An Overview of the National Minimum Wage for Employers and Employees

Ioana Jelea, solicitor in our employment team, explores the recent reports about UK companies failing to pay their workers the national minimum wage (“NMW”) and discusses the legal implications and consequences faced by employers found to be in breach of the legally mandated minimum wage requirement.

The UK government has fined more than 200 companies, including industry giants Marks & Spencer, WH Smith, Lloyds Pharmacy and Argos, for failing to pay their workers the national minimum wage.

The companies in question were found to have underpaid their staff by a combined amount of around £4.9 million and as a result paid a total of £7 million in fines for the breaches.

The National Minimum Wage Act in the UK

The National Minimum Wage Act 1998 was introduced to strengthen the rights and protections of workers. The NMW is increased annually and sets the minimum hourly rate which employers must legally pay their workers.

Factors in Non-Compliance with the NMW

The government found that common factors contributing to employers’ breach of the NMW Act include:

  1. Deductions from workers’ wages, which reduce NWM, for items such as uniforms and expenses.
  2. Failure to pay for overtime.
  3. Failure to pay correctly for time deemed as work, such as mandatory training, travel time and trial shifts.
  4. Paying the incorrect NMW rate, for example by not increasing NMW pay in line with the annual NMW increase.
  5. Failure to pay apprentices at the correct NMW rate.

Legal Implications and Consequences

Employers found in breach of the NMW Act may face significant legal repercussions. The consequences faced by employers for underpayment of the NMW include:

  1. Formal and/or legal action by underpaid workers – workers who have suffered an underpayment of NMW can raise a formal grievance to their employer, complain to HM Revenue and Customs or bring the following claims against their employers:
  • Unfair dismissal or detriment.
  • Unlawful deduction from wages.
  • Breach of contract.
  1. Financial penalties – employers found to have not paid their workers the NMW can face substantial fines – currently up to a maximum of £20,000 per underpaid worker.
  2. Reputational damage – the government’s annual ‘name and shame’ scheme puts negative spotlight on employers found to be in breach of the NMW legal requirement and can result in significant damage to the employers’ reputation. This is intended to promote awareness of NMW enforcement and ensure compliance with the law.
  3. Criminal prosecution – in limited cases, employers can face criminal prosecution. This can occur if employers persistently refuse to comply with the law and to co-operate with the compliance officers.

As an employer, if you find that you may have paid your workers below the NMW, it is important to rectify this immediately and seek legal advice on your position to avoid or minimise any legal repercussions.

As an employee/worker, if you find that you have been subjected to an underpayment of the NMW, you may wish to be advised on your rights and your employer’s obligations to ensure that you are properly compensated.

Whether you are an employer or employee/worker dealing with a NMW issue, our team of specialist employment solicitors is more than happy to discuss your situation with you. Please get in touch by telephone, email or submit a website enquiry.

If you wish to discuss any of the above, our team of specialist employment law solicitors are more than happy to help. Please be in contact by telephone or email at or on 020 3940 3789.

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