A Frosty Reception for Iceland

Relations between Iceland Foods and HM Revenue & Customs (HMRC) are decidedly frosty at the minute following a minimum wage dispute.

A voluntary savings scheme set up for Iceland employees has meant that the company has breached National Minimum Wages (NMW) regulations, according to HMRC.

Iceland staff participating in the voluntary savings scheme can put aside money from their wages and can opt to withdraw the money on demand, typically at Christmas.  The scheme is intended to help employees save over the year and in November 2018, the total saved and repaid to employees in the Christmas Club was more than £3.7m.

However, HMRC’s Minimum Wage Task Force has told the supermarket it is breaking NMW rules, because the pay of staff utilising the scheme had technically fallen below the statutory pay threshold.  According to a recent report, HMRC suggests that Iceland has been underpaying NMW by £3.5m annually for the past six years. As such, HMRC are threatening Iceland Foods with a compensation bill of £21m over the scheme.

Iceland is also accused of breaching NMW rules in relation to guidance it issued to shop staff to wear ‘sensible shoes’. HMRC said that the pay for store staff who chose to buy their own footwear would have fallen below the minimum wage in the weeks that the shoes were purchased and has argued that Iceland should refund store staff for two shoe purchases a year, at a notional value of £20 each, going back six years.

It would appear that HMRC are taking a much tougher stance on NMW, even over simple technical breaches.  In light of this case and with the added possibility of facing criminal prosecution, employers may wish to review their benefits and the deductions that they are making to ensure they are not falling foul of the legislation.

Meanwhile, the government has launched a consultation into the NMW rules regarding salaried workers and the operation of salary sacrifice schemes.  The consultation, which closes on 1 March 2019, is looking for views on proposed changes to the regulations, which relate specifically to salaried hours work and where employers feel NMW rules unfairly penalise them without generating any benefit or protection for workers.

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