The case of HMRC v Ant Marketing has highlighted that, when calculating whether the NMW has been paid, deductions for the cost of training is classed as expenditure “in connection with employment” and as such it may be treated as “reductions”. Accordingly, if training costs are deducted and this takes an employee below the NMW, the employer will be in breach.
This will be the case even where the deductions are contingent on the event of an employee leaving within a certain time period, or only represent a proportion of the training costs incurred by the employer. Where training is mandatory, the expenditure is much more likely to be regarded as “in connection with employment”. However, deductions for non-mandatory training may also be treated as a reduction, depending on the circumstances.
If an employer has not been paid NMW, they can enforce their entitlement by making a claim for breach of contract or for unlawful deduction from wages. HMRC can enforce this by issuing a Notice of Underpayment, and/or the employer may be guilty of a criminal offence if it has refused or wilfully neglected to pay the employee their entitlement. Accordingly, where employees are paid NMW (or close to it) employers must bear in mind the consequences of any deductions from those wages.
For more information on any of the items discussed in this article please contact either Nick Hall or a member of the Employment Team.