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HMRC challenging National Minimum Wage breaches regarding uniforms.

If your business pays National Minimum Wage (NMW) or just above the threshold and places a requirement on staff regarding uniform, you could be open to a breach of your NMW obligations. With HMRC challenges increasing, Mark Taylor shares how you can ensure you're fully compliant.

The NMW is not a tax and the Department for Business, Energy and Industrial Strategy (BEIS) is responsible for NMW compliance and enforcement policy. However, HMRC is charged with enforcing the legislation on BEIS’s behalf.

HMRC is targeting the hospitality industry for potential NMW breaches in situations where employers require employees to wear a specific uniform as a condition of their employment. If you the employer requires your staff the worker to purchase specific items, such as overalls, then any deductions made from employee pay or payments made to you (the employer) in respect of those items will always reduce national minimum wage pay.  If a worker makes a payment to a third party for required uniforms,  the payment will also reduce national minimum wage pay since it is expenditure incurred in connection with the worker’s employment.

Most businesses have a dress code on what people must wear to work. This should not be a problem for employers paying significantly above the NMW because the cost of clothing should not reduce wages below it. However, employers who pay workers at or slightly above the NMW need to take care that their dress code could not cause technical breaches of the rules. This is a particular problem for the retail and hospitality sectors.

Where a uniform is not required or where a worker freely chooses to pay for additional items of uniform (over and above the dress requirements of the employment), any payment to the employer or a third party will not reduce national minimum wage pay. The worker can also arrange to purchase optional items from a third party and ask their employer to deduct the cost from their pay and pay the third party on their behalf. The deduction will not reduce the worker’s national minimum wage pay.

Example one: An employer requires its workers to wear a t-shirt with the restaurant’s logo which is purchased from the employer. The purchase (either by payment to the employer or deduction from the worker’s pay) will reduce national minimum wage pay.

Example two: If the worker in example 1 freely chooses to purchase an additional branded t-shirt from the employer, this is not then a requirement of the job. So, a payment for the item would not reduce national minimum wage pay, however, a deduction from the worker’s pay would still reduce their national minimum wage pay.

Example three: A restaurant requires workers to wear a uniform consisting of any black trousers and any white t-shirt. Workers can purchase these from any shop. The cost of purchasing these items will reduce national minimum wage pay since it is a specific requirement imposed on the worker by the employer.

If an employer provides a uniform, any charge the employer makes for ordinary wear and tear to that uniform will reduce the worker’s national minimum wage pay. However, if the worker damages the uniform, loses it or does not return it at the end of the employment, the charge will not reduce national minimum wage pay, provided:

  • the damage, loss or non-return is a result of the worker’s misconduct and
  • the charge is the result of a contractual requirement.

Example four: A worker is required to wear an employer supplied uniform. His contract states he must return the uniform if he leaves the employment and if he does not, the cost will be deducted from his final pay. If the worker fails to return the uniform as required, the deduction will not reduce national minimum wage pay since it is contractual deduction relating to conduct.

HMRC is also specifically targeting footwear where they believe the employer requires an employee to wear specific or uniform shoes. The retailer, Iceland Foods, has been accused of breaching NMW rules in relation to guidance it issued to store employees to wear ‘sensible shoes’. The company provides safety shoes free of charge for those who request them, normally warehouse workers rather than store staff. The latter can, and usually do provide their own footwear. HMRC’s contention is that the pay for store staff who chose to buy their own footwear would have fallen below the NMW in the weeks that the shoes were bought and has said Iceland should refund store staff for two shoe purchases a year, at a notional value of £20 each, going back six years.

NMW investigations should not be under-estimated. The number of investigations opened by HMRC into employers over potential breaches of the NMW increased 43% to 3,975 for the year ending 31 March 2018, up from 2,775 in 2016-17. HMRC identified £15.6m in pay owed to more than 200,000 workers in 2017-18 and imposed fines of £14m. More than 600 employers were ‘named and shamed’ in that period by the BEIS. Non-compliance with NMW, even as a result of a technical breach, can be costly in financial terms but also in adverse media attention.

About the author

Mark Taylor

+44 (0)20 7710 3389
taylorm@buzzacott.co.uk

The NMW is not a tax and the Department for Business, Energy and Industrial Strategy (BEIS) is responsible for NMW compliance and enforcement policy. However, HMRC is charged with enforcing the legislation on BEIS’s behalf.

HMRC is targeting the hospitality industry for potential NMW breaches in situations where employers require employees to wear a specific uniform as a condition of their employment. If you the employer requires your staff the worker to purchase specific items, such as overalls, then any deductions made from employee pay or payments made to you (the employer) in respect of those items will always reduce national minimum wage pay.  If a worker makes a payment to a third party for required uniforms,  the payment will also reduce national minimum wage pay since it is expenditure incurred in connection with the worker’s employment.

Most businesses have a dress code on what people must wear to work. This should not be a problem for employers paying significantly above the NMW because the cost of clothing should not reduce wages below it. However, employers who pay workers at or slightly above the NMW need to take care that their dress code could not cause technical breaches of the rules. This is a particular problem for the retail and hospitality sectors.

Where a uniform is not required or where a worker freely chooses to pay for additional items of uniform (over and above the dress requirements of the employment), any payment to the employer or a third party will not reduce national minimum wage pay. The worker can also arrange to purchase optional items from a third party and ask their employer to deduct the cost from their pay and pay the third party on their behalf. The deduction will not reduce the worker’s national minimum wage pay.

Example one: An employer requires its workers to wear a t-shirt with the restaurant’s logo which is purchased from the employer. The purchase (either by payment to the employer or deduction from the worker’s pay) will reduce national minimum wage pay.

Example two: If the worker in example 1 freely chooses to purchase an additional branded t-shirt from the employer, this is not then a requirement of the job. So, a payment for the item would not reduce national minimum wage pay, however, a deduction from the worker’s pay would still reduce their national minimum wage pay.

Example three: A restaurant requires workers to wear a uniform consisting of any black trousers and any white t-shirt. Workers can purchase these from any shop. The cost of purchasing these items will reduce national minimum wage pay since it is a specific requirement imposed on the worker by the employer.

If an employer provides a uniform, any charge the employer makes for ordinary wear and tear to that uniform will reduce the worker’s national minimum wage pay. However, if the worker damages the uniform, loses it or does not return it at the end of the employment, the charge will not reduce national minimum wage pay, provided:

  • the damage, loss or non-return is a result of the worker’s misconduct and
  • the charge is the result of a contractual requirement.

Example four: A worker is required to wear an employer supplied uniform. His contract states he must return the uniform if he leaves the employment and if he does not, the cost will be deducted from his final pay. If the worker fails to return the uniform as required, the deduction will not reduce national minimum wage pay since it is contractual deduction relating to conduct.

HMRC is also specifically targeting footwear where they believe the employer requires an employee to wear specific or uniform shoes. The retailer, Iceland Foods, has been accused of breaching NMW rules in relation to guidance it issued to store employees to wear ‘sensible shoes’. The company provides safety shoes free of charge for those who request them, normally warehouse workers rather than store staff. The latter can, and usually do provide their own footwear. HMRC’s contention is that the pay for store staff who chose to buy their own footwear would have fallen below the NMW in the weeks that the shoes were bought and has said Iceland should refund store staff for two shoe purchases a year, at a notional value of £20 each, going back six years.

NMW investigations should not be under-estimated. The number of investigations opened by HMRC into employers over potential breaches of the NMW increased 43% to 3,975 for the year ending 31 March 2018, up from 2,775 in 2016-17. HMRC identified £15.6m in pay owed to more than 200,000 workers in 2017-18 and imposed fines of £14m. More than 600 employers were ‘named and shamed’ in that period by the BEIS. Non-compliance with NMW, even as a result of a technical breach, can be costly in financial terms but also in adverse media attention.

Get in touch

Get in touch

If you have any concerns regarding your NMW and uniform policy, we can carry out NMW checks to ensure you fully comply with legislation. Alternatively, if you are challenged by HMRC, we can support your organisation by ensuring that you are treated fairly and proportionately by HMRC and help minimise your potential exposure to any penalties.

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