Reasons for not paying minimum wage

Last week the Government named and shamed 360 employers who are underpaying their employees. Top of the list was Debenhams were nearly 12,000 employees were short-changed.

Some of the more generic excuses for underpaying employees included:

• Pay is topped up with tips
• Wages were docked to pay for their Christmas Party
• Wages were docked to pay for their uniform

However, some more imaginative excuses included:

• “It's part of UK culture not to pay young workers for the first three months as they have to prove their worth first.”
• "I thought it was OK to pay foreign workers below the national minimum wage.”
• "She doesn’t deserve the national minimum wage because she only makes the tea and sweeps the floors.”
• "I’ve got an agreement with my workers that I won’t pay them the national minimum wage; they understand, and even signed a contract to this effect.
• "My workers are often just on standby when there are no customers in the shop; I only pay them for when they’re actually serving someone.”

The national minimum wage and national living wage (those over 25) will increase from 1 April 2017. If employers wish to avoid being named and shamed, they need to familiarise themselves with new rates and make plans to amend payrolls where necessary. 

National minimum wage rates from 1 April 2017.

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Why your business needs contracts of employment

The contract of employment is one of the most important documents any employer will deal with, it is the cornerstone of the employer / employee relationship. Unfortunately however, this essential document is often neglected or feared, particularly by busy, small employers.

Below are some of the key points employers need to know about contracts of employment.

• A legal obligation: all employees must receive a written statement of their terms and conditions within two months of starting employment. Legislation sets out certain terms that must be put in writing:
• Name of employer & employee
• Date employment and continuous employment started
• Job location
• Pay and pay frequency
• Working hours
• Holiday entitlement
• Details of job and job title
• Details of any collective agreement
• Possible fines: in the event of an employment tribunal, if a business is found to have not issued a complete contract they could face a fine of up to a month’s pay.
• Employer Protection: additional clauses can be included in the contract that can protect your business’ interests.
• Short-time working or lay-off: if inconsistent demand for work is a factor in your business this clause may help you manage staff levels.
• Notice on termination: legislation requires employees to give their employers 1 weeks notice if they intend leaving employment. Would this be enough for your business to find alternative cover and schedule a proper hand-over? If not you can include longer notice periods in the contract.
• Confidentiality: if your employee will have access to confidential information or any trade secrets you may need to consider protecting the use of this information through a confidentiality clause.
• Restrictive covenant clauses: are you fearful that ex-employees might set up in competition to you, or work for a competitor, putting your business in jeopardy? If so, restrictive covenant contract clauses can help protect your business.

Having appropriate contracts of employment will not only ensure your business is legally compliant, but it will also make clear to employees what their rights are and what is expected of them, ultimately helping to protect your business in times of disputes or conflict.

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Bright Contracts - Employment Contracts and Handbooks