Are you paying your staff correctly?

Today we have seen a number of high profile companies including Wagamama, TGI Friday’s and Marriott Hotels, named and shamed for failing to pay their employees correctly and have had to make payments in back pay into the £millions.

So how do you avoid these pit falls and keep yourself off the naughty list?

There are two main considerations: firstly determining ‘working time’ and second determining ‘elements of pay’.

Working Time: is relevant to the Working Time Regulations 1998 rules based on the average maximum working week, night working, rest periods and rest breaks.

Working time is defined as any period during which the worker is working, carrying out his duties and at the employer’s disposal.  All of these need to be satisfied to be deemed to be working time.  In addition any period during which the worker is receiving “relevant training” and any additional period which is agreed in a relevant agreement to be working time would be included.

Some of the typical activities which are normally treated as working time are:

  • Working during the day in accordance with the contract of employment
  • Paid overtime
  • Time being ‘on call’ whether at home or another location
  • Responding to telephone calls when ‘on call’
  • Travel time where travel is included in the job, such as travelling to site or as a sales rep
  • Working lunches

Total Pay: The following elements of pay count towards the NMW:

  • Basic salary (the gross amount).
  • Bonus, commission and other incentive payments based on performance
  • Piecework payments.
  • Accommodation allowance

However the following are some elements of pay which do not count towards the NMW and are therefore ignored when calculating total remuneration:

  • Benefits in kind whether or not they have a monetary value
  • Loans by the employer
  • Advances of wages
  • Pension payments
  • Lump sum payments on retirement
  • Redundancy payments
  • Tribunal or settlement awards
  • Any allowances or payments that are not attributable to the employee’s performance, for example London weighting or an on-call allowance. However, if such payments are consolidated into the standard pay they will count towards the NMW.
  • Expenses or allowances, including repayment of money spent in connection with the job
  • Expenses for travel to a temporary workplace (and related subsistence)
  • Tips and gratuities paid by the employer through its payroll

Total pay should also be calculated by reference to a period such as daily, weekly or monthly.

Average Hourly Rate of Pay: to calculate a workers average hourly rate of pay, and therefore to ensure you are paying at least the National Minimum Wage (NMW) you need to divide total pay by total hours worked over the pay reference period.

From 1 April 2018 we will see the NMW increase from £7.50 to £7.83 per hour for all workers over 25-years old so you still have time to ensure that you are paying people in accordance with the regs and ensure that you do not see yourself joining the other 179 companies.

As an expert in pay and grading, I offer my clients guidance on how to calculate average hourly rates of pay, and with this the peace of mind that they are not going to be the next Wagamama or Birmingham City FC, hit with multiple NMW pay claims.

Elaine Fisher is a Director and Senior HR and Pay Consultant at Eagle HR and a Partner (non-lawyer) at Harrison Clark Rickerbys – contact her on 01905 746446 or [email protected].