From 1 April 2018, the national living wage increases to £7.83 for those aged over 25 and the national minimum wage increases as follows: £7.38 for 21-24 year olds; £5.90 for 18-20 year olds; £4.20 for under 18s; and £3.70 for apprentices.

The Department for Business Energy and Industrial Strategy (BEIS) is responsible for national minimum wage policy and the policy on compliance and enforcement and HMRC is responsible for national minimum wage enforcement on behalf of BEIS. In the last week, HMRC named and shamed various employers who did not comply with the National Minimum Wage Regulations 2015 (NMW). This included well known high street brands and leisure chains.

Many employers were caught out because of their uniform policies. NMW regulation 12 and 13 provide that any deductions made by an employer for the cost of uniform provided or for the cost of uniform to be purchased (whether from the employer directly, a third party generally or by the worker directly) does not reduce worker pay below the minimum wage in the relevant pay period. The same principle also applies for tools which workers are required to provide or be provided with for the purposes of their work. It does not matter that the uniform or tool can also be used for the worker’s own benefit – e.g. black shoes. What matters is that wearing the item or having the tool is a requirement for the role. Any additional uniform or tools bought by the worker are not counted for NMW purposes.

The issue seemed to be that many employers did not appreciate that unbranded items of clothing which were required to be worn at work e.g. white t-short, black trousers, flat black shoes are also considered to be 'uniform' by HMRC when assessing whether NMW had been complied with. So what the employers had failed to do is account for the cost of the purchase of such items during the relevant pay period to determine whether the cost had brought the workers beneath the minimum wage thresholds. If the thresholds were breached, the employer should have made up the shortfall during the pay period to bring the worker back up to the minimum wage. For some workers (particularly those working 40 plus hour weeks) at the national living wage whose uniform requirements are pretty straightforward, the underpayment may be fairly small. The greater cost could be working out on a case by case basis what the underpayment (if any) in fact is. Of greater concern for employers must be students, casual workers and part-time workers who face the same uniform requirements, but whose pay during relevant pay periods would be significantly reduced at the time they were required to purchase uniform.

To remedy past NMW infractions of this nature, employers should consider calculating the potential underpayment for current and ex workers on a case by case basis and making payments to such workers before HMRC undertake an audit. If no self-correction is made, HMRC could issue a 'Notice of Underpayment' for the shortfall, issue penalties and the employer will appear on the 'name and shame' list. Calculating potential underpayments may not be straight-forward. Questions which an employer will need to consider include:

  • how often is an employee required to replace their uniform?
  • if they are not, how long would it be expected to last as a matter of practicality?
  • what if the employee did not purchase anything new for the role?
  • what is a reasonable amount to allow for items if no receipts have been kept?

Going forwards, employers need to carefully consider what their uniform requirements are (or are they in fact necessary), who pays for the uniform and how often the uniform should be replaced or to ensure that pay rates are sufficiently above minimum levels that the purchase of tools or uniforms will not be a breach of the NMW.