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Under the National Minimum Wage provisions hauliers must pay their staff the going rate—and ownerdrivers who pay themselves too little could he in trouble... From next year the Inland Revenue will he focusing on people who provide services through a company to see if it is a sham to obtain self-employed status. And even those who are self-employed will be under review for National Insurance contribution rates.
But hauliers are already having to deal with major new regulations under the National Minimum Wage (NMW) provisions, which took effect on I April 1999. They impose considerable new burdens on business: no employers will be unaffected, even if they are paying over the minimum rate.
• Who is covered? All but the genuinely self-employed—not just those with contracts of employment, but those carrying out any work or services for another party Most agency workers will be "workers"; even some voluntary workers might be eligible for the NMW. Those rewarding themselves partly through a firm charging for their services will be caught when that company in turn pays them as "workers" if they cannot show that they are genuinely self-employed.
• What work is covered?
• l "Time work", where workers are engaged and paid wholly on a time basis, or partly on time and partly on piecework or commission, CI "Output work", where workers are engaged and paid wholly on piecework or commission.
El "Non-hours work", where workers are engaged and paid on a basis other than time work or output work.
Time work includes standby—being on call at work premises and available to do work. Output work includes business travel, such as commission travelling salesmen.
• What is the rate of the NMW?
LL Underi8s: No rate; Li Apprentices: No rate; II 18-22: £3.00 per hour; CI Over 225: Recruits receiving accredited training, £3.20 per hour; workers over 22, £3.60 per hour.
• How is payment of the NMW calculated? Take the worker's gross pay and subtract the specified reductions and deductions. Divide this amount by the total number of hours worked by the worker and the pay reference period. Compare the average hourly rate with the relevant NMW rate.
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• How is the NMW calculated over the payreference period? The pay-reference period is a month, or less if payments are made more frequently. Hours worked in a pay-reference period depend on the type of work,
Time work is the total number of hours of time worked in the pay-reference period.
Output work is either the total number of hours in the pay-reference period spent doing the output work, or where no normal hours are set. The hours worked can be by written agreement by a fair estimate of weekly hours, a record of hours worked and a piecerate/commission rate.
Non-hours work is either the total nhmber of hours worked in the pay-reference period carrying out the contractually required duties, or a written agreement specifying a "realistic" average number of hours on a normal working day.
• What pay Is counted? All money payments in the pay-reference period and any money payments made in the following pay-reference period in respect of the last period. That calculation is subject to some reductions.
Bonuses and incentive or performance payments count, as do deductions for misconduct where the worker is contractually liable; for repayment of loans; and for share purchases,
• What pay is not counted? Benefits in kind, vouchers, loans, pension payments, court awards, redundancy/severance payments, suggestion scheme awards: payments for the previous pay reference period; payments when the worker was absent—sickness, holiday, industrial action, maternity; and payments over the basic rate, such as overtime or shift premiums or premium rates for output work.
• What records must be kept? Sufficient records for three years to show workers are paid at least the NMW rate. Employers may choose the method and what is kept, but if challenged the burden will be on employers to prove they have paid the NMW. Entrepreneurs operating through their companies may not be concerned, but enforcement is still an issue.
All workers have the right to see their records within 14 days, so record keeping is essential.
• What sanctions are there for breaches of the regulations? The sanctions are twofold. Firstly, those that can be exercised by workers against their employers; and secondly, those operated by the enforcement authorities.
For a self-employed worker such as an owner-driver the rights of employees might appear to be irrelevant. But if an owner-driver pays himself below the NMW he is breaking the law just as much as if he were under-paying an employee.
Workers have a right to an accompanied inspection of the records. Failure to allow this or to produce records can lead to an award of up to 8o times the hourly NMW rate. Workers paid under the NMW can claim the difference from the NMW rate—and they can claim compensation, or automatic unfair dismissal, if they are dismissed for asserting their rights under the NMW rules, Agreements to exclude the NMW rights are invalid; the burden of proof lies on the employer to show that the NMW rate was paid.
There are a number of enforcement and criminal remedies. The Inland Revenue can require production of records and payment of the NMW rate and arrears, or issue penalty notices requiring payment of double the N MW rate for each affected worker for each day of non-compliance.
There are new criminal offences for refusing or neglecting to pay the NMW rate; failing to keep records; keeping false records, producing false records; and obstructing an enforcement officer. These can lead to fines up to L5,000.
• by Jonathan Exton-Wright
Jonathan rxten-Wright is a partner in the employment department ofthe law firm Dibb Lupton Alsop.