You’re not the only one dealing with a festive hangover. A Christmas savings scheme for Iceland Foods’ employees has fallen foul of National Minimum Wage (NMW) regulations, leaving the supermarket with a potential £21m bill.
At Iceland, employees can set aside money from their weekly paycheck and claim it back on demand. The scheme -- which is voluntary -- is branded as a benefit, intended to help employees save over the year for Yuletide indulgences. The money is kept in a ring fenced bank account and employees can withdraw their money at any time, not necessarily at Christmas.
But according to HMRC it constitutes a violation of NMW rules as some parsimonious employees fell under the minimum wage mark after contributing to the scheme. That they eventually received the full amount is irrelevant in HMRC's view.
The underpayment amounts to £21m and Iceland also faces a potential fine of double the amount of the alleged underpayment.
Speaking to The Times, which first reported the story, Iceland’s chief exec and founder has branded HMRC’s allegation as “just madness”. Sir Malcolm Walker pledged to fight the HMRC claim.
In a searing blog posted on Iceland’s website last year, Walker attacked the investigation in its early stages. He observed that Iceland has “continued to raise pay each year” but “the introduction of the National Living Wage has brought our rates much closer to the legal minimum and this has recently has brought us under the baleful gaze of the HMRC minimum wage task force”.
Iceland’s NMW troubles don’t end with the savings scheme, however. The old chestnut of employee uniforms also cropped up. HMRC claimed that Iceland staff should be compensated for their work footwear since staff guidance advocates "sensible shoes" should be worn.
The guideline applies only to retail staff, as the company’s warehouse workers are provided with free safety shoes. The case echoes last year’s NMW kerfuffle centering on the asian food chain Wagamama.
The restaurant chain was forced to repay an average of £50 to 2,630 employees after an “inadvertent misunderstanding” of how minimum wage laws apply to staff uniforms. Front-of-house staff are required to wear black jeans or a black skirt with their branded Wagamama top.
The government considered this akin to asking the staff to buy a uniform. Wagamama updated its uniform policy and now pays “a uniform supplement to cover the black jeans”.
As longtime AccountingWEB member New Moon observed at the time, “The [Wagamama] case seems to centre around asking staff to wear a particular colour or style of clothing is effectively creating a uniform, even though the items of clothing don’t have a logo and would previously be called dual purpose by HMRC.”
Reflecting on both strands of the investigation into Iceland’s NMW practices, Walker wrote: “You’d think HMRC might put more effort into chasing the £1bn of corporation tax successfully avoided by the likes of Apple, Facebook and Google, or the VAT dodged on Amazon and eBay for which they castigated by the Commons Public Accounts Committee last year.”
According to Steven Porter, a partner at Pinsent Masons, the uniform element crops up frequently in HMRC NMW task force investigations, but the savings scheme adds a layer of intrigue. “HMRC has got the bit between its teeth when it comes to National Minimum Wage rules and looks determined to pursue anything it sees as a breach,” Porter said.
He added, “HMRC are policing innocent breaches arising from uncertainty in the law. There appears to be no grading in that respect. I can see where HMRC are coming from, technically speaking those employees didn’t receive the right amount of money. But the legislation is very mechanical and Iceland are trying operate commercially and help their employees.”
The ultimate story here, according to Porter, is that HMRC is taking a much tougher stance on the National Minimum Wage, even over simple technical breaches. According to Pinsent Masons’ research, the number of investigations opened by HMRC into employers over potential breaches of the NMW has increased 43% in a year to 3,975 in 2017/18, up from 2,775 in 2016/17.