When you’re out shopping on the high street, how often do you see sales assistants wearing the store’s current season’s offerings? Fairly frequently if you happen to shop in one of those trendy fashion outlets with a high turnover of stock. Well, this common marketing ploy might well come back to bite those retailers who have benefitted from the low cost promotion strategy for many years.
Fashion retailer, Monsoon, has been caught unintentionally failing to pay the national minimum wage (NMW) to more than a quarter of its UK store staff. They have been ordered to pay back more than £100,000 in wages to staff, fined £28,000 by HMRC and publicly shamed by the Government as Monsoon topped its list of 115 companies who had unlawfully underpaid staff wages.
Monsoon were caught out by their practice of requiring store staff to wear Monsoon clothes whilst at work which they were required to purchase (at a discount) from their wages. The effect of this compulsory purchase was that many workers were taking home less than the NMW. Monsoon reports that it has since increased the wages of its staff and now pays a clothing allowance.
It is not only the retail sector that is guilty of this all too common practice. Many businesses in the hospitality, hairdressing and social care sectors insist that staff purchase uniform or tools and equipment for the job via their wages. Any such expense will be considered a deduction and could mean that a worker’s wages unintentionally fall below the legal minimum. The Trades Union Congress estimates that at least 250,000 workers are being underpaid but that only a quarter of offenders are being caught.
So what should employers do now?
Carry out a review of their staff uniform policies and benefits packages to ensure that they are paying staff at least the NMW after the appropriate deductions have been made from the calculation.
What deductions from wages reduce pay for NMW purposes?
- deductions for expenditure connected with the job, e.g. uniform, safety equipment and tools
- deductions for the employer’s own use or benefit, e.g. for meals or transport provided by the employer, regardless of whether the worker can choose to buy the goods or services
- payments to a third person for expenditure connected with the job, e.g. uniform, safety equipment and tools
- deductions for the worker’s accommodation if the amount charged is over a certain level
What is the current NMW?
The NMW increased in October 2015 to £6.70 for workers aged 21 and over. Remember that minimum pay is set to increase again in April 2016 with the introduction of the new living wage (£7.20 for workers aged 25 and over).