It is a criminal offence for an employer to pay an employee less than the national minimum wage (NMW) or national living wage (NLW) but it is not always just as simple as checking the employee’s hourly rate, you may need to consider the points below. The national living wage is essentially the new national minimum wage for all workers and employees who are aged 25 and over, however see the end of this article for more information. Although it would be usual for a Veterinary practice to pay for uniforms, equipment and training for their employees, you should still consider whether there are any issues for your practice, in particular the timing of when employees who are part of the apprenticeship scheme start work if this is different to when the apprenticeship starts.
Uniforms
It is important that you are aware that there can be an NMW/NLW issue if an employee is asked or made to wear a particular uniform that they have to fund themselves (rather than their employer paying for). If the cost to the employee, which is considered as though a salary deduction, pushes them below the NMW/NLW then there is an issue.
The most likely scenarios for there to be an issue is if there is a policy that employees must wear a branded uniform, specific colour of clothing or say dark trousers. If the policy is for employees to wear smart clothes, or say a suit, then it would be unlikely there is an NMW/NLW issue.
Equipment
If an employee is asked to pay for equipment to be used in the business then the cost of the equipment would be treated as though it was a salary deduction and if this pushes them below the NMW/NLW, then this could be problematic and would need to be carefully considered.
Training
If there is a contractual obligation for an employee to repay training costs incurred by the employer, in the event that they leave employment, then there would be no problem.
If the employee requested to go on a course and the employee has to pay for it, then this should not impact on the NMW/NLW calculation.
If the employee is contractually required to undertake certain training e.g. to allow them to be eligible to do the job and the employee pays for this training, then this would be an issue.
Apprenticeships
Government guidance says that an apprentice must be paid a lawful wage for the time they are in work and in 'off the job training' (off the job training is the government’s name for 'on the job training' – confusing, we know!).
The cost of the apprentice’s wage must be met and the apprentice minimum wage should be paid from the start of the apprenticeship programme and not before. Therefore any apprenticeship scheme documentation should be signed as soon as the apprentice begins work with you. If it is not, the apprentice would be entitled to the usual NMW/NLW levels. More information about the apprenticeship rate can be found here.
Salary sacrifice
The NMW/NLW is based on the post sacrifice amount. Therefore, an employee being paid the NMW/NLW cannot enter into a salary sacrifice arrangement, nor could they if doing so would bring them below that threshold. Common examples would be pensions or childcare.
Accommodation
Where the employer is providing accommodation to the employee, this should be taken into account. This can mean that an employer could pay below the MNW/NLW but still be deemed to be meeting the NMW/NLW when taking into account the accommodation benefit. The calculation for this, however, is complex and is not based on the value or cost of the benefit provided. If you think this could apply to your practice please let us know and we will be happy to provide further advice.
Optional remuneration
Following on from the accommodation point we would like to remind you about optional remuneration arrangements. If an employee is provided with accommodation as standard, with no option to receive a higher salary instead, the optional remuneration rules will not apply but the normal benefit in kind (BIK) rules should be considered. Where the new rules do apply, then BIK to be declared is the higher of:
- the BIK calculated in the normal way; and
- the amount of salary given up in return for the benefit.
You can find more information on optional remuneration here.
NMW, NLW and the living wage
We thought it would be helpful to provide some clarity with regards to the NMW, the NLW and the living wage.
The NMW and the NLW are essentially the same and are rates set by the government. The NLW applies to those aged 25 years and over. The NMW applies to apprentices and those aged 24 and under. Please see more detail here.
The living wage that is often talked about is not the NLW. It is in fact a voluntary living wage recommended by the Living Wage Foundation. More information on the Living Wage Foundation can be found by clicking here.