Minimum wage increases and deductions: A useful update for employers
The Chancellor, Rishi Sunak, announced as part of the budget (27 October 2021) that the national minimum wage rates would increase from 1st April 2022 to:
- National living wage for over-23s: £9.50 an hour
- National minimum wage for those aged 21-22: £9.18
- National minimum wage for 18 to 20-year-olds: £6.83
- National minimum wage for under-18s: £4.81
- The apprentice rate: £4.81
Those employers paying employees the national living or minimum wage need to be aware and prepare for this increase.
Augustine v Data Cars
The employment appeal tribunal (EAT) recently decided the case of Augustine v Data Cars Limited on the issue of deductions and the national minimum wage. The timing of the judgment is apt given the recently announced increase.
The case provides a clear example of when payments an employee makes to their employer (for whatever purpose) are treated as a deduction from their wages. If those deductions take the rate of pay below the national living or minimum wage then the employer will be in breach of its obligations.
In this case, Mr Augustine was a taxi driver and an employee of Data Cars Limited. As an employee, Mr Augustine was entitled to receive national minimum wage at the appropriate rate. Mr Augustine rented both a car and a uniform from Data Cars Limited. It should however be noted that he did not have to do this – he could have supplied his own vehicle and he was not obliged to wear a uniform. That being said, if Mr Augustine wanted to be designated as a “gold driver” he needed the uniform – Mr Augustine chose to be a “gold driver” and therefore needed the uniform.
At the end of Mr Augustine’s employment, he claimed that the rental costs of the car and the uniform should be deemed to be deductions and that, once deducted, he had not received the national minimum wage from Data Cars. Data Cars argued that the car and uniform rentals were optional and therefore should not be considered as deductions to Mr Augustine’s wages.
The EAT agreed with Mr Augustine. It stated that regulation 13(1)(b) of the National Minimum Wage Regulations 2015 stated that for a payment to constitute a deduction it needed to be made “in connection with employment”.
The car and uniform rental costs were deemed to be in connection with Mr Augustine’s employment. The fact that the cost was not a requirement of employment did not matter.
The case is a useful reminder to employers who make deductions from employees’ wages to ensure that if they make deductions in connection with employment that after the deductions the employee still receives at least the relevant national minimum wage rate.
Deductions can be made from employees’ wages due to conduct or other events and not to have the effect of pay falling below the national minimum wage.
Some examples of wage deductions are:
- Previous accidental overpayment of wages
- Failure to return company property at the end of employment
- Damage caused by an employee to company property (provided the employment contract allows for this)
- Payment of tax and national insurance
If you are an employer and need some clarity on minimum wage rates, deductions or any other aspect of employment law, then contact our specialist team today. Call 01752 203500 or email me directly via robert.zacal@GAsolicitors.com.
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