Nicole Moscardini

According to HMRC’s National Minimum Wage Manual, deductions made from a worker’s pay or payments made by the worker to the employer will always reduce national minimum wage (NMW) pay if they are made “in connection with the employment”. Any such amounts must be deducted by an employer when calculating whether NMW has been paid.

In Augustine v Data Cars Ltd the claimant was a taxi driver who worked for the respondent. He paid £160 per week to the respondent in fees for equipment required to enable him to carry out his job.

He rented a car from a company associated with the respondent as well as paying for insurance, fuel and cleaning costs. He also hired a uniform that enabled him to undertake additional jobs as a “gold driver”.

When the claimant subsequently brought a claim that he had not been paid NMW, there was a dispute as to which payments fell to be deducted when calculating NMW. The employment tribunal found the fees, insurance, fuel and cleaning costs should be deducted but decided the car hire and uniform hire were optional expenses and therefore did not take them into account when calculating NMW.

When the claimant appealed to the EAT it was held that both the car and uniform hire should have been included in the deductions. The statutory test, re-iterated in the HMRC guidance, was whether the expenditure was “in connection with employment”. It does not have to be a requirement of the employment, so the fact that the claimant could have used his own vehicle or chosen not to hire the uniform was irrelevant. The fact was that both the car and uniform were connected to the employment.

In light of this case, employers should be aware that any costs incurred by an employee or worker that are “in connection with employment” must be deducted when calculating NMW, even if the costs are incurred by the employee by choice. The judgment also confirms that when an employee or worker claims they have not been paid NMW the burden of proof lies with the employer to show that is not the case. Employers should therefore ensure they retain any evidence necessary to show they have correctly paid NMW.

Nicole Moscardini is a senior solicitor at Morton Fraser