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Smaller employers sometimes struggle with the calculation of the national minimum wage (NMW).

Areas like differing rates, age issues, apprenticeship rules and the national living wage all add to the complexities of complying with payroll administration.

However, recent reports show that ‘household name’ employers can also get it wrong. The latest big name to announce problems with NMW was the John Lewis Partnership.  In its recently published annual report the chairman’s statement revealed that:

Since announcing our unaudited profit before tax on 9 March 2017, a further exceptional charge of £36m has been recorded for the year ended 28 January 2017. We have identified that some of our pay practices, though designed to help Partners, have technically not complied with the National Minimum Wage (NMW) Regulations.

The £36m exceptional charge principally relates to payments that are required to be made to recipient Partners and former Partners for the previous six years.

We are now required to make good those amounts.

The full report is available here.

The John Lewis Partnership famously treats its current and former workers as partners and operates a pay practice which levels out income to ensure staff receive the same monthly salary, regardless of how many hours they work each month. So this policy, designed to help workers, fell foul of the NMW laws because of timing issues.

Other large companies that have recently hit the NMW headlines in 2017:

In March 2017, Tesco contacted many employees to inform them of underpayments made which were discovered during a review of the wages system. The error was reported to be around £10m in total and was blamed on a technical error relating to staff contributing part of their salary to pensions, childcare and cycle to work schemes.

Argos has been fined after an HMRC investigation revealed that underpayments had been made of around £2.4m. These related to time spent by the workers in briefings and security searches before or after their normal shifts.

Debenhams were also named and shamed by HMRC after an investigation found that due to technical errors underpayments were made to nearly 12,000 of its workers.

Tip of the iceberg

Unfortunately these high profile companies only represent a fraction of the employers who get the calculations wrong.

In February 2017 the government published a ‘name and shame’ list of more than 350 employers who had not paid the national minimum or living wage.

The Department for Business, Energy and Industrial Strategy named 359 businesses which underpaid 15,513 workers a total of £994,685, with employers in the hairdressing, hospitality and retail sectors the most prolific offenders.

As well as recovering arrears for some of the UK’s lowest paid workers, HMRC issued penalties worth around £800,000.

The full list includes a mix of large/small companies and shows that size is not a barrier to falling foul of the NMW regulations.

Article from ACCA In Practice