Wages

With the rate of the national minimum wage rising next month, we take a look at the basic rules and regulations that must be followed when paying your staff.

However much you put off other paperwork - and most publicans will admit to leaving the VAT until the last minute - calculating and paying wages is something your staff are very unlikely to let you neglect for too long.

From the beginning of October, the rate of the national minimum wage rises, and with that in mind, this feature looks at some of the basic rules and regulations which legally have to be followed when paying your staff. What are wages?​

Legally, wages are sums payable to the worker by their employer in connection with his or her job. They include:

• any fees, bonuses, commission, holiday pay or other payments in connection with the worker's job
• statutory payments such as Statutory Sick Pay and Statutory Maternity Pay
• luncheon vouchers, gift tokens and other vouchers of a fixed monetary value that can be exchanged for money, goods or services.

Not included are:

• loans or advances of wages
• payments of expenses
• pension and redundancy payments
• lump sums on retirement or in compensation for loss of office
• payments in kind, other than of fixed monetary value
• tips and other gratuities paid directly to the worker by a third party.

When and how to pay​

The legal right for employees to insist on being paid in cash was removed some years ago. However, some longer serving employees may still have this right protected by written terms and conditions of employment, If you "inherit" staff when you take over a pub, you need to be sure this type of information is passed on so you know where you stand.

Generally, employment legislation now imposes no requirement on an employer to pay an employee's wages at any particular time, in any particular form or by any particular method such as cash, cheque or credit transfer.

These, like other terms and conditions of employment, remain matters for negotiation and agreement between you as the employer, and individual staff. Remember that in the first two months of employment, an employee must be given notice of the terms and conditions under which they are employed. One of the things this must include is the amount they will be paid and the intervals at which it will be paid.

If you plan to vary these written terms - for example, if you want to switch from a weekly cash payment to a monthly payment by bank transfer - you must get employees' consent.

Pay statements​ Every pay statement must give the following particulars:

• the gross amount of the wages or salary
• the amounts of any fixed deductions and the purposes for which they are made
• the amounts of any variable deductions and the purposes for which they are made
• the net amount of the wages or salary payable
• if the amount is split into different payment methods - eg, some paid in cash and some into a bank account - the amount and method of each part-payment.

You can give either:

• a pay statement which specifies the amounts and purposes of every fixed deduction separately; or
• a pay statement which only gives the total amount of fixed deductions. If you do this you must give the employee a standing statement of fixed deductions before the first statement is issued, and at least annually afterwards.

Deductions​ For an employer to lawfully make deductions from a worker's wages or to receive payments from a worker, the deduction or payment must be:

• required or authorised by legislation, most obviously income tax and national insurance contributions; or
• authorised by the worker's contract - provided that the worker has been given a written copy of the relevant terms or a written explanation of them before it is made; or
• agreed to in writing by the worker before it is made.

There is also provision for employers to make deductions at other times, such as to recover overpayment of wages, and to satisfy a court order or tribunal decision. However, it is good practice to take professional advice from an accountant or solicitor if you are unsure, since the regulations can be quite complex.

Deductions for stock shortages​

There is special legal protection for workers involved is selling goods and services to the public. If you make deductions to make up a cash shortfall or stock deficiency - and once again, consider taking professional advice before you do so - it must not be more that 10 per cent of gross pay at a time, and the first deduction must be made within 12 months of the cash shortage or stock deficiency having been established by the employer.

The Minimum Wage​

The National Minimum Wage came into force in April 1999, honouring a pledge by Labour in its 1997 election manifesto. The rate is set by the Secretary of State for Trade and Industry, who is advised by the Low Pay Commission, but not bound by its recommendations.

The rate for workers aged 22 and over is:

• Current - £3.70 an hour
• From October 1 2001 - £4.10 an hour
• From October 1 2002 - £4.20 an hour

The rate for workers aged 18 -21 is

• Current - £3.20 an hour
• From October 1 2001 - £3.50 an hour
• From October 1 2002 - £3.60 an hour

The increase from October 2002 is conditional on what the Government calls "the continuation of favourable economic conditions.

Who qualifies?​

Most adult workers in the UK must be paid at least the national minimum wage. This includes workers in a number of categories commonly employed in pubs, including:

• part-time staff
• staff on temporary contracts
• casual staff
• agency workers, regardless of whether paid directly by you, or via the agency
• workers from outside the UK, regardless of how long their stay is.

Workers who do not have to receive the minimum wage include:

• the self-employed - with the burden of proof on the employer. It is up to you to prove that you are not simply classifying employees as self-employed to avoid paying the minimum wage
• company directors - however, if a director has a contract setting out employment terms, the minimum wage applies
• workers under 18, and apprentices - you need to be aware of the other regulations specifying when these employees can work in pubs.

Training​

Workers over 22 can be paid at the training rate, currently £3.20 an hour, for the first six months of a new job with a new employer. It can only be paid when there is a written agreement between employer and employee. Training must be given on at least 26 days during the six months, and it must lead to an accredited qualification such as an NVQ.

Employers obligations​

As an employer, it is your legal obligation to ensure that workers are being paid at least the minimum wage, and to keep records to prove it. Employees have a right to see these records, as do the Inland Revenue, employment tribunals and the civil courts.

It is a criminal offence not to pay the minimum wage, not to keep records, or to obstruct compliance officers, with fines of up to £5,000 for each offence.

The most recent figures published by the Government shows that more than £5million has been recovered from employers who have underpaid since the legislation was introduced.