Should payments made by an employee for vehicle and uniform rental be treated as reductions when calculating the National Minimum Wage (NMW)?
Well according to a recent Employment Appeals Tribunal (EAT), yes, they should.
In this latest case, a taxi driver in Watford was employed by a firm, which dictated that as part of his conditions of employment he was required to provide a vehicle and uniform, both of which were rented from a company associated with his employer.
In the case of Augustine v Data Cars Ltd, Mr Augustine was employed as a taxi driver by Data Cars.
But at the end of his employment, he brought a variety of claims to the employment tribunal, including that he had not been paid the NMW.
When making remuneration calculations, there are certain allowances and expenses which are deductible.
Mr Augustine argued the cost of the car rental and the purchase of the uniform should be deducted from his total remuneration.
The initial employment tribunal disagreed, concluding the payments did not need to be considered for the purposes of calculating NMW, on the basis that both payments were optional and not a condition of employment.
Mr Augustine successfully appealed, with both payments found to be deductions for the purposes of calculating his NMW.
The EAT allowed the claimant’s appeal and pointed out that the correct test was whether the expenditure was incurred “in connection with” the employment and that both the rental payments and uniform costs satisfied that test.
This case highlights the complexities involved with calculating pay for NMW purposes and the potential pitfalls of getting your calculations wrong.
Employers risk a penalty and being ‘named and shamed’ publicly by HMRC if they fall foul of the NMW regulations, even if the mistakes may have been made quite innocently.
Many employers are caught out because of their uniform policies. NMW regulation 12 and 13 provide that any deductions made by an employer for the cost of uniform provided or for the cost of uniform to be purchased (whether from the employer directly, a third party generally or by the worker directly) does not reduce worker pay below the minimum wage in the relevant pay period.
The same principle also applies to tools which workers are required to provide or that they are provided with for the purposes of their work.
It does not matter that the uniform or tool can also be used for the worker’s benefit. What matters is that wearing the item or having the tool is a requirement of their employment. Any additional uniforms or tools bought by the worker are not counted for NMW purposes.
A common issue, as in this case, is that many employers do not appreciate that unbranded items of clothing, which were required to be worn at work such as white t-shirt, black trousers or flat black shoes, are also considered to be ‘uniform’ by HMRC when assessing whether NMW had been complied with.
This kind of area can be a minefield for employers, but basically, when calculating hourly pay you must divide total pay by the number of hours worked.
Remember, the National Living Wage increases to £9.50 from £8.91, while the National Minimum Wage for 21- and 22-year-olds rises to £9.18 from £8.36 from next April.