HMRC, represented by Calum MacNeill KC and Alan Cowan of Ampersand, has won an appeal against a decision of an Employment Tribunal that a savings scheme operated by an employer did not contravene minimum wage legislation, despite it resulting in some employees receiving less than minimum wage when they asked for part of their wages to be saved for them.
Lees of Scotland, the famous manufacturers of confectionary items, teacakes and snowballs, operated the scheme in an entirely benign way, helping their employees to save for holidays or other contingencies, and all the employees who participated did so willingly. By the time the scheme was terminated in 2020, no workers had lost out, in the sense that they had received all the funds they had asked the company to set aside for them. The ET held that sums deducted at the workers’ request were not kept “for the employer’s own use and benefit” and so did not fall to be deducted when calculating whether minimum wage had been paid (National Minimum Wage Regulations 2015, regulation 12(1)). It also held that when sums were later paid out on request, that constituted “additional remuneration” and thus was to be taken into account when calculating any shortfall (National Minimum Wage Act 1998, section 17).
The EAT disagreed on both counts. Sums withheld were at the complete disposal of the employer until such time as they came under an obligation to pay on request. When sums were paid, they were not “delayed or deferred wages” as the ET had characterized them. They were not calculated by reference to pay reference periods and nor did they follow the system of calculation set out in section 17.
The EAT thus restored the notice of underpayment which HMRC had served on the company. The company was represented by Sally Robertson of Cloisters Chambers, London.
The full judgment can be found here.