Common mistakes to avoid with UK National Minimum Wage

Tuesday 3rd October 2023

With the latest ‘name and shame’ list now in the public domain highlighting 202 companies which have failed to pay the correct wage to their workers, employers should consider what they need to do to avoid being a part of this list in the future. Not only does falling short of national minimum wage damage company reputation but it can also result in millions of pounds in fines and being ordered to repay workers.

Total remuneration is the gross amount that is paid to an employee within a particular pay reference period, less any deductions. Employers should consider exactly what payments make up total remuneration to ensure that any deductions they may make to an employee’s wage within a pay reference period do not bring them below national minimum wage.

The reasons for employers making the ’name and shame’ list were as follows:

  • 39% wrongly deducted pay from workers’ wages – an example of how this can occur is where an employee signs up for salary sacrifice in return for a non-cash benefit which can be fully or partially exempt from tax and national insurance. The sum sacrificed should not be included within the total remuneration for the purposes of national minimum wage, however, many employers are not aware of this.
  • 39% failed to pay workers for the correct number of hours worked – employers should take into consideration additional working time where an employee is required to be in work for longer than their contracted hours. The most common example of this is where employees have spent additional time travelling between work sites or have spent additional time training.
  • 21% did not pay the correct apprenticeship rate – there is a specific national minimum wage solely for apprentices which is currently £5.28 and usually updates annually in line with other rates of national minimum wage. However, the apprentice rate can only be paid where apprentices are either under 19, or 19 or over but in the first year of their apprenticeship.

Employers need to bear in mind the strict consequences that they can face for breaching national minimum wage and ensure they fully understand how much employees are being paid each month. It is recommended that employers keep a record of working time to ensure employees are being paid for all hours worked and that any possible deductions are clearly contained within the employee’s contract of employment.

For further advice on the payments and deductions that are taken into account as total remuneration for the purpose of national minimum wage and how to avoid falling short of it, please do not hesitate to get in touch with a member of the Employment team who will be happy to help.