Underpayment of Salary and Leaky Taps

February Update – Underpayment of Salary and Leaky Taps

There are two main developments this month.

Increase to National Living Wage/National Minimum Wage

The new minimum wage rates from 1 April 2017 will be:
• £7.50 per hour – 25 yrs old and over
• £7.05 per hour – 21-24 yrs old
• £5.60 per hour – 18-20 yrs old
• £4.05 per hour – 16-17 yrs old
• £3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

You will want to make sure you are not on the government’s list as this month they named and shamed 360 employers who had underpaid their staff. This included Debenhams, 84 employers in the hospitality industry and another 50 in the retail sector.

Employee Status

There has been another decision regarding employment status and whilst it did not break any new legal ground, it is a useful wake up call to those employers who regularly use self-employed individuals as part of their work force.


Mr Smith was a plumber working for Pimlico Plumbers and had done so for nearly six years. When matters ended, he tried to claim unfair dismissal, discrimination and holiday pay.

The tribunal found he was not an employee but he was a worker and so was entitled to protection from discrimination and holiday pay. The Court of Appeal upheld the decision

How does this affect employers?

The Court of Appeal held that there was clear obligation to provide personal service and the contract did not include a right of substitution. They also held that Pimlico exercised a high degree of control and there were also restrictions in the contract stopping Mr Smith from working as a plumber anywhere in Greater London for three months.

It is important to note that each case will be case sensitive and will turn on the specific arrangements in place. Nevertheless, those employers who rely on self-employed individuals will need to watch developments carefully, particularly as there are a growing number of claims in this area which attract a fair amount of negative publicity for the employer.

There is a risk of large financial exposure for misclassifying a worker as self-employed in the areas of holiday pay, pension and sick pay.

What we can do for you

It will be important not to make any hasty decisions as an employer. However, self-employed individuals may begin to challenge what their status is and caution needs to be exercised by both sides in such an arrangement.

We can advise both individuals and employers on what issues to be aware of and whether the ‘label’ put on an arrangement is correct or not. This case shows that a tribunal will be happy to look behind the title given to an arrangement to establish its true nature.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Aeris Employment Law Ltd will be pleased to discuss resolutions to specific legal concerns you may have.

Posted in News.