People Management, the magazine issued by the Chartered Institute for Personnel and Development, recently issued a news item with the headline “Workers denied minimum wage receive £4m in back pay”. When we read the headline we were surprised that so many businesses were not paying the correct minimum wage rates as they are easy to find and when they change there is usually a great deal of press about the fact. However, the headline didn’t tell the whole story.
HMRC has clamped down on businesses who pay the correct hourly rate but who adopt working practices which mean that overall the employee does not receive the correct pay rate.
Examples of Business Practices which can Impact on Pay Rates
As an example given by HMRC when they made their announcement, businesses required staff to arrive 30 minutes before their shift starts or work 30 minutes after their shift ends so as to undertake opening or closing activities. Another example was where a large fashion retailer had required employees to purchase items from their range as uniform.
The HMRC deemed that both of these practices amounted to employees being paid less than the minimum wage and issued orders to the companies involved to make back payments to impacted staff.
The Grey Area of Unpaid Interns
There has been a great deal in the press this year regarding the issue of unpaid interns, and campaigners have handed a list of companies to MPs who they feel are breaking the law by using unpaid interns. HMRC are now investigating 100 firms regarding this matter.
It was always felt that internships offered graduates and school leavers valuable experience and therefore providing them with work experience whilst not paying them was deemed to be acceptable. However, more and more interns are undertaking activities which would see them classed as ‘workers’ and, therefore, they would be covered by national minimum wage rules and other employment rights.
How do You Determine if you Should Pay an Intern?
When the courts consider whether an intern was, in fact, a ‘worker’, they look at a number of factors:
- Was the intern required to work set ours?
- If no intern had been available, would a paid employee have been needed to undertake the activity?
- Was the intern left to work unsupervised?
- Was the intern required to manage staff?
If the answer is ‘yes’ to any of the above questions then it’s likely that the intern would be deemed to be a worker and would, therefore, need to be paid at national minimum wage rates.
Make Sure Employees are Paid for All Hours They Work
- if you’re paying minimum wage rates then you need to make sure that employees are paid for each and every hour that they are required to work, otherwise you’ll quickly find that individuals are no longer being paid at the correct level;
- if your business uses interns then you need to be very careful if you chose to not pay them.