The restaurant chain Wagamama is one of nearly 180 employers named by the government for not paying the National Minimum Wage (NMW). But the restaurant chain's case is notable for another reason: staff uniforms.
All in all, 43 businesses in the hospitality industry featured in the latest list, including names like TGI Friday’s and Marriott Hotels. Around 9,200 workers will receive £1.1m in unpaid wages, and the employers were slapped with £1.3m in penalties.
British-based asian food chain Wagamama topped the list, repaying an average of £50 to 2,630 employees. The Wagamama case, however, is interesting for another reason, however.
A spokesperson for the restaurant chain blamed its underpayment on 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 asking the staff to buy a uniform.
But as AccountingWEB member New Moon observed on Any Answers, “The 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.”
Wagamama said it has updated its uniform policy and it will now pay “a uniform supplement to cover the black jeans”. But it still raises the question: Can non-logo clothes be treated as uniform for tax purposes?
In reply to New Moon’s query, SteLacca said, “I suspect that HMRC would maintain that the jeans are not a uniform, and that they serve a duality of purpose, and so are not an allowable expense, and the payment for them is a taxable benefit (or, if cash/wages - taxable via PAYE).”
RBW provided an excellent answer to the question, noting that it’s helpful to “to bear in mind that what is and isn't pay for NMW purposes is not and never was based on tax definitions”.
He concluded, “As far as I understand it, Wagamama's failure was that they didn’t pay a uniform allowance over and above the minimum wage. They just required employees to wear certain clothing. After deducting reasonable costs of such clothing from the pay the employees were left with a net rate of pay below the NMW.
“The employer could have avoided that NMW failure by (a) paying a specific allowance for clothing or (b) a rate of pay with sufficient headroom to cover the clothing. Either way as far as I can see there's no implication for tax.”