Iceland dispute with HMRC raises questions on NMW and employer dress codes

It has been widely reported that HM Revenue & Customs (HMRC) are conducting an investigation into both Iceland Foods’ Christmas savings scheme that is offered to staff, as well as the company asking employees to wear “sensible shoes” on the shop floor, as it may have breached national minimum wage regulations.

HMRC are considering whether employees’ pay fell below the minimum wage threshold through the operation of the savings scheme which deducted a certain amount from weekly wage packets and transferred the sum to a separate savings account.  Although the funds in the savings account are available to the affected employees on demand (usually at Christmas), the scheme may nevertheless be in breach of national minimum wage rules.

HMRC are also considering whether requiring employees to wear “sensible shoes” on the shop floor will reduce employees’ NMW pay owing to the cost of the shoes.

Many smaller employers operate similar Christmas savings schemes, and may also have a dress code for employees even if they are not in staff uniform.

Iceland chief executive Sir Malcolm Walker told The Times that the situation was “just madness”, meanwhile smaller employers remain uncertain where they stand as a result.    Meanwhile, Retail Gazette report that the company will meet  junior business minister Kelly Tolhurst in the coming weeks.  Walker has said he is “confident we will get a positive outcome”.

Croner are expert consultants in Employment Law.   Associate Director of Croner, Paul Holcroft, said other employers should keep a watchful eye on what happens in this matter.  Paul says:

“The current NMW law states an employer cannot make any deduction from an employee’s pay if it is considered for their own use and benefit, which is being applied by the HMRC in this case.

“Many smaller companies operate similar schemes and have expressed concerns that they may now in breach of minimum wage rules.

“From the employer perspective, it is worrying that a voluntary savings scheme may constitute a breach of minimum wage laws even if all payments remain available to employees at any time they wish to access the savings.

“It is also worrying that if the HMRC win this case, then there could be a big impact on employers imposing dress codes on their staff.

“Employers should be aware that there are several different types of deduction from both the gross pay and the take-home pay that can reduce an employee’s national minimum wage pay.

“Employers who operate similar schemes should watch this situation closely for further developments in Iceland’s challenge.

“For the “sensible shoes” issue, it is likely that an employment tribunal ruling on the matter will be required to confirm the position so employers should await the result of this before making any changes to their current dress code policies.

“HMRC’s argument for this is that because the employee has to buy “sensible shoes” to perform the job, this makes the shoes compulsory which results in reducing the employee’s NMW pay.

Image Credit: Retail Gazette