Hospitality payroll solution provider Fourth and employment law specialist GQ Littler teamed up to deliver an overview of the challenges the national minimum wage poses the hospitality industry at an event titled 'National minimum wage: challenges for the hospitality sector and how to solve them' on 6 March.
Founded in 1999, Fourth, a provider of cloud-based forecasting, cost control software for the hospitality industry, solutions for purchase-to-pay & inventory and workforce management, currently processes 4.2m payslips and 485,000 employees in the UK – equating to 425m hours worked.
The national minimum wage (NMW) came into force in 1999 after being introduced by the 1998 Minimum Wage Act. In 2016, then Chancellor George Osborne introduced the national living wage (NLW) as an offshoot, establishing a minimum hourly rate for the over-25 age bracket.
While seeming, in theory, quite straightforward, the reality for the hospitality industry is, in the words of GQ Littler partner Richard Harvey, “a lot more complex than at first sight”.
Fourth’s analytics and insight solutions director Mike Shipley highlights a handful of key trends over the past year. Shipley commented that, in the light of Brexit and last year’s snap election, he “can’t remember a time when more has been going on in this regard.”
Before the referendum to leave the European Union, the gap between the NMW and average hourly pay in the hospitality industry was 4%.
However, since Britain voted to leave the EU, this figure increased to 8.5%, reaching a high of 13% at the end of 2017.
This is, according to Shipley, as a result of hospitality worker supply and demand. Net migration has dipped, fewer and fewer workers are entering the hospitality sector from the Euro zone and, as a consequence, the minimum wage is being driven up.
Brexit has also seen most young workers being paid in excess of the average hourly rate – for instance, workers under the age of 21 are now being paid, on average, more than the minimum level, so the NLW rate for over-25s means that employing younger workers is no longer, as Shipley puts it, a “silver bullet”.
According to Richard Harvey and Raoul Parekh of GQ Littler, these recent trends coupled with increasingly proactive HMRC mean that it’s crucial the industry discusses the issues NMW poses.
Key considerations for the hospitality industry
Different age bands
Employers need to be aware that it’s not uncommon for someone’s age to change within a shift or pay reference period – moving them to the NLW for the over-25s. For example, if a 24-year-old was to work an 8pm until 3am shift and turns 25 at midnight, they’d need to be paid differently for the final three hours of their shift.
Employers need to pay for any travel done during the working day to keep commuting staff’s wages at the NMW – this does not include the journey to and from work.
For example, if a staff member was to arrive at a bar for work only to be told that they were needed at a branch that was a 20-minute journey away, the employer would need to pay for them to reach the new branch.
Topping up with tips
The law changed in 2009 meaning that tips don’t count towards wages and can’t be used to top staff up to the NMW.
Dress codes and uniforms
Uniform costs must be deducted from pay when you work out NMW. Monsoon is a high-profile example of a company caught out by this because it required workers to wear its brand’s clothing – which they weren’t compensated for – meaning that 1,400 staff members came in as being paid less than the NMW.
Employers are advised to allow for a buffer between the paid hourly rate and NMW to accommodate the staff members' need to buy uniforms.
Employers need to keep proper records of wages paid. While you can shred someone’s contract, if they are paid the NMW, you are legally obliged to keep records to show it’s been fulfilled.
Other common mistakes when it comes to the NLW include not paying staff for trial shifts or being on standby, rounding up working hours incorrectly, not paying staff for out-of-hours training and meetings, and not paying staff for the time that it takes to change into their uniform – for example, a chef should be paid from the time he walks on-site to change rather than from the time he enters the kitchen.
For more information, Fourth and GQ Littler’s NMW guide is available to download here.