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National Minimum Wage penalties and zero hours contract restrictions

On 26 May 2015 two provisions of the Small Business, Enterprise & Employment Act 2015 came into force. These deal with the following issues:

1. Penalties for non-payment of the National Minimum Wage – the maximum financial penalty for non-payment (underpayment) of the NMW has increased from £10,000 in total to up to £20,000 per worker.

2. Zero hours contracts – provisions of zero hours contracts which seek to require the employee to work exclusively for the employer, or seeks to prohibit or restrict the worker from performing work for any other business are unenforceable.

What are the practical implications of these changes?

If you are a business which pays workers at the NMW rate, it is worthwhile reviewing whether you are fully compliant. This is particularly worthwhile if your employees are mobile and have several places of work. If you do not pay for the travel time incurred, you may not be paying the NMW. You are now at greater risk of far more substantial fines in the event of any investigation of your NMW compliance by HM Revenue & Customs.

If you make use of zero hours contracts for any of your employees, you should review them going forward to ensure you don’t have an unlawful exclusivity clause for existing employees on zero hours contracts (or if you do, that you don’t rely on it to the detriment of the employee). In other words, if an employee has other work outside of the hours that they work for you, think very carefully before taking any steps to discipline them for not being available on any occasion that you want them to work.

For all new employees on a zero hours contract, you should make sure that you remove any reference to exclusivity.

If you have any queries please contact our Head of Employment, Paul Ball on 0113 246 2312.

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