In the fashion industry complexities can arise with the interaction of the national minimum wage (NMW) and deductions from wages which are common for items of clothing, jewellery or shoes, such as happened in the Monsoon situation. The risks also apply to other common adjustments for short falls, or claw back of overpaid commission, for example in this sector.
The strict legal obligation is to ensure an employee’s average salary over a pay reference period (which means the intervals in which they are paid – for most, this is monthly) does not fall below the minimum: which of course also differs with age. That figure must be calculated after a number of specified deductions and there is a list of items which by law cannot count towards the NMW. This list includes overtime rates, expenses and allowances. In the case of a clothing allowance or a shoe allowance where staff can buy at a discount, the law also states that deductions for expenditure on such items should be deducted before analysing the average figure – in other words, these cannot count towards the NMW.
This highlights the complexity of the NMW provisions and challenges for payroll and pay policies, which are likely to increase with the advent of the National living wage next April (when those aged 25 and over will be entitled to a higher level of £7.20).
The criticism which Monsoon has received should encourage other fashion businesses to conduct an audit and check that they are fully compliant, not least because the publicity means other employees will be alerted to their entitlement!
The rates as at October 2015 are as follows:
- Adult rate: workers aged 21 or over £6.70
- Development rate: workers aged between 18 and 20 inclusive £5.30
- Young workers rate: workers aged under 18 but above the compulsory school age (excluding apprentices) £3.87.
- Apprentice rate: apprentices under 19 years of age or 19 and over but in the first year of their apprenticeship £3.30.