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Calculating NMW isn’t just about hourly rates – here are some of the common pitfalls to avoid to make sure you don’t unintentionally underpay NMW.
Record keeping – don’t forget! Accurate NMW records are your best friend. You must keep them for three years, but civil claims can be brought up to five years after a breach, so you might want to go ‘belt and braces’ and keep them for a longer period.
Uniform – if employees are required to buy clothing for their role, the cost must be deducted from their hourly pay when calculating whether NMW has been paid. Asking employees to wear their own clothing of a specific type or colour (such as black jeans and black shoes) can be considered as requiring employees to buy a ‘uniform’ and should be factored into NMW calculations (as was the case for Wagamama and TGI Fridays).
Clocking in and out – I’ll often see systems where the time employees clock in or out is rounded, meaning time records are not accurately capturing all time actually worked. This can quite easily result in underpaying NMW.
Salaried employees – a more technical point, but no less important. If an employee’s salary is at or close to NMW, and their monthly wage is calculated based on 1/12th of their annual salary, you could find yourself underpaying NMW in the months with 31 days. Take advice to make sure that you can treat your employees as salaried workers (so that you can average hours and pay over a whole year) and avoid an unintentional underpayment of the NMW.
