Category Archives: Minimum wage

Sports Direct: Failure to Pay National Minimum Wage – A Business Model With Exploitation at its Heart? (Part 1)

14184143 - green grass  uk pound symbol against blue skySUMMARY:  The Sports Direct founder, Mike Ashley, faced the Business Innovation and Skills (“BIS”) Select Committee on 7 June 2016 for an evidence session into the working practices adopted by Sports Direct.  A month later, it was widely reported that Sports Direct’s profits had been hit.  Mr Ashley’s fortunes have not improved as this month it has been announced that shareholders will be asked to vote on whether there should be an independent workplace review – we will have to wait until September to see how this latest chapter unfolds.

But how did it come to this?

To recap, Mr Ashley received intense criticism stemming from the Guardian Newspaper’s investigation at the end of 2015, which uncovered allegations that his Company:

  1. Failed to pay its workers the minimum wage;
  2. Engaged a significant proportion of staff via zero hours contracts and short term hours agency worker agreements;
  3. Created a culture of fear throughout its workforce due to arbitrary and outdated disciplinary practices; and
  4. Conducted daily physical security searches of employees.

On the back of the ever increasing publicity of how some high profile companies treat their employees, we have produced a two part series to enable you to assess whether your company is inadvertently making the same mistakes as those reportedly made by Sports Direct.  The first in this series explores the allegation that Sports Direct failed to pay its workers the minimum wage and sets out the law behind this complex issue.

___________________________________________________________________________

THE ALLEGATIONS:

HM Revenue and Customs (“HMRC”) are currently investigating allegations that Sports Direct paid its workers less than the National Minimum Wage (“NMW”) effectively saving the Company millions of pounds per year.

The underpayment allegedly arose as a result of workers being forced to undergo compulsory rigorous security checks at the end of their shifts as a theft prevention measure, adding as much as 15 minutes onto their working day (or up to one hour and fifteen minutes to their working week), which is unpaid.

In addition, it is also alleged that workers faced a 15 minute deduction from their pay for “clocking on” 1 minute after their designated start time, even if they actually arrived on site on time.

WERE THE SPORTS DIRECT STAFF WHO WEREN’T EMPLOYEES ENTITLED TO NMW?

All employers are obliged to pay the NMW regardless of their size, and the NMW applies to all “workers” ordinarily working in the UK who are over compulsory school leaving age, not just employees.  This includes agency workers and apprentices.

WHAT ARE THE CURRENT NMW RATES?

From 1 April 2016, there are now 5 rates of NMW:

CATEGORY   RATE (£)
National Living Wage Workers aged 25+

7.20

Standard Adult Rate Workers aged 21-24 (inclusive)

6.70

Development Rate Workers aged 18-20 (inclusive)

5.30

Young Workers Rate Workers aged under 18 but above the compulsory school age

3.87

Apprentice Rate Apprentices either:

  1. Under the age of 19; or
  2. Aged 19 or over, but in the first year of their apprenticeship

3.30

HOW DO I DETERMINE IF MY COMPANY IS PAYING THE NMW?

In order to determine whether the NMW is being paid to your workers, you will need to determine their average hourly rate of pay.

On the face of it this calculation seems quite a simple one – sadly, this is not so. The average rate of pay is calculated by dividing the total amount of “money payments” that a worker earns across the relevant reference period, by the number of hours the worker has worked during that same reference period. However, what amounts to a “money payment” frequently trips up the uninitiated – see below.

The number of hours worked (known as “working time”) can also prove a tricky area for companies and one which has given rise to a raft of case law on its own. This is dealt with below.

Turning then to the relevant reference period, this is usually one month and cannot be greater than one month. However, if the worker is paid weekly or daily, then this is their reference period.

What Money Payments Should Be Considered?

Companies must exercise caution as some payments cannot be included as “money payments” for NMW purposes:

EXAMPLES OF INCLUDED PAYMENTS Basic salary
Bonus**An annual bonus paid for example in December, will usually only count for the December reference period
Commission/Incentive Payments Based on Performance
Accommodation Allowances
Allowances Paid by HMRC Dispensation Agreements
 

EXAMPLES OF EXCLUDED PAYMENTS

Benefits in Kind
Loans Given by the Company
Advances of Wages
Pension Payments
Lump Sum Payments on Retirement
Redundancy Payments
Tribunal/Settlement Awards
Premiums Paid for Overtime/Shift Work
Expenses
Tips and Gratuities

What About Deductions From Pay?

Certain deductions from a worker’s pay can reduce their pay for NMW purposes, including deductions made by a company in respect of expenditure in connection with carrying out their duties (e.g. the cleaning or purchase of uniforms). After these deductions have been taken into account the worker must still be left with at least the NMW.

Another famous retailer, Monsoon, was ordered to pay more that £100,000 to its employees in 2015 as a result of its practice of requiring staff to wear Monsoon clothes at work and deducting the discounted cost of the clothes from their wages. After the deduction, staff were left with less than the NMW.

Conversely, certain deductions do not reduce a worker’s pay for NMW purposes such as a deduction permitted by the contract between the Company and the worker due to misconduct.

In the case of Sports Direct, it has been reported that deductions were made from workers’ pay for lateness. If the deductions were not permitted by contract, the deduction would reduce the workers’ pay for NMW purposes.

A deduction of this nature could also amount to an unlawful deduction of wages, allowing the worker to bring a claim in the Employment Tribunal.

What Is Classed As Working Time?

Finally, a key issue for the Sports Direct case is what is actually classed as working time?

Working time is defined as any time during which a worker is working, at their employer’s disposal and carrying out their duties. There has also been recent case law demonstrating that, for those workers without a fixed placed of work, travelling time to their first assignment of the day and travelling time from the last assignment of the day may count as working time.

Against this legal backdrop, should the time spent by Sports Direct workers undergoing compulsory security checks be considered working time that is counted for NMW purposes? It is highly likely that the answer to this question is “yes”.  This is because workers are not free to leave the company’s premises until the compulsory security checks are completed.

How Can Your Company Avoid A Similar Fate?

Those companies operating in sectors where payment of the minimum wage is prevalent often adopt a proactive stance and schedule annual reviews to ensure legal compliance in this respect. These reviews can be linked to annual pay reviews or can form part of wider audits which align HR strategies to deliver the businesses’ objectives.

In any event, and at the very least, all companies need to:

  • have an awareness of the current NMW rates which are updated twice a year;
  • understand what payments can be included for NMW purposes; and
  • understand what counts as working time for NMW purposes.

This then enables a company to identify any risks which may arise on the back of the publicity surrounding high profile NMW cases such as Sports Direct; at the very least this will enable that company to tackle those risks head on.

CONTACT DETAILS:

If you would like more information on this topic, audits or would like to discuss a specific concern in relation to your business, please contact us:

Call: +44 (0) 808 172 93 22     Email: fgmedia@fgsolicitors.co.uk

This update is for general guidance only and does not constitute definitive legal advice.

Apprentices – Four Reasons and a Risk

160607 Apprenticeship Training CareerSUMMARY: Four reasons to engage an apprentice and how to overcome the main risk

The government has been encouraging employers to engage apprentices and many employers are now seeing the benefits of them.

Four key benefits

1. National Insurance Contributions (“NICs”)

Since 6 April 2016, employers do not have to pay class 1 NICs for apprentices who are earning less than £827 a week (£43,000 a year) and are:

  1. under age 25; and
  2. following an approved UK government statutory apprenticeship framework.

Specific evidence is needed to show that these two requirements are satisfied. For example, an appropriate agreement.

 2. Apprentice rate minimum wage

If the apprentice is in the first year of their apprenticeship or is under the age of 19, employers can pay the apprenticeship rate, which is currently £3.30 per hour.

3. Gain skills in areas your organisation needs to grow

Organisations will be constantly considering and implementing new ways to grow.  Apprentices can be a cost effective way of supporting the larger strategic aim.

4. Funding

There could be funding available from the Skills Funding Agency to your business to support apprenticeship programmes.  Further information can be found at www.gov.uk/government/organisations/skills-funding-agency

Risks

The intention is for the apprenticeship relationship to be a positive and beneficial one for the organisation and the individual. However, not all working relationships will be harmonious.  If things do not work out, employers need to be able to address problems and ultimately dismiss individuals both fairly and lawfully if problems subsist; this is often where the risk lies.  Why?  Apprentices can have enhanced rights on dismissal, which limits the ability to terminate the agreement without potentially a significant financial liability.

Having the right agreement in place lowers the risk by ensuring an apprentice can be dismissed in the same way as an employee.

More Information

For more information on apprenticeships and how you can make them work for you, please visit: http://www.fgsolicitors.co.uk/news/apprenticeships-make-them-work-for-you/

Alternatively, if you would like more information on other contract essentials, please visit: http://www.fgsolicitors.co.uk/news/contract-essentials/

Contact Details

If you are considering recruiting an apprentice and want to benefit from the above advantages, without worrying about the risk, please contact us:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

FG Solicitors’ quick guide to key payments by employers

As part of our popular “quick guides” series, our team of employment law experts has produced an easy to use guide to key payments by employers. For more comprehensive advice on payments which should be made as well as when employees qualify for them, please contact a member of our team using the details below.

STATUTORY WEEKLY PAYMENTS DURING ABSENCES FROM WORK

April 16

Maternity/adoption pay prescribed rate (max)

£139.58

Paternity pay (max)

£139.58

Shared parental pay (max)

£139.58

Sick pay

£88.45

Lower earnings limit  (a)

£112.00

 

NATIONAL MINIMUM WAGE RATES (HOURLY)

April 16

October 16

Apprentices  (b)

£3.30

£3.40

Age 16-17

£3.87

£4.00

Age 18-20

£5.30

£5.55

Age 21-24

£6.70

£6.95

National Living Wage (Age 25+)

£7.20

£7.20

 

KEY COMPENSATION LIMITS

April 16

Week’s pay

£479

Statutory redundancy payment: up to 30 weeks’ pay

£14,370

Unfair dismissal basic award: up to 30 weeks’ pay

£14,370

Unfair dismissal compensatory award  (c)

£78,962

Breach of right to be accompanied: up to 2 weeks’ pay

£958

Breach of flexible working regulations: up to 8 weeks’ pay

£3,832

Failure to give written particulars of employment: 2 or 4 weeks’ pay  (d)

£958 or £1,916

Breach of contract claim in employment tribunal

£25,000

Failure to inform or consult: collective redundancy  (e)

90 days’ pay

Failure to inform or consult: TUPE transfer  (e)

13 weeks’ pay

…….

Key:

(a). To qualify for these payments, in addition to other criteria such as length of service, the employee must earn the same or more than the weekly lower earnings limit (“LEL”), which is set by the government. The LEL from April 2016 is £112.00 before tax.

(b). Only applicable to those under 19 or in the first year of their apprenticeship. For all other apprentices, refer to age bands.

(c). Maximum compensatory award is lower of statutory limit or 52 weeks’ actual gross pay at the time of dismissal. Limit does not apply where reason for dismissal or redundancy selection is carrying out health and safety activities or making a protected disclosure.

(d). Please see our guide to essential contracts.

(e). Calculated by reference to employee’s actual gross pay – the limit on a week’s pay does not apply.

Contact Details

For more details about amending handbooks or contracts of employment or consulting with your workforce please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

FGazette July 2015

FGazette NewsletterFor all the latest updates on government actions in regards to trade unions, employment tribunals with a focus on settlement agreements and engaging your workforce please follow the link in the image.

Please forward the FGazette to any of your colleagues and contacts to whom you feel it may be of benefit.

If you have any problems viewing this link, please contact us on 0808 172 93 22 or fgmedia@fgsolicitors.co.uk

Zero Hours Contracts Exclusivity Proposals

FG Solicitors -  Zero Hour ContractSUMMARY: The government has proposed a ban on exclusivity clauses in zero hours contracts supported by draft regulations aimed at preventing employers from circumventing the ban.

Background

The government has decided to ban exclusivity clauses in contracts which do not guarantee hours of work (zero hours contracts). There is a clause in the Small Business, Enterprise and Employment Bill (“SBEEB”) which would render the use of exclusivity clauses in zero hours contracts unenforceable.

The government’s most recent consultation included consideration of how to prevent employers seeking to avoid the ban on exclusivity clauses.  The government will have powers under the SBEEB to make regulations to deal with avoidance of the ban, widen the scope of who should be protected by the ban and provide routes of redress for an affected individual.

The government was concerned that if the ban solely related to exclusivity clauses in zero hours contracts, employers could avoid it relatively easily by guaranteeing workers, for example, 1 hour of work per week.

Although originally there were suggestions that zero hours contracts should be banned entirely, this is no longer proposed.

Proposals

The proposed anti-avoidance regulations deal with the following:

a)    Introducing a right for zero hours workers (or low income workers – see below) not to suffer detriment on the grounds that the worker has done work or performed services under another contract or arrangement.

b)    The prohibition on exclusivity clauses in zero hours contracts would extend to all contracts of employment or worker’s contracts under which the individual is not guaranteed a certain level of weekly income.  This is to address the concern that employers would avoid the ban by offering workers a very low minimum number of hours.

The weekly income threshold would be set in the following way:

[Y] number of hours per week multiplied by the adult national minimum wage (currently £6.50 per hour).  We do not know what “Y”, the number of hours per week, is at this time and therefore do not know what the threshold will be.

If, for example, Y is set at 10 hours per week, the weekly income threshold will be 10 x 6.50 = £65.00.  If a worker earned £10 per hour and was guaranteed work for 6 hours per week, they would fall below this threshold and so the prohibition on exclusivity clauses would apply.  If the same worker was guaranteed 7 hours per week, they would be above the threshold and therefore the employer could require them to work exclusively for them.

By way of another example, if an employee aged 16 was paid £3.79 per hour in accordance with the national minimum wage, they would have protection under the proposals if they worked up to 17 hours per week (based on the example of a £65 weekly income threshold).

c)    If the worker’s hourly rate of pay is at least £20 it would not matter how many hours they worked – the ban on exclusivity clauses would not apply to them.  This means, using the above example, that if a worker earning £20 per hour was guaranteed work for 3 hours per week they would be earning under the amount set out in the threshold above (£65).  However, the employer could still demand that they work exclusively for them because they are being paid £20 per hour.

d)    The affected worker would have 3 months (plus appropriate ACAS early conciliation time) after suffering a detriment for working under another contract/arrangement to bring a claim in the employment tribunal and receive compensation.  The employment tribunal would also be able to impose financial penalties in certain cases.

The government has also indicated it will improve its guidance on zero hours contracts.

Practical steps

Businesses may be concerned about their ability to engage the staff they need and have a flexible workforce if these proposals come into effect.  In particular, if workers fall below the low weekly income threshold, businesses will not be able to prevent them from working for direct competitors. There are a number of practical steps that businesses could take to evaluate and mitigate possible adverse effects from the proposals and ensure future compliance once these proposals are finalised and a date set for them coming into force.

For now, businesses should be aware that if they have exclusivity clauses in their contracts and engage low income workers, these proposals are likely to affect them.  If businesses are not concerned about exclusivity, these proposals should not concern them.

Businesses could also put in place procedures for ensuring that reasons are noted for choosing not to offer work to workers who are not guaranteed work (or only guaranteed a small number of hours of work).  This is because if the reason an employer does not offer a worker (whose guaranteed income falls below the weekly income threshold) work is that they have worked for another business, the worker could bring a claim on the basis they have suffered a detriment, under the proposals.  Such procedures would be useful in any event in relation to defending potential discrimination claims.

Businesses could also be checking whether they are offering the appropriate benefits, including holiday entitlement, to workers with no or few guaranteed hours.

Only proposals

It is important to remember that these are proposals and, particularly given the imminent general election, they may not come into force and/or they may be substantially amended.  No date has been set for this legislation to come into force.  It is also unknown when guidance on zero hours contracts will be reviewed or improved.

There is considerable uncertainty in relation to the level of the weekly income threshold, which is likely to ultimately determine the extent of the impact of these proposals on businesses.

What are the next steps?

We will keep businesses informed as to the likely date legislation will come into force and any amendments to the proposals including the likely level of the weekly income threshold.

Businesses who have exclusivity clauses in contracts are likely to require advice on varying these when and if the proposals come into effect.

If you would like any advice on taking any of the practical steps outlined above, please contact us using the details below.

Contact Details

For more details about the proposals on banning exclusivity in zero hours contracts and advice on practical steps businesses can take please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

National Minimum Wage Increases

coins-123rf-ref-47388381Summary: Employers should be aware that from 1 October 2014 changes to the national minimum wage will come into effect.

The Changes

The Government has announced the following changes to the national minimum wage which will take effect from 1 October 2014:

From 1 October 2013 to 30 September 2014

From 1 October 2014

Standard Adult Rate

£6.31

 £6.50

Development Rate

£5.03

 £5.13

Young Workers Rate

£3.72

 £3.79

Apprenticeship Rate

£2.68

 £2.73

The Categories

The Standard Adult Rate

This rate applies to workers aged 21 or over.

The Development Rate

This rate applies to workers aged between 18 and 20 inclusive.

The Young Workers’ Rate

This rate applies to workers aged below 18 but above the compulsory school age who are not apprentices.

 Apprenticeship Rate

This rate applies to all apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship.

Contact Details

For more details about the minimum wage changes please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 1604 871143

This update is for general guidance only and does not constitute definitive advice.

National Minimum Wage Increases

Coins (123rf ref 4738838)

Summary: Employers should be aware that from 1 October 2013 changes to the national minimum wage will come into effect.

The Changes

The Government has announced the following changes to the national minimum wage which will take effect from 1 October 2013:

From 1 October 2012 to 30 September 2013

From 1 October 2013

Standard Adult Rate

£6.19

 £6.31
Development Rate

£4.98

 £5.03
Young Workers Rate

£3.68

 £3.72
Apprenticeship Rate

£2.65

 £2.68

The Categories

The Standard Adult Rate

This rate applies to workers aged 21 or over.

The Development Rate

This rate applies to workers aged between 18 and 20 inclusive.

The Young Workers’ Rate

This rate applies to workers aged below 18 but above the compulsory school age but who are not apprentices.

Apprenticeship Rate

This rate was introduced in October 2010 and applies to all apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship.

Contact Details

For more details about the minimum wage changes please contact:

fgmedia@floydgraham.co.uk

+44 (0) 1604 871143

This update is for general guidance only and does not constitute definitive advice.