Some of you may have read recently that Iceland Foods appear to have been given an unwanted Christmas present from HMRC in the form of a demand to pay £21m in back pay, with potential penalties to follow, for failing to adhere to minimum wage regulations. Some might snap to the conclusion that this is a case big a business flouting with the rules, but if the news stories are to be believed, it may be far from it.

From April 2019 the National Minimum Wage is as follows:

Age Rate
25 and over £8.21
21 to 24 £7.70
18 to 20 £6.15
Under 18 £4.35
Apprentice £3.90

The top rate for those 25 and over is also known as the National Living Wage.

Care does however need to be taken, as items such as:

  • payments made for the employer’s own use or benefit, such as paying for the employees travel to work,
  • things the worker bought for the job and is not refunded for, such as tools, uniform, safety equipment,
  • tips, service charges and cover charges, and
  • extra pay for working unsocial hours on a shift,

must not be included in minimum wage calculations. Importantly, many other employment benefits, such as childcare vouchers and a company car, are also excluded even if they form part of a salary sacrifice arrangement. Living accommodation provided by the employer can be included however.

The Iceland case appears to revolve around two issues. Whether voluntary deductions into a Christmas club saving scheme were ‘for the employer’s benefit’ and whether the expense incurred by employees when purchasing ‘sensible shoes’ should be regarded as uniform costs not refunded.

The Christmas club deductions appear to be entirely voluntary, are reported as being held in a ringfenced account managed by independent trustees and are repayable to the employee at their demand. I’m struggling, as many others are, to see where the breach is here. Iceland appear likely to challenge this point.

The shoes matter could be less clear depending on the exact requirements put on the employees. Avoiding inappropriate flipflops or platform soles in the workplace is different to specifying a particular shoe type, but where is the line drawn?

As always, best practice is to take professional advice, especially if you are paying at or near National Minimum Wage levels or operate any form of salary sacrifice or pay deduction scheme.

This article originally appeared in the February/March edition of Wiltshire Business