NMW Calculations – was the opportunity for clarity missed?
We know that National Minimum Wage (NMW) calculations are often dreaded by employers following a raft of legislation and case law which has made the subject a rather tricky and complex area to navigate. In particular, where a worker or employee incurs certain costs related to their job, it can be difficult for employers to conclude what deductions can be made to an employee’s wages to ensure that the NMW requirement is being met.
In an attempt to clarify the position, an employee recently put the rules to the test in a case that was appealed to the Employment Appeal Tribunal.
The employee – Mr Augustine – worked as a mini cab driver for Data Cars Ltd. During his employment, he paid a regular weekly fee of £160 to his employer for equipment to be fitted in his car and access to the booking app which enabled him to carry passengers. Initially Mr Augustine provided his own vehicle, but later rented a vehicle from a company associated with Data Cars. He was also required to have insurance and, while working for Data Cars, he incurred fuel and cleaning costs. In addition, he bought a Data Cars uniform.
He brought a claim against Data Cars claiming that he was not actually self-employed, but should actually be considered a worker or employee, and the question arose as to whether, for the purposes of the NMW calculation, certain payments made by Mr Augustine fell to be deducted.
Initially, the tribunal hearing the case held that the costs incurred by Mr Augustine did not need to be taken into account when calculating the NMW on the basis that, Mr Augustine was not required to rent a vehicle to do his job – he could have used his own, and he was not required to pay for a uniform; rather this was entirely optional, neither was either contractually or legally required in order for him to do his job.
On appeal, the Employment Appeal Tribunal (EAT) held that both the cost of the car hire and the cost of the purchase of the uniform were deductions and stated that the statutory test to be applied is whether the expenditure is ‘in connection with employment’ (and not reimbursed by the employer). They found that the expenditure does not have to be a requirement of employment. It was therefore irrelevant that Mr Augustine could use his own car or that the uniform was not obligatory. He plainly hired the car and wore the uniform in connection with his employment.
The EAT also stated that when a worker or employee asserts that they have been paid less than the NMW, it will be presumed that they are correct unless the contrary can be established. This means that the onus falls on the employer to demonstrate that they have met their obligation to pay the correct NMW.
So, on having the opportunity to clarify the position of deductions for the purposes of NMW, the decision by the EAT seems to have opened Pandora’s box suggesting that any cost incurred by a worker in connection with their employment will reduce NMW pay, even where that cost is not required to be incurred by law or by the employer, and there is no reference to the “reasonableness” leaving an employer potentially exposed to the frivolities of its workers. This case highlights the importance of employers having very clear contracts about what is and is not expected of their employees.