Hundreds of companies fail to pay the minimum wage

by | Mar 27, 2017 | News, Payroll

Hundreds of companies fail to pay the minimum wage

by | Mar 27, 2017 | News, Payroll

In February 2017, the government named over 350 businesses who had failed to pay their employees the National Minimum Wage or the National Living Wage. These companies were of all shapes and sizes, and there were some well-known High Street names in there too. Paying the minimum wage is the law and those companies that don’t will be fined and will have to back date what they should have paid but didn’t. This article looks in a bit more detail at the statistics, which for the first time included the National Living Wage, which was introduced on 1st April 2016 for workers aged over 25.

(The current National Living Wage rate is £7.20 an hour. Those under 25 receive the National Minimum Wage, which is currently £6.95 for 21 to 24 year-olds, and £5.55 for 18 to 20 year-olds.)

Some of the Excuses for not paying the Minimum Wage

Generally speaking, no excuses are accepted for not paying workers the minimum wage. That doesn’t stop companies trying. Some of the excuses quoted by the government from businesses for not paying the full amount of the minimum or living wages, included:

– Making the staff pay for their own work uniforms

– Reducing wages to pay for the firm’s Christmas Party

– Using tips to top up pay to hit the minimum requirements

Who were some of the offending companies? How much were they fined?

The biggest offenders were employers in hairdressing, hospitality and retail. Some of the offending companies were: Lloyds Pharmacy, Subway, and Debenhams. Of the 360 businesses named by the government, over 15,500 workers had to be paid back nearly £1 million that they should have received in the first place.

However, it is believed that the figure of 15,500 workers not receiving the minimum wage is actually a significant undercounting of the true figure. Indeed, The Office for National Statistics has calculated that as many as 362,000 workers were not paid the National Minimum Wage in April 2016.

In addition, the ONS has said that 1.3% of employees are not being paid the minimum wage, which works out to 178,000 full-time workers, and 184,000 part-time workers. It is a big problem.

In the case of Debenhams, the company had to re-pay £134,000 to more than 11,000 staff – more than half of its shop workers – after an accounting error left each of them short in wages. The company was fined £63,000. The point here is that even though the under-payment came from an accounting error, which was quickly rectified (see below), they were still named by the government and fined.

A spokesperson for Debenhams said:

“As a responsible employer Debenhams is committed to the National Minimum Wage, and as soon as the error was identified by a routine HMRC audit last year, we reimbursed all those affected.”

Make Sure You Comply With the Legislation

The problem is widespread and getting caught for non-compliance is costly, with the 360 businesses that broke the law even if it was accidental or inadvertent being fined a total of £800,000.

The chances of more companies being caught and fines are likely to go up, however, with the TUC calling for higher fines, and more prosecutions. Frances O?Grady, the TUC?s General Secretary said:

“This should be a wake-up call for employers who value their reputation. If you cheat your staff out of the minimum wage you will be named and shamed. But we also need to see prosecutions and higher fines for the most serious offenders, especially those who deliberately flout the law.”

One way to make sure you comply is to ensure your payroll system is properly set up to cope with the Minimum Wage legislation. That way, you can be sure that your employees are always being paid what the legislation says they should. As an outsourced payroll services provider, we set everything up so that you don’t need to worry.

Call us on 0121 422 0550 or contact us if you would like to talk about how our payroll service could help your business.


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