National Minimum Wage
The hotel industry is a seven day a week, 24 hour a day industry, making employment a major issue. Over a series of short articles we will review and discuss the major areas surrounding employment in the hotel sector, so as to keeping you abreast of the ever changing rules and regulations.
In 1999 the Government introduced the concept of the National Minimum Wage (NMW). It was made a legal requirement that employers had to pay their employees’ above the lower rate thresholds. The NMW is widely accepted as having been a good measure introduced by the current Government, and there is little indication from opposing parties that they would repeal the legislation after the 2010 general election.
Is your Hotel fulfilling its legal obligations?
All workers in the UK are entitled to the NMW!
A worker is someone who works for you under a contract and is not genuinely self-employed. The contract can be written, implied or an oral (verbal) contract. So in the Hotel industry, this covers everyone from your Managers through to part time or temporary waitresses and washers up!
The NMW rates are based on three age levels and are reviewed every October. From 1 October 2009 the following rates applied:-
- Employee aged 22 years and above - £5.80 / hour
- Employee aged 18 to 21 years - £4.83 / hour
- Employee under 18 - £3.57 / hour
Some exemptions to these rules do exist, for the likes of self employed people, workers who are still of compulsory school age and apprentices. So this impacts on a hotel when, for example, you are employing an apprentice chef under the age of 19, or over 19 but in their first year of Apprenticeship. In these cases NMW does not apply. This would also be the case where say a University Student was undertaking some work experience as part of their hospitality degree but the placement was less than a year. The government has, however, asked the low pay commission to investigate this for apprentices as there is much debate, so watch this space!
What happens if we provide accommodation to our employees?
Accommodation is the only benefit that can be taken into account when calculating the national minimum wage. Where accommodation is provided and the employer charges a fee, they must consider the ‘accommodation offset’ which is currently set at £4.51 per day. Where accommodation is provided free of charge, the notional value counts towards the NMW, therefore the actual pay may be less than the NMW. The accommodation offset will also apply whenever the employer provides accommodation regardless of whether the employee could have chosen not to occupy the accommodation or whether they actually use it. If accommodation is optional to a worker and he chooses to accept the offer then the accommodation offset will apply.
Here are a number of frequently asked questions by employers in the hotel industry:-
Is £4.51 a day all I can charge my workers for accommodation I provide?
NO, you can charge more, but you must ensure the worker is not paid less than the NMW once the accommodation offset is taken into account. Any sum charged in excess of the offset will reduce a worker’s pay for NMW pay purposes.
In what circumstances can I deduct rent from my workers?
Deductions from a worker’s pay can be made where: -
• relevant provision is made in the worker’s contract
• there is a legislative provision which authorises you to do so
• the worker has first given their written consent or agreement.
This rule is found in section 13 of the Employment Rights Act 1996 and applies to deductions for rent regardless of whether the employer is collecting rent for himself or another landlord, or whether the accommodation offset applies.
Note that Section 8(2)(a) of the same Act requires that any deductions from gross pay and the purpose for which they are deducted, must be set out in a written itemised pay statement. This applies in all circumstances where an employer makes any deduction. For example, if an employer deducts £60 a week for accommodation there is no requirement in Section 8 to state that £29.05 counts towards the accommodation offset; all the employer needs to do is show the deduction of £60 and state its purpose.
If I provide the accommodation but require the gas and electricity to be paid separately, also deducted from their wage, does this count as part of the accommodation offset?
Yes, the amount deducted for gas and electricity must be included in the daily allowance however if the worker is responsible for paying the utility companies directly, the accommodation offset rules will not apply to these payments.
Would these rules still apply if I provided the accommodation but arranged their employment elsewhere?
This all depends on the relationship between yourself and the employer and whether the employer can be shown to derive a benefit from the arrangement. If the relationship is one of spouse, business partners, etc it may lead to the conclusion that it is the employer who is providing the worker with accommodation rather than a landlord finding work for his tenant.
If there is no connection between you and the employer and the employer derives no benefit from the arrangement the accommodation offset provisions will not apply.
What will happen if we have overlooked our legal obligations?
It is the employer’s responsibility to ensure their employee’s are paid the NMW. Failure to do so is unlawful and enforcement action may be taken. NMW compliance officers regularly visit employers to ensure these obligations are being met.
For further detail on any of the above, please feel free to contact us.