Retailers call for ‘unreasonable’ minimum wage enforcement to stop

19 Feb 2019 By Maggie Baska

HMRC asked to halt investigations as current enforcement system is ‘not fit for purpose’

Retailers have called on HM Revenues and Customs (HMRC) to halt enforcement against employers that have breached national minimum wage (NMW) rules, claiming the current system is “no longer fit for purpose”. 

The British Retail Consortium (BRC), an industry body, has asked for a pause on cases involving the use of salary sacrifice schemes until the government has concluded its current consultation on their use.

In a letter to HMRC, the BRC said current regulations, which are now two decades old, no longer reflected the flexibility offered by the retail sector. It added that the tax authority “too often” targeted employers that inadvertently violated rules despite taking “all reasonable steps to comply”.

“Against this backdrop, it is unreasonable for HMRC to continue to take enforcement action against those employers who are operating reasonable pay practices designed to support colleagues,” it said.

The row reflects mounting anger from employers, many of them retailers, who believe they have inadvertently fallen foul of NMW regulations. HMRC has stepped up its enforcement regime in recent years and has successfully levied fines against hundreds of employers, many of them accused of deliberate underpayment. But many have also been punished for deductions for uniforms or confusion over processing tips, with businesses claiming regulations are unclear or inconsistent.

In December, just weeks after business secretary Greg Clark announced a review of the regulations, it emerged retailer Iceland could be facing a bill of £21m in underpaid wages because it may have broken NNW regulations through a voluntary salary sacrifice scheme – designed to help employees save for Christmas – which may have pushed employees’ pay below minimum wage levels. 

Sir Malcolm Walker, Iceland founder and chief executive, welcomed the BRC’s letter and said he “wholeheartedly” supported efforts to encourage HMRC to drop its investigations.

“These [are] ludicrous and massively time-wasting investigations into technical breaches of the minimum wage rules by companies that are actually trying to do the right thing and give a helping hand to their staff,” he said.

“With all the headwinds facing retailers today, surely the government can see that this sort of harassment is completely counterproductive and needs to be called off?”

In the letter, Helen Dickinson, chief executive of the BRC, welcomed the government’s consultation on NMW rules, but said any amendments to the regulations and guidance would take time. She added that pausing enforcement activity would enable HMRC to “reset” its relationship with business ahead of April’s rise in the minimum wage. 

But a government spokesperson said HMRC was enforcing NMW rules in line with the law and policy set out by the Department for Business, Energy and Industrial Strategy. “We can only enforce the law and the rules as they stand now, and are therefore not in a position to pause or alter enforcement activity on the basis that there is an open consultation.

“Once the consultation closes, the government will analyse and assess the responses to decide what, if any, action it wishes to take.”

Separately, a new website has been launched to help freelancers and other workers who cannot afford to pay for legal aid claim wages and holiday allowances they are owed by their former employers. 

The service, MyPay London, has been launched by charity Legal Action Group and has been supported by the Independent Workers Union of Great Britain. It works in a similar way to filling in an online tax return and enables workers – initially restricted to those in the capital – to calculate the sums they believe they are owed. 

A recent survey by Middlesex University concluded that two million British workers were collectively losing as much as £3bn a year in uncollected wages and holiday allowances.

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