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An updated look at National Minimum Wage policy

Posted on 22 June 2022

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The Department for Business, Energy and Industrial Strategy (BEIS) released an updated policy paper on 15 June 2022, entitled "National Minimum Wage: policy on enforcement, prosecutions and naming employers who break National Minimum Wage law".

Perhaps most notably for employers, unless exceptional circumstances apply, the Naming Scheme continues to operate since its reintroduction in 2020 (see A message for employers: HMRC continues to enforce (mishcon.com) for more information). 

However, a key development relates to the issue of "sleep-in shifts", which addresses the changes for workers who are permitted to sleep during their shifts. This follows the outcome of the joint court cases judgment released on 19 March 2021 (Royal Mencap Society v Tomlinson-Blake and Shannon v Rampersad [2021] UKSC 8), in which the Supreme Court clarified that sleep-in workers are only working and eligible for minimum wage when they are 'awake for the purpose of working' and therefore not entitled to minimum wage when they are permitted to sleep during working hours. However, the policy paper is a reminder to employers that the outcome of Royal Mencap applies on a case-by-case basis and on individual facts and it is imperative to consider what an employee's contract provides and what occurs in practice.

The 2020 policy paper presented the Secretary of State's directions regarding penalties, which stated that there were specific circumstances in which a Notice of Underpayment (NoU) should not impose a penalty (which is adopted in the latest policy paper). Importantly, the Secretary of State identified a number of circumstances where underpayments would not be subject to financial penalties, including a reduction by an employer of a worker's pay in accordance with salary sacrifice schemes (unless the sacrifice was made in order to comply with a requirement imposed by the employer in connection with the worker's employment). The updated guidance further confirms that employers who are eligible to have their financial penalty waived will not be considered for naming under the BEIS Naming Scheme (see Section 5.3 National Minimum Wage Naming Scheme from 2020 onwards). Whilst BEIS expresses its intention to support employers to ensure minimum wage is paid correctly, HMRC remains committed to enforcement action against employers if they are not compliant with the NMW Regulations and have extensive powers to do so.  

This is a timely reminder that employers should remain vigilant in carrying out necessary checks across the business, adopting protective measures and maintaining sufficient record-keeping. As ever considering whether self-correction is necessary where underpayments have been identified is crucial. Proactively identifying a potential underpayment can avoid the risks of being issued a NoU, 'naming and shaming' and the related negative publicity, and significant penalties of 200% of arrears owed to workers potentially going back six years. 

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