National Minimum Wage (NMW)
All workers must be paid the NMW rate appropriate for their age.
When calculating NMW pay, certain sums must be subtracted from the worker’s gross pay, for example, any deductions from the worker’s wage packet to cover the cost of tools or uniforms. However, an employer cannot lawfully deduct such sums if this reduces the worker’s pay below the appropriate NMW rate. So, if an employer requires its staff to wear a uniform and requires the staff to pay for that uniform, the employer must make sure that their pay does not fall below the NMW.
Guidance in the HMRC NMW Manual distinguishes between “required uniforms” and “optional uniforms”. For more information, you can access that section of the Manual by following this link: https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm11220#IDAZBR2H
If the employer requires the worker to purchase specific items, then any deductions from pay or any payments made by the worker to the employer for those items will reduce NMW pay. This is the case irrespective of whether the employee buys the uniform from the employer or buys it from a third party like a shop or online retailer (as it will still be “expenditure incurred in connection with the worker’s employment”) and regardless of whether the uniform is:
What you would a consider a traditional uniform (such as a branded outfit); or
A more casual requirement to wear a certain colour or type of clothing (black trousers and a white t-shirt, for example). If a worker chooses to wear their own clothes, rather than purchase new ones, this is a grey area but the employer may not have to contribute to the costs of purchasing those clothes (or at least not until the worker wears those items out and has to replace them. In that situation, the employer could notify those staff (in a relevant policy) that they are entitled to be reimbursed for the cost of any items of clothing they need to purchase subject to any restrictions set out in the policy (which could include, for example, proof of payment etc. or proof that such a purchase was necessary. For longer serving staff, an employer should probably offer a reasonable clothing allowance (see also below)).
However, where a uniform is not required (so optional), or where a worker chooses to pay for additional items over and above the dress requirements of their employment, any payment to the employer or a third party will not reduce NMW pay. For example, where a hairdresser is required to wear a branded t-shirt and freely chooses to buy a spare one, any payment for the extra one would not reduce NMW pay (although a deduction from the worker’s pay would still reduce their NMW pay).
What does this mean for employers?
Aside from the negative publicity and possible reputational/brand damage if an employer is “named and shamed”, where there is a breach of the NMW Regulations, HMRC can issue a notice of underpayment to recover arrears and can impose a financial penalty of 200% of the wages owed (subject to a maximum penalty of £20,000 per worker) so it can be very costly for the employer.
If an employer requires staff to wear a uniform, they should assess existing uniform and pay policies to ensure workers are not being underpaid.
Where there is a risk of the NMW Regulations being breached, options include:
- Providing a uniform for the worker to use during their employment and requiring its return when their employment comes to an end.
- Reimbursing a worker for the reasonable cost of buying the necessary uniform (what is “reasonable” will depend on the item of clothing. For example, if an employer’s policy requires black jeans or trousers, the employer could limit the amount the employer reimburses the worker to reflect the cost of suitable non-branded jeans).
- Giving staff a clothing allowance.
- Increasing the rate of pay so deductions do not result in underpayments of the NMW.
- Removing the requirement for staff to wear uniform and/or particular clothes.
If you have any further queries on this subject matter, contact a member of the HR Consultancy team.
Written by Anil Champaneri, Senior HR Consultant