The business and advisory firm states that the number of businesses being investigated for minimum wage offences has risen but the firm says that this is often a result of commonplace practices such as salary sacrifice schemes and employee workwear policies inadvertently dragging employee pay under the minimum wage threshold.
The warning comes as HMRC intensifies its focus on minimum wage breaches, which has included a 99% increase in its enforcement budget to £26.3m since 2016 and growth in the number of minimum wage enforcement officers from 330 in 2017 to more than 450 in 2021.
The government has also increased the potential penalties facing businesses found to have underpaid their employees, which have risen from 50% of the arrears owed to workers in 2014 to 200% of the underpayment today.
In 2019-2020 this led to over £18.5m in penalties over 3,300 closed investigations.
Grant Thornton states that currently, 60% of minimum reviews originate from current workers, ex-workers, or third parties making complaints to HMRC.
Michelle Perry, associate director, employer solutions, Grant Thornton said: ‘National minimum wage compliance is under the microscope right now and due to the myriad of challenges facing businesses it’s inevitable that some finance teams, even those with the best of intentions, could be caught out.
‘The government is encouraging at-risk workers to check their hourly rate of pay as well as any deductions or unpaid working time. A common way for employers to be unknowingly non-compliant is through employee benefits and salary sacrifices such as pension contributions. This is because they mean a reduction in base pay, and if it falls under the national minimum wage then it’s not legal.
‘Situations like this are often where employers unknowingly slip up, as it’s not done to put the employee at a disadvantage but it’s still illegal, therefore either the pay has to increase or the employee taken out of the salary sacrifice scheme.’
The firm says that certain sectors can have specific issues that are more likely to cause a wage to drop under the minimum. Within the retail and hospitality businesses where a uniform is required, if a uniform cost is met by the worker and the employee falls under the minimum wage because of it then the employer could be penalised.
The firm highlighted one case where a restaurant chain asked staff to wear black jeans or a skirt with a branded top and ended up having to repay an average of £50 to 2,630 employees.
Perry continued: ‘There are a lot of other issues that can arise as part of the average working day which could cause a minimum wage issue, such as time records not capturing all time actually worked, clocking in systems that round down, the smoothing of variable pay and failing to account for the time taken to perform actions such as security checks, putting on personal protection equipment or undertaking training.’
Grant Thornton warns that as businesses deal with an increased workload due to the Covid-19 pandemic as well as ‘building back from the lockdown’ then there could be an increase in those who have failed to identify policies that break the national minimum wage legislation.
The firm also highlighted that the several legislative changes which happened in April could have increased an employer’s liability if they were not accounted for, these include post-Brexit temporary transitional powers, the re-categorisation of workers, and changes to salary premiums.
Perry concluded: ‘It’s vital that employers review their policies and ensure that they are compliant, as otherwise they risk being penalised. HMRC will not accept ignorance as an excuse and even if there was no intent to underpay workers they will still be charged.'
