National Minimum Wage Naming Scheme

Failure to pay the national minimum wage 

The start of 2021 saw 139 household names (including Tesco and Pizza Hut) face reputational damage and financial penalties for failing to pay the national minimum wage (NMW) to over 95,000 workers between 2016 and 2018. In addition to reputational damage, offending employers are required to pay arrears of wages and a penalty of up to 200% of the underpayment (capped at £10,000 per worker).

What is the Naming Scheme?

The Scheme that names employers who break NMW laws was re-introduced for 2020. The Scheme was initially created to raise awareness of minimum wage and deter employers who would otherwise be tempted to pay less than the minimum wage.

From 2020 onwards, employers that intentionally or unintentionally fail to pay NMW will be named in the BEIS’ annual press release, naming the employer, the number of underpaid workers, the period of underpayment and the amount of arrears. Employers in the North West are more likely to have underpaid their workers.

BEIS commented “Paying the minimum wage is not optional, it is the law.”  The re-introduction of the list should “serve as a wake up call to named employers and a reminder to everyone of the importance of paying workers what they are legally entitled to”. 

What are the common errors?

Many employer underpayments are not intentional but a reflection of a poor understanding of the legislation which, in some aspects, is complex. Common breaches of NMW laws occur where employers:

• make deductions from workers’ wages, for example in relation to parking or travel costs, accommodation costs, training costs, shortages, uniform and work equipment (including PPE). Salary sacrifice schemes can also reduce the pay that counts towards NMW;
• fail to pay workers for their full working time, for example additional time worked at the end of a shift or during travel time;
• fail to acknowledge change in the classification/age bands; and
• incorrectly treat a person as self-employed rather than a worker.

Employers, in order to limit their errors, should keep and retain accurate records of the amount they are remunerating their workers. Employers should also frequently carry out audits of such records to ensure they are up to date with the current rates.

What are the rates in 2021?

From April 2021, the NMW rates will increase as follows:

Employers should seek legal advice to ensure compliance with the most recent NMW legislation and to avoid humiliation by the Naming Scheme.

You can also read additional guidance on the NMW provided by BEIS, Acas and HMRC.

Here to help

If you have any more questions regarding the National Minimum Wage Naming Scheme or if you would like further information on how we can help, please do not hesitate to contact a member of our Employment team on 0161 941 4000 or via email.