Workers in the hospitality and leisure sector may become more scarce as a result of Brexit so it is important to get the basics right so that your workers want to work for you. The recent breach of National Minimum Wage (NMW) in the public shaming exercise highlighted that Wagamama and TGI Fridays, amongst others in the sector, had failed to pay the NMW. Wagamama commented that it was a misunderstanding on the rules on staff uniform and what benefits and costs they could count towards the NMW.

The current NMW for those aged 25 and over goes up to £7.83 in April. So what are the types of pay and benefits that an employer cannot lawfully deduct from a worker’s pay if it reduces the overall pay per hour below the NMW?

  • Expenditure in connection with employment, for example, to cover the cost of tools or uniforms or deductions which are for the employer’s “own use and benefit”
  • Any premium paid for overtime or shift work
  • Any allowances or payments that are not attributable to the employee’s performance, for example London weighting or an on-call allowance. However, if such payments are consolidated into the standard pay they will count towards the NMW.
  • Expenses or allowances, including repayment of money spent in connection with the job
  • Expenses for travel to a temporary workplace (and related subsistence) eligible for tax relief
  • Tips and gratuities

However, there are certain deductions that do not count as reductions against the NMW rate:

  • The accommodation allowance, (a fixed amount that can be credited against the hourly NMW rate if accommodation is provided)
  • Because of the worker’s conduct in respect of which the worker is contractually liable
  • Accidental overpayment of wages
  • Payments made by the worker (but not deductions) in respect of the purchase of goods or services from the employer (for example, meals purchased from a staff canteen), unless the purchase is required by contract or otherwise required by the employer in connection with employment
  • Deductions that are not for expenditure connected to the worker’s employment, or for the employer’s own use or benefit (for example union subscriptions and pension contributions)
  • Tax and NI