Life is for living: the risk of not paying staff a wage to live on

In recent years although morality has become part of the tax debate, poverty has largely been sidelined from the reward agenda. While "doing the right thing" is very much a part of my DNA, I'm not able to get into the finer details of it to any great extent - I tend to leave this to my wife. As a reward professional, I help clients to reward and incentivise their people in a compliant manner whereas my wife, being what the insurance website calls a “minister of religion”, helps people to live their own lives in a rewarding and possibly compliant manner. It’s rare that our working worlds ever come together.

Helping the less fortunate is a cause we both agree on, but it’s largely been something I had, until recently, restricted to my spare time. One of these areas of focus has been the "Living Wage". My wife and I know that our own employers pay at least the £8.80 London Living Wage (LLW), £2.30 per hour above the current National Minimum Wage (NMW) which rises to £6.50 today. But we also know that not all employers do this, in fact some don't even pay the NMW. As the Mayor of London, Boris Johnson says, “Paying the London Living Wage is not only morally right, but makes good business sense too."

With the maximum penalty per employee having risen from £5,000 to £20,000 in May this year, along with the potential cost of reimbursement of underpayments and the knock on reputational risk, this is increasingly on the Reward Manager and HRD’s agenda as there is a pressing need for employers to make sure that they're compliant. Previously employers may have chosen to take the risk in the knowledge there were only a handful of officers nationally relying on either employee whistleblowing and other sector specific reviews. But now HMRC are working more collaboratively and using the wealth of information from Real Time Information reporting (RTI) to step up their focus on employers across the UK.

HMRC recently published some of the worst excuses they were given by NMW offenders, coinciding with the NMW’s 15th anniversary, which included an employer forgetting the name of his wife or even how many employees he had. It was a rather light-hearted approach to a serious issue. Can it ever be moral to exploit employees in relation to something that affects them so deeply?

And there's increasing social pressure on companies and events in the public eye to make sure they pay at least at the Living Wage. The 2012 Olympic Games were the first Games to pay all directly employed staff at the Olympic Park at this level, swiftly followed by the recent Invictus Games for injured service personnel. It's also a point of focus on the political agenda too, with calls at the recent 2014 Labour Party conference to increase the NMW to £8 per hour.

It's not always the case that businesses are intentionally paying below the NMW. Some aren't fully aware of what counts as pay, have an inconsistent pay structure, irregular working practices or haven't kept up with changing legislation. A technical rather than intentional breach can easily happen, particularly where paying employees near to the NMW threshold. So it's important that this area of risk is carefully reviewed so employers don't inadvertently fall foul of the law.

Of course, in my mind, I'd rather the HR agenda appreciated both the value of employees’ contribution as well as the reality of the cost of living in the UK, particularly where supporting a family, by paying the Living Wage.

From a legal compliance perspective, why not take the time to make sure you're not in breach and then go one step further and see if you can do the right thing?

At PwC, we support clients with all aspect of employment tax compliance and employee reward including National Minimum Wage reviews. PwC is a Living Wage accredited employer and we're happy to share our experiences of the process, calculation and experience of becoming a Living Wage employer. If you'd like to share your views, feel free to comment in the box below or get in touch.


Jonathan Berger | Senior Manager
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