Can an Employer Pay Less than Minimum Wage?

Q.

Can an employer pay less than the minimum wage if they pay a bonus?

A.

Depending on the circumstances, the answer is, unfortunately, yes. Many people have assumed that the minimum wage is just that, the lowest wage that an employer is allowed to pay an employee. But that isn’t the case.

Tips in the Catering Industry

This has been highlighted in recent campaigns by a couple of national newspapers in relations to the use of tips to make up the difference to the minimum wage in the catering industry. In many cases, waiters were being paid less than half the minimum wage, which is currently £6.08 for people over the age of 21.

This is legal as long as the total amount earned is equal to or greater than the minimum wage, and many restaurants told the investigating newspapers that they committed to make up that difference even if there was a shortfall. But many people were surprised that this was happening at all and the government has now pledged to look at loopholes in the Minimum Wage Law to tighten up these practises.

Although the recent fuss was with the catering industry, there is nothing in law or tax regulations about tips that makes them any different to any other bonus that are paid to staff, at least with respect to the minimum wage. Looking at the government's documentation with regard to the minimum wage, it is clear that a bonus payment is acceptable as part of a contribution to a minimum wage.

Check That Minimum Wage Legislation Applies

In other words – yes, employees can be paid under the minimum wage as long as the bonus makes up the difference. If it doesn't, then staff should take action.

The first thing to do is to make sure the minimum wage legislation applies to them. There are also a number of employment areas where the minimum wage law does not apply. One of those is live-in staff, such as nannies, au pairs and other carers, while another is people who are undertaking an apprentice or similar work-based training scheme.

Assuming that they do not fall into any category, then staff can inform the Inland Revenue if they believe that there is a shortfall, or if the bonus payment is being used to avoid another element of minimum wage legislation.