What Expenses Are Considered When Calculating Minimum Wage?
The Employment Appeal Tribunal (EAT) determined in a recent case that a taxi driver's car and uniform rental costs should have been taken into account when calculating whether he had been paid the national minimum wage (NMW).
Rental Costs
In the case of Augustine v Data Cars Ltd, Mr Augustine was employed as a taxi driver by Data Cars. As part of his employment, he was required to provide a vehicle and therefore rented a car from a company associated with Data Cars. He also chose to rent a uniform from Data Cars Ltd too, as a uniform was required if he wanted to work as a designated 'gold driver'. At the end of his employment, he brought a variety of claims to the employment tribunal, including a claim that he had not been paid the NMW.
How Is NMW Calculated?
When calculating how much a worker is paid per hour (and therefore whether it is above or below the NMW) it is necessary to divide the total remuneration in the relevant pay reference period by the total number of hours worked or deemed to have been worked.
When working out what the total renumeration is, there are certain payments which should be deducted; and these include expenses or allowances, including repayment of money spent in connection with the job.In this instance, Mr Augustine argued that the cost of the car rental and the purchase of the uniform were expenses which should be deducted from his total remuneration when calculating his hourly pay for NMW purposes. The employment tribunal disagreed, concluding that 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 appealed.
The Decision of the EAT
The EAT overturned the decision, finding that both payments were deductions for the purposes of calculating Mr Augustine's NMW. The EAT confirmed that a payment will be deductible for calculating NMW if a payment is made by an individual 'in connection with their employment' and is not later reimbursed by the employer, regardless of the fact that it was not compulsory for the uniform or car to be rented. The EAT reiterated that payments do not have to be a requirement or necessity of employment to qualify as a deduction.
In this instance, the payments were both made in connection with Mr Augustine's employment so the EAT found that they were both deductible for calculating whether he had received the NMW.
Implications for Employers
This case highlights the complexities involved with calculating pay for NMW purposes and the potential pitfalls of getting your calculations wrong.
If the employer gets the calculation wrong, then it could have far wider implications for the employer than just facing a claim from an employee. Employers who are getting the calculations wrong, and failing to pay the NMW as a result, are being 'named and shamed' by the Government in their 'naming scheme' as falling foul of the NMW regulations. This is the case even if the mistakes have been made quite innocently. Being named can have consequences for an employer's reputation as well as their ability to bid for public contracts.
For advice on the national minimum wage regulations, please contact Ellen Netto in our Employment Law on 07384 812 798, or please complete the form below.