Common Minimum Wage Errors and How to Avoid Them

It’s not uncommon, for a number of reasons, for minimum wage to be miscalculated, which leads to firms underpaying their employees. This is, of course, something that they can be severely reprimanded for. To some extent, payroll software such as Xero can smooth out the kinks, but some level of human oversight, maybe from an accountant, may still be required. Here are some of the trickier minimum wage rules, as laid out by the Department for Business, Energy and Industrial Strategy (BEIS).

Deductions for uniforms

BEIS guidance stipulates that deductions for “expenditure connected to the job” (e.g. uniforms, safety clothing, tools, etc.) will reduce pay for minimum wage purpose. This means that such deductions may not be taken if doing so would bring the employee’s pay below the relevant minimum wage rate.

Deductions for Christmas party

Employee contributions towards the company’s Christmas party are not statutory, nor are they work-related, and are mainly for the benefit of the employer. Because of this, deductions made for the Christmas party do affect the minimum wage and cannot be taken if doing so would reduce the worker’s pay below the relevant minimum wage rate.

Accounting for overtime

There are several ways in which overtime hours can be mishandled with reference to the national minimum wage. Firstly, employers may correctly include the overtime hours worked by the employee, but incorrectly include the pay at the enhanced overtime rate, rather than excluding the premium and including only the pay on the basic rate. A similar rule applies to shift work, where the premium for working unsociable hours may be disregarded.

Further complexity arises surrounding wages that are paid in arrears, which is very typical for overtime pay. Both hours and pay need to be included in the pay period in which the hours are worked, when the wage is paid in the following pay period. However, if the wage is paid in a later pay period than that, both the hours and pay tend to be counted in the later pay period. As a result of this, it is not always possible for employers or workers to confirm, based on the figures on a single pay slip, that the pay in that pay period meets with national minimum wage regulations.

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Paying the apprentice rate

Another common error is the paying of the apprentice rate to workers who are not apprentices. The apprentice rate is payable to those who are employed on certain apprenticeship schemes, or workers engaged under a contract of apprenticeship. Anyone else must be paid the correct minimum wage rate related to his or her age. Furthermore, apprentices over 19 years of age must be paid the relevant age rate after the first year of their apprenticeship.


BEIS regulations stipulate that tips, gratuities, service charges and cover charges for customers do not count towards the minimum wage, regardless of how they are paid to workers. This rule was introduced in October 2009 and means that employers are incorrect in including tips in their workers’ minimum wage pay.

Other considerations

Other things that must be considered when ensuring that workers are being paid the correct minimum wage include annual rate increases, as well as keeping an eye on age-related as younger workers reach their birthdays, although payroll software should take care of this.

It may also be necessary to make sure that the relevant procedures are put into place to collect the relevant data that payroll software does not, e.g. any extra hours that may have been worked. Failure to keep adequate records is a criminal offence. Employers are advised to become familiar with the BEIS guidance in order to ensure that they are meeting the necessary requirements.

For advice on payroll, Xero and the minimum wage, feel free to call Phebys Accountants on 01480 896267, or email

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