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Restaurateurs and Caterers

Tips & the National Minimum Wage

With effect from 1st October 2015, the national minimum wage (NMW) increases to £6.70 per hour for employees aged 21 and over. Lower rates apply for younger staff and apprentices.

The right to be paid the NMW is a statutory right. Regardless of any written or oral agreement between the employer and the worker, the law makes it clear that the worker has a statutory right to be paid at least the NMW by their employer.

For pay reference periods which start on or after 1 October 2009 amounts paid by the employer to the worker which represent tips, gratuities, service charges or cover charges paid by customers do not count towards NMW pay.

Restaurateurs and caterers can often fall foul of the NMW regulations. This is because employees in this sector do not typically work set or standard hours. Shift workers can work different hours each day or week and proper systems may not be in place to record hours actually worked. Similarly, arrangements for time off in lieu are often agreed informally or verbally. Operators often forget (or don’t know!) that any time off in lieu must be taken in the same pay period to qualify.

Restaurants and other similar catering establishments may be contacted by HMRC for a NMW Compliance Review. These reviews are often carried out after a complaint from a worker or ex-worker. However, this is often not disclosed to the operators. Some complaints may be genuine whilst others may be incorrect or driven by malice. Unfortunately, the burden to disprove such claims lies with the operators. Therefore, it is important the operators are aware of their NMW record keeping requirements.

The law states that any employer who is subject to a complaint must disprove that claim.  If not, HMRC will accept that NMW has not been paid. An Underpayment Notice is then issued requiring the employer to pay the employee any shortfall (calculated at current NMW rates). This will, of course, be subject to employer NIC. There is also an automatic penalty of 50% of the arrears due (reduced to 25% if the worker or ex-worker is paid within 14 days).

From 1 January 2011 onwards, operators who are deemed to have failed to pay their employees the NMW can also be publicly “named and shamed” by HMRC.  This could cause significant reputational damage to the establishments. To be “named and shamed” a business must have underpaid its workers by at least £2,000 with the average underpayment per worker being at least £500.

Morris & Co have a dedicated team specialising in payroll that can assist you in meeting the NMW requirements.

For a free no obligation chat about your circumstances, please contact Michelle Anthony on 0151 348 8400 or email ma@moco.co.uk

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