Tahir's Tips: Changes in the National Minimum Wage

The fashion industry can be incredibly labour intensive, with lots of resources required for design, production and manufacturing products. Fast fashion in particular requires a quick, low cost, production process, hence why manufacturing is often outsourced. The use of ethically sound manufacturers can be incredibly important to a fashion brand. A prime example of this can be seen in the example of H&M, which claimed to have a strong ethical policy but was accused of using sweatshops in some of the poorest countries in the world to manufacture its products.

There has been an upsurge of 'Made in Britain’ brands of late, with a growing demand internationally to tap into British heritage, style and personality when it comes to fashion. Whilst Britain might not be the cheapest location to employ people and set up a manufacturing process, the sense of quality behind the ‘Made in Britain’ moniker is very much in vogue at the moment.

So the good news for the industry is an increase in fashion related employment opportunities.

However, where fashion companies employ people in the UK, or even within the EU, there is legislation, aimed at protecting the rights of employees, which must be complied with. This includes things such as maximum working hours as well as setting out how often, and for how long, employees can have breaks. One of the most important pieces of employment legislation deals with the national minimum wage and failure to pay employees the national minimum wage (NMW) is increasingly being placed high up on the government’s agenda. In the past few months the government has introduced a series of tougher measures to crack down on employers who fail to pay their staff in line with NMW rates. All employers in the fashion industry should be aware too that NMW rates are set to increase soon too.

The current NMW rates (applicable since the 1st October 2013) are as follows:

For workers aged 21 years or more – £6.31 per hour

For workers aged 18 to 20 inclusive – £5.03 per hour

For workers aged under 18 (but above compulsory school age) – £3.72 per hour

For apprentices aged under 19 – £2.68 per hour

These rates are set to increase from the 1st October 2014 as follows:

For workers aged 21 years or more – £6.50 per hour

For workers aged 18 to 20 inclusive – £5.13 per hour

For workers aged under 18 (but above compulsory school age) – £3.79 per hour

For apprentices aged under 19 – £2.73 per hour

Employers who fail to pay their staff in line with the above rates run the risk of being fined up to £20,000. In addition to the financial penalties that can be imposed, employers also risk being publicly named and shamed. The company name of the offending employer is listed together with the total sum they neglected to pay and the number of workers affected by the underpayment. The naming and shaming has already begun with employers being cited on the www.gov.uk website. This could be disastrous for a fashion company in terms of the negative publicity that would likely follow and could cause irreparable harm to any fashion brand.

The government also plans to increase the penalty so that it will be up to £20,000 for each individual worker an employer has underpaid, rather than the maximum penalty for each employer. Although this has not yet been laid before Parliament, the government has stated that it intends to introduce this legislation as soon as possible. We will have to wait and see if this will indeed be prioritised ahead of the next general election.

Putting NMW high up on the government’s agenda, inevitably brings the issue of unpaid interns into the spotlight too. One of the key concerns for employers taking on interns on an unpaid basis is the risk that they will be classified as workers rather than volunteers and hence be entitled to a number of legal entitlements, including NMW.

Employers, particularly in the fashion and beauty arenas, where historically there has been widespread use of unpaid interns, need to ensure that they are clear as to the terms on which they engage staff and the type of relationships they are intending to create. Unwittingly hiring workers rather than volunteers leaves employers open to a number of risks including those relating to breaching NMW rates as outlined above. It is therefore more important than ever for employers to be savvy with regard to the relationships being created and to ensure they are supported by the right documentation.

Feel free to get in touch if you would like any more information about how your company may be affected by the employment regulations or how to organise your employment matters to minimise issues.

For more information on Industry member, Tahir visit his personal partner page on the Sheridans website. To contact him directly, visit The Industry Directory, email [email protected] or telephone 020 7079 0103.