The government has recently published its latest list of 115 employers who have failed to pay the national minimum wage (NMW) to all their workers.

Monsoon Accessorize tops the list, having been "named and shamed" for failing to pay £104,507.83 to 1,438 workers. But, according to the TUC, the government's latest list of offenders is only the tip of the iceberg.

The latest list is a reminder of how easy it is even for large, sophisticated and often well-intentioned employers to fall foul of the national minimum wage. We suggest seven top reasons why companies may be inadvertently failing to comply with the NMW.

  1. Use of unpaid interns: The use of unpaid interns is a common practice in certain industries, but it is not always a legal one. Workers should normally be paid for work performed, except where a specific exemption applies (e.g. for charity work). Organisations that engage unpaid interns must be confident that they are covered by an exemption.
  2. Miscategorisation of workers/employees as "self-employed": Genuinely self-employed workers are not entitled to the NMW. But employers do not always pay sufficient attention to the correct legal status of their workers. This can be a very expensive mistake.
  3. Benefits in kind and deductions: Accommodation is the only benefit in kind which can count towards a worker's pay for NMW purposes. Where an employer makes any deductions from a worker's pay to cover the cost of items which are necessary for the worker's job, NMW pay will be reduced. This was the reason for Monsoon Accessorize's breach of the MNW. The company deducted the cost of discounted clothing which workers had bought to wear at work from their wages.
  4. Overtime: Employers should closely monitor the hours of employees who are engaged on a low monthly or annual salary and who are expected to work overtime without additional payment. Without careful monitoring it is easy for employers to accidentally under-pay such workers in busy times.
  5. Commission: Employers who rely on commission payments to top up workers' pay to the NMW must ensure that workers are receiving the NMW for each pay reference period (which cannot be longer than 31 days).
  6. Salary sacrifice: Employers can unwittingly agree to salary sacrifice arrangements which reduce the basic pay of their workers below the threshold for the NMW.
  7. Failure to keep pace with the NMW: The NMW usually rises each year in October. The latest rate (applicable from 1 October 2015) is £6.70 per hour for workers over 20 years of age. Smaller employers can be caught out by the rise. Also, employers that engage younger workers can forget to increase their pay when they hit one of the age thresholds. Workers aged 16–17 must be paid at the minimum rate of £3.87 per hour and workers aged 18–20 must receive £5.30 per hour. Apprentices must receive £3.30 per hour.

Employers should remember that the maximum penalty which may be imposed for failing to pay the NMW has recently increased to £20,000 per unpaid worker. In addition, employers must pay arrears of wages directly to the unpaid employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.