Author Mark Richards

Businesses are failing to pay the National Minimum Wage – and they don’t want to pay the new business rates

There has recently been a spate of companies getting into trouble for failing to pay either the National Minimum Wage (NMW) or the National Living Wage (NLW). There have been some high-profile cases and the Government recently ‘named and shamed’ 360 businesses for failing to pay either the NMW or the NLW.

The issue come to the fore last year when Sports Direct was forced to refund workers a total of £1m for spending time unpaid in security queues. Now Argos – which is owned by Sainsbury’s – has done the same. Not paying staff for attending meetings before their shifts started and requiring them to undergo security checks after clocking off.

Sainsbury’s said it discovered the ‘oversight’ after it took over the Argos business.

Also, after a routine visit from HM Revenue and Customs. One of the few times when workers must have been pleased to see the taxman!

It was not just Sainsbury’s though. There were plenty of household names on the guilty list. Including Subway, Lloyds Pharmacy and the inappropriately-nicknamed ‘Buddies’ – St. Mirren Football Club. Debenhams was also on the list, having to repay £134,000 to more than 11,000 staff thanks to an ‘accounting error.’

Up and down the country more than 15,000 employees were paid back more than £1m – but that may be only scratching the surface. The Office for National Statistics has calculated that 362,000 jobs did not pay the NMW in April 2016. The biggest offenders being employers in hairdressing, retail and hospitality. Traditionally low paid sectors of the economy. One worker at a dental practice – in Harley Street, no less – had to be repaid nearly £12,000.

With 1,500 more cases being worked on by the taxman, expect more firms to get their wrists slapped soon: but do not hold your breath for prosecutions. There have been only 13 since 2007 a situation that does not please the TUC. General Secretary Frances O’Grady said,

“This should be a wake-up call for employers who value their reputation. If you cheat your staff out of the minimum wage you will be named and shamed.”

What is the National Minimum Wage? And how much is it?

Put simply the NMW is the minimum amount of pay – per hour – which a worker must receive in the UK. It ranges from £3.40 for apprentices and £4 for those under 18 to £7.20 for people aged 25 and over: that works out to £288 for a 40-hour week. If you’d like to check if you are receiving the minimum wage correctly, then there is a calculator on the Government website.

The National Living Wage (applicable to workers aged 25 and over) is also set at £7.20 an hour. Although independent calculations suggest a figure of £8.45 an hour across the UK and £9.75 an hour in London. The Government has given a commitment to increase the NLW to £9 an hour by 2020.

So, is it all the employers’ fault?

It is tempting to lay all the blame for the failure to pay the NMW at the door of the employers. And in truth, there is no excuse for ‘accounting errors’ or however the mistake is dressed up. But the employers are fighting a battle of their own now. And it is significant that the three sectors that were ‘named and shamed’ the most, hairdressing, hospitality and retail, are sectors associated with the British high street.

The planned changes to business rates

In the same way that householders pay council tax, so businesses pay business rates. In April wide-ranging changes will be introduced, which currently have companies and employers’ organisations up in arms.

The new rates will come into effect in April and are the first change for nearly a decade. They will see companies paying rates which consider the rise in property prices since 2008. This is inevitably bad news for companies in the South East. Here property prices have soared. Whereas some businesses where high street rental prices have fallen should find themselves paying lower rates.

The bone of contention is that many businesses will see their business rates rise

That is, by up to 42% next year. The cap on rises was previously set at 12.5%. Many Tory MPs are urging the Chancellor to bring in some sort of transitional relief to help businesses adjust.

Mike Coupe, Chief Executive of Sainsbury’s, took time off from refunding Argos staff to call for “fundamental reforms” to business rates. He labelled the present system “archaic,” saying it totally ignored the rise of online retailers. Incidentally, who are usually based in a warehouse on an out-of-town trading estate.

Shops are not alone in the protest. Pubs and restaurants have also demanded that the Chancellor do something. The Association for Licensed Multiple Retailers has written to Philp Hammond asking for transitional relief for the sector. They claim the planned rate rises will see an average 15% increase for pubs and 23% for restaurants. Adding a potential £300m to £500m to the costs of the hospitality sector. Prepare to pay more for your pint and your Piri-Piri Chicken…

The problems for the high street…

high-street problems

The British High Street is under increasing pressure. Some of the supermarkets did report good trading figures over Christmas. Yet, high street retailers such as Next reported that sales were down.

Now retail sales have slipped back unexpectedly in January. That is following on from overall lower-than-expected figures for December. Sales for January were up by only 1.5% compared to January 2016 – the weakest performance since November 2013.

…And the problems for the Government

By Monday morning the papers were reporting that the argument over business rates had reached the Cabinet. ‘May facing rates split in Cabinet,’ said the Daily Telegraph. Writing that senior figures in the Tory party have told Chancellor Philp Hammond he must back down from the ‘looming nightmare’ or ‘face a revolt.’

Meanwhile retail expert Mary Portas – the so-called ‘Queen of Shops’ – claimed at least a third of independent shops will die off under the current plans. She has bluntly told the Government to ‘end the madness.’

Business Secretary Sajid Javed has rebutted this, saying claims that the Government is forcing ‘countless companies out of business [are] a myth’. What’s undeniable is independent shops give the high street so much of its character. No-one wants to shop in identikit, chain-filled high streets that leave you wondering whether you are in Watford, Wakefield or Wolverhampton.

Equally, no-one wants to be paid less than they are worth. Especially if they are already struggling to make ends meet. Solving these two problems will be a real challenge for British businesses and Her Majesty’s Government in the months ahead.