Minimum Wage Compliance

It has been reported in the press that Iceland Foods is to challenge a ruling by HMRC concerning two matters which impact upon the minimum wage legislation. Both of the issues may have impact upon motor dealerships in particular as well as the workplace overall.
 
The first concerns the deduction by the employer of money from an employee’s wages as part of a Christmas savings scheme. The monies were withheld lawfully and each of the individuals involved received all of the funds in due course at Christmas. However, HMRC stated that the deduction of the monies meant that the employer “was technically paying below the minimum wage”.
 
The relevance of this issue is not so much the issue itself but the fact that HMRC are taking the issue of Minimum Wages seriously even if they appear to  be trying to catch out employers on technicalities rather than taking a collaborative approach with employers to support them with their compliance duties.
 
The second concerns the requirement by Iceland Foods for staff to wear “sensible shoes”. The requirement was supported by the fact that Iceland Foods was prepared to provide shoes to employees free of charge. Many employees declined to wear the free shoes and chose to wear their own shoes. HMRC ruled that if the individual wore his or her own shoes the cost of “sensible shoes” was £20 in each period of 6 months and set off the cost as if it were treated as a necessary expense of the employee for the purposes of determining minimum wage. When doing so several employees were found to be below minimum wages levels.
 
The relevance of this issue is far more important. Whilst HMRC do  not allow the costs of shoes as an expense for taxation purposes, by treating the cost of “sensible shoes” as a necessary expense of the employee for the purposes of determining minimum wage, the question will be what else might be considered to be a necessary expense of the employee for the purposes of determining minimum wage?

“Sir Malcolm Walker, CEO and founder of Iceland Foods described the matter as “just madness” and intends to fight the matter and go to court if necessary. In order to avoid the cost both in terms of time and money, we recommend that all motor dealers take a moment in the early days of 2019 to reflect upon minimum wage legislation compliance before they face a similar challenge.”

Author: Chris Cummings