Heat and Light Deduction Breaches Minimum Wage Law
The Court of Appeal has upheld the ruling of the Employment Appeal Tribunal (EAT) in the case of Leisure Employment Services Ltd. v HM Revenue and Customs (HMRC), which dealt with the operation of the national minimum wage legislation.
HMRC had issued enforcement notices against Leisure Employment Services alleging that workers provided with accommodation at their holiday resorts were being paid less than the national minimum wage. These workers were required to sign an agreement with the company stating that they would pay a standard £6 per fortnight for gas and electricity. This was normally taken as a deduction from salary. Those who had money deducted in this way were, as a result, being paid less than the minimum wage.
The issue was whether the employer was entitled to treat the £6 deduction as part of an employee’s wages even though the employee actually received less than the minimum wage after the deduction had been made.
The Court of Appeal supported the EAT’s view that as the workers were under an obligation to pay a particular sum of money in order to be permitted to use the accommodation on offer, the amount they paid was in respect of the provision of living accommodation. As the company had already taken full advantage of the maximum deduction that can be made from the minimum wage where an employer provides accommodation (currently £4.15 per day), the employer could not treat the £6 deducted as part of the employees’ wages. Furthermore, the deduction made was for the employer’s own use and benefitbecause it was the employer who was liable to pay the utilities supplier. Leisure Employment Services had therefore paid these workers less than the national minimum wage, contrary to the 1998 National Minimum Wage Act.
The workers who had money deducted in this way will be entitled to receive back-pay in recompense.
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