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Deductions and the Minimum Wage
Do you make deductions from your employees for course attendance when they leave within a certain period, but worried that this might leave you open to action from HMRC if this takes the employee below the National Minimum Wage? If so, you will be interested to know of a recent case which addressed this issue.

Lorne Stewart required some of its employees to go on courses. If they left the company within two years of such courses, the company had indicated that it would deduct the cost from the employees’ pay. However, in one particular case HMRC issued a notice of underpayment against the company when it applied this policy against an employee who had resigned, and the issue of whether or not the employer was entitled to make the deduction went to the Employment Appeal Tribunal (EAT).

The EAT found in Lorne Stewart’s favour. In assessing whether the National Minimum Wage has been met, employers have to exclude “any deduction in respect of conduct of the worker, or any other event, in respect of which he (whether together with any other workers or in the definition of “any other event”, and so the deduction of course fees could be disregarded in working out if she had received the National Minimum Wage. The EAT made it clear that “any other event” required some conduct (but not necessarily misconduct) on the part of the employee; they had to be in some way responsible for the event. So the employee’s voluntary resignation was captured by that definition.

Beware however, that redundancy forced upon the employee, would not amount to “any other event” and their final salary payment would need to meet the National Minimum Wage.
Posted on 19 Nov 2016

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