The Minimum Wage Update: How to not fall foul of the rules

All employers must ensure that they pay their staff a wage not below the National Minimum Wage (NMW) or National Living Wage (NLW) level, as appropriate. NMW rates are updated every October and NLW rates every April, with current rates shown below.

Falling foul of the rules may mean more than a hit to reputation - the Government has already “named and shamed” some NMW offenders, with some high profile cases making the national press.


It is important to note that at no time can an employee’s hourly rate of pay fall below NMW/NLW levels. Many of the employers who fall foul of the NMW legislation do so not through the malicious underpayment of their employees, but through misapplication of the complex legislation.


The Details


One such complication can arise in cases of salary sacrifice arrangements (pension contributions, childcare vouchers or cycle to work schemes are all popular examples), as employers would be in breach of NMW/NLW rules if they allow lower paid employees to reduce their salary below NMW/NLW levels as part of a sacrifice scheme.


HMRC has become increasingly interested in NMW compliance over recent years, having now expanded the total number of staff dealing with NMW enquires to more than 400. As HMRC focus on NMW compliance, more employers are receiving letters advising they will be subject to a NMW audit.


Falling foul of the rules may mean more than a hit to reputation – the Government has already “named and shamed” many NMW offenders, with some high-profile cases making the national press. NMW failures can lead to penalties of 200% of the total underpayment (up to a maximum of £20,000 per worker). There is also Employer’s NIC to pay, plus the professional costs associated in dealing with a enquiry.

The enforcement of NMW has significant implications for the charitable sector. Mencap was involved in a high-profile Employment Tribunal in April last year, concerning a carer who was paid a flat sum plus one hour’s pay (circa £29 total) for an eight-hour ‘sleep in’ shift in an individual’s home. The carer had her own bedroom and was required to keep a “listening ear” during the night in case her support was required. She was otherwise free to sleep or use her time as she wished, but she could not leave the premises.


The Employment Tribunal judge ruled against Mencap, concluding that the employee was still performing her role as carer during the sleep-in shift, whether she was asleep or not.

Mencap and other care providers have since changed the way they pay sleep-in carers since the decision. Mencap also appealed the tribunal decision and the Court of Appeal began hearing that appeal in March, with the decision expected to be delivered in the coming months.


The estimated cost of up to six years’ NMW back pay demanded by HMRC could cost care organisations an estimated £400 million, which could lead to many care providers going bankrupt. The care sector awaits the Court of Appeal outcome with baited breath.

Charity Aid

This article was featured in our Charity Aid Spring Edition, to find the full publication click here.

If you have any concerns or queries about how NMW applies to you and your employees, please get in touch.