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Could You Be Breaching The NMW and Not Know It?

1st Nov 2015
Employee Benefits, Employment Law, Human Resources, Payroll

Retailer Monsoon Accessorize has been “named and shamed” by the government for failing to pay more than a quarter of its UK store staff the national minimum wage (NMW).

In HM Revenue and Customs’ (HMRC) latest list of offenders, the private retailer neglected to pay 1,438 workers, a total of £104,507.83.

The company has now been forced to reimburse staff and pay a fine of £28,147.81.

In a statement, the retailer said it had been working with HMRC to review its payroll processes and rectify the breach of pay regulations.

“This review has revealed an historic, unintentional breach of the regulations in respect of its staff discount policies for Monsoon clothing. Monsoon is pleased that this issue has been identified and has already taken prompt action to remedy it,” it added.

Monsoon requires all staff to wear Monsoon clothes on duty. Employees were previously required to purchase these at a discounted rate out of their wages, but the compulsory expense meant that many staff were taking home less than the legally required minimum wage.

Sally Hulston, managing associate at law firm Addleshaw Goddard, said this was a common trap that many organisations fall into, including Foot Locker and French Connection who have both been caught for failing to pay the minimum wage for the same reason.

Hulston said: “Like Monsoon, they also cited errors in the way that staff uniform policy was conducted for being responsible for the breaches. In light of this, employers are encouraged to review their dress codes and introduce additional administrative checks if necessary.”

Audrey Williams, partner at Fox Williams, said it was an employer’s duty to ensure employee benefits were not counted towards a worker’s average salary.

“The strict legal obligation is to ensure an employee’s average salary over a pay reference period – the intervals in which they are paid – does not fall below the minimum,” she said. “That figure must be calculated after a number of specified deductions and there is a list of items which by law cannot count towards the NMW, including overtime rates, expenses and allowances” she explained.

James Major, partner at Clyde & Co, added: “Businesses who require employees to purchase uniform, tools, equipment or other products (even if at a discount) – a common practice in retail and hospitality businesses in particular – need to be aware that the cost to staff will be considered a deduction for NMW purposes.”

The legal experts warned that many current employee benefits packages could be in breach of pay regulations. They urged HR and payroll professionals to review and update their policies in light of Monsoon’s case.

Rachel Yorke, solicitor, employment law and HR group at SAS Daniels, explained: “Examples of the benefits that cannot be counted towards an employee’s salary calculation include vouchers, reimbursement for work-related expenses, loan and wage advances and any benefit in kind (other than accommodation).

If any of the issues raised in this article affect your business, please give us a call to discuss your options. We’re a friendly bunch and really keen to make a difference to your business by finding a solution that works for you and your business so call us on 01473 360160.

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