Are you being paid the National Minimum Wage?
Many students will be working part-time during the summer break; they need to ensure they are receiving proper pay for their hard work under the National Minimum Wage (NMW) laws.
Earlier this year, the Government implemented new penalties for rogue employers who break the law and do not pay the NMW.
The maximum penalty has gone up from £5,000 to £20,000. As well as higher penalties, there are plans to name and shame employers who fail to pay what their workers are due. This move is important for low paid workers, many of whom are students. It comes after an HMRC report, published late last year, showed that 48% of employers in an industry synonymous with low pay – the social care sector - were not complying with the NMW.
There are several well-known tricks that employers use to sidestep the rules including: using tips to make up the NMW; wrongly classifying employees as volunteers; paying cash-in-hand so that hours and wages go unrecorded; and asking employees to say they are self-employed.
However HMRC’s report provided insight into some other employer practices resulting in underpayment of the NMW. Many of the issues identified are relevant to all low paid workers, not just those working in the social care sector, so we thought it would be useful to summarise them for you. First though, we will start with a reminder of the basics of the NMW.
The NMW provides a legally binding minimum hourly rate of pay for most workers over compulsory school leaving age. The rates are reviewed each year and usually increase from 1st October each year. The rates of NMW can be found in our working section and are currently:
- Workers aged 21 and over: £6.31
- Workers aged 18-20: £5.03
- Workers aged 16-17: £3.72
- Apprentices aged under 19 or over 19 and in their first year of their apprenticeship: £2.68
There are a few exceptions to the rules which concern students (for example those relating to work experience or internships) and details can be found here.
Even so, the vast majority of student workers should be paid the NMW.
Common reasons for NMW non-compliance as highlighted in the HMRC report
Some deductions from pay have the effect of bringing pay below NMW rates. Where things provided by an employer are necessary for a worker to do his or her job, such as a uniform or equipment, the employer must pay the worker at least the NMW rate in addition to recouping the costs of the uniform or equipment.
Example: Worker A is paid £7 an hour for 40 hours per week. The worker has earned £280 but then a deduction of £35 is made for a uniform that he has been given, so he only received £245 (or the equivalent of £6.12 an hour) which is below the NMW.
Where workers undergo training (for example – employment induction or skills development) the time spent on such activities is working time for NMW purposes where a contract of employment has started or where it is a contractual requirement for the worker to attend the training. Where prospective workers attend pre-employment induction events to assess their suitability for employment or as part of the job application process, then this would not count.
Whilst it is not a requirement under NMW law for an employer to make separate payments to workers for travelling time, workers should be paid at least the NMW rate for all hours worked, including travel time (which means travelling in connection with work, not travelling from their home to place of work).
Example: Worker B is paid weekly. Last week she was paid £6.35 per hour for 30 hours work (£190.50) However the worker spent 45 minutes driving to a meeting, so the minimum amount to be paid to the worker should be £6.31 x 30 hours, 45 minutes = £194.03. Worker B has been paid below the NMW.
Some employers reward workers with enhanced rates of pay – for example at weekends. A worker’s basic rate of pay, before enhancement, should not fall below the NMW – being paid an inflated rate for working on a Sunday for example, cannot be used to disguise a low rate for the rest of the week.
Example: Worker C is paid weekly. Last week she was paid £200.60 for 31 and half hours work. On the face of it, this looks like it meets the minimum wage, but actually, eight of the hours were paid at £7.42 for a Sunday shift, which means that the wages in respect of the other ‘normal’ 23.5 hours were only £141.24. This is below the NMW.
Other common reasons for underpayments were:
Using rates of pay below the NMW rate due to that worker, such as not applying October rate changes or adjusting young workers’ pay when they have a birthday, and the incorrect use of apprentice rates.
Many students work for low pay, so knowing about the NMW is important. It can also be helpful to keep full records of the precise hours you have worked in case of any problems. There is more information on the NMW and what to do if you think you are not getting the wages you are entitled to on our NMW factsheet.