What is ‘working time’ for the purposes of National Minimum Wage?

If you look back at every time the government has named and shamed an organisation, you would notice that “unpaid working time” is listed as a common reason for National Minimum Wage (NMW) underpayment. Understanding what ‘working time’ means is vital to make sure you don’t fall foul of the rules.

What is 'working time' for NMW?

Ideally, we would like to present a clear and concise definition at this point. Unfortunately, under NMW rules, the definition of ‘working time’ depends on which of the four categories of worker you engage (i.e. salaried hours work, time, output or unmeasured).

If we take the simplest of the four definitions, that of a time worker, working time for such employees under the NMW rules can be summarised as:

“hours when a worker is available, and required to be available, at or near a place of work”

But there are additional considerations for:

• Workers that are permitted to sleep during their shift
• Training – which has a separate definition for what time counts;
• Travel - which also has a specific definition to establish whether this time counts as working time.

What mistakes do employers make?

Leaving aside travel time, which is another complexity, the top five reasons why unpaid working time issues arise are:

• Arriving before or leaving after shift time – HMRC will typically look to scrutinise any time the worker is at work and is not paid, particularly if the employer doesn’t have records to demonstrate that this is unrelated to working time (such as the worker turns up early to catchup with colleagues, or due to public transport times and is not working during this time). Problems can arise in cases where a worker has to perform pre-work tasks such as changing into uniform, loading up computers - even the time taken to enter the building and place their belongings in a staff common room before the required start time.
• Worker is asked to come in early or stay late – Problems can arise if managers have asked staff to come in early or stay late for team meetings, or to come in early to allow a shift handover meeting. Common examples we have seen for staying late range from correcting a till misbalance to undertaking security checks.
• Control processes that override clock in systems – Many employers will have an override process to allow for a worker forgetting to clock in/out. Unless there is a clear audit trail, such as workers signing to confirm the override time sheet is correct, then we are seeing cases where HMRC are challenging that worker have accrued unpaid working time. Other issues have arisen due to rounding in the payroll system to account for arriving early/lateness, i.e. individuals are paid to the nearest 15 minutes, or due to the location of the clock in machine being the other side of the factory floor.
• Break time - Where workers don’t clock in/out for breaks, HMRC will typically look to challenge that, without evidence the break was taken, an element of that time is working time. It is worth bearing in mind that for time workers, you cannot include any pay a worker may receive for breaks for NMW purposes. Where this happens, we’ve seen HMRC argue that you can’t include the pay for the break, but you also can’t assume they took the whole break and, therefore they have pursued unpaid working time based on worker accounts in interviews.
• Time of in lieu (“TOIL”) – The concept of TOIL does not exist for NMW purposes. Therefore, ignoring salaried work, which has its own strict criteria, employers must have controls in place to monitor additional time worked that isn’t taken back in the same pay period to evidence NMW compliance.

Protecting your organisation

In the majority of the cases that we come across in this area, the underpayment arises not due to deliberate intent, but because the employer was unaware the worker was working for this time. Often, we find supervisors, team leaders etc will take their own initiative to try and instigate change with the right intentions, but unaware that their well-intended actions have unfortunate consequences for NMW purposes.

Communication and education activities with a range of stakeholders within the business and a strong policy suite with robust controls and processes are ever increasingly important to ensure compliance with NMW.

If you have any questions about your NMW position and would like to discuss with an expert, get in touch with our team.

 

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