Minimum Wage Laws to be Reviewed

Business secretary Greg Clark has pledged to review national minimum wage regulations amid claims that current policy is overly cumbersome for employers.

Mr Clark acknowledged in a letter to UK retailers that minimum wage rules “unnecessarily burden and penalise” employers and he has asked companies to share their own experiences in complying with the rules. The announcement follows news that a number of large businesses have been found to have breached minimum wage regulations on technicalities, with some potentially obliged to pay millions of pounds in compensation as a result.

Most recently, HMRC warned that Iceland Foods could face a bill of £21m for placing low-paid staff in a voluntary savings scheme in which workers had sums deducted from their weekly pay packets and so technically fell below statutory minimum wage requirements. The company is accused of underpaying staff by £3.5m annually over a six-year period, despite staff opting into the scheme and being able to withdraw the money deducted in full at Christmas. In addition, regulators faulted the store for its uniform policy, stating that staff who bought their own shoes to comply with uniform requirements may also have been paid below minimum wage when accounting for the shoes’ price.

Elsewhere, Wagamama and Monsoon Accessorize were also found to be in breach of minimum pay regulations by not paying for staff to comply with work uniform policies.

Employers unfairly penalised by ‘overly complex’ regulations

Addressing the recent cases in his letter to the British Retail Consortium, Mr Clark acknowledged that regulations appeared “overly complex.”

He added that he would consider reform of the law if “evidence shows that rules unnecessarily penalise employers, and [changes] will not reduce the protection offered to low-paid workers.”

A consultation into potential reforms is now underway, with ministers fearing that salary sacrifice schemes in particular are unfairly targeted by current rules. Under current rules, employers must consider whether pay received by workers after any deductions meet minimum wage requirements – regardless of whether the pay deducted is ultimately repaid.

Iceland’s case will hinge on whether the pay deducted under the savings scheme is found to have been deducted “for the employer’s own use and benefit,” per 2015 national minimum wage regulations. As the scheme was voluntary and workers ultimately suffered no financial harm, legal experts argue that it is particularly unfair and “perverse” to penalise the employer for the savings scheme. If Iceland did not gain any benefit from collecting the savings – such as interest – then arguably the savings should not be factored as deductions when calculating workers’ wages, say the experts.

Industry leaders have echoed politicians’ concerns about current regulations, with British Retail Consortium policy adviser Fionnuala Horrocks-Burns saying it is “essential” that rules are updated to reflect modern pay practices.

One in five young workers is not paid the minimum wage

Whilst plans to reform unnecessary aspects of wage regulations have been welcomed by employers, charities warn that stronger legal enforcement of pay laws is necessary to protect many workers who are not receiving their statutory pay.

In a recent study of more than 4,000 workers aged 18-30, the Young Women’s Trust charity found that one in five young workers is receiving less than the national minimum wage.

Unveiling the findings, Carole Easton, the charity’s chief executive, called on the government to crack down on those not following the law, stating:

“Paying young people less than the minimum wage is not just illegal, it is immoral.”

She added: “Alongside enforcing existing laws, ministers should also raise the minimum wage for young people by extending the national living wage to under-25s, who can currently be paid less for the same work.”

A spokesman for the Department for Business, Innovation and Skills responded by noting that the government is “spending a record £26.3m on ensuring the UK’s lowest-paid workers get what they are owed” this year, adding that reforms would benefit both businesses and employees.

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