% paid the incorrect apprenticeship rate. It would be an hour well spent to re-read the regulations. which are available online at acas.org.uk.
David Wright is a consultant in all aspects of employment practice and law. He is the main employment law consultant for Habia and provides a personalised support service for UK salons. 01302 355372 / davidwrightpersonnel.co.uk