A client suggested there may be certain instances where staff will be exempt from receiving the national minimum wage and asks when exactly will this apply?
Whilst employees and workers will be entitled to the national minimum wage (NMW), our client is correct in thinking that certain groups will be exempt from this requirement, meaning they are free to agree their own rate of payment with these individuals.
Most notably self-employed contractors running their own business are exempt from the NMW. These individuals won’t typically operate under a contract for services, will be free to agree their own quote for providing services to your client and will have the unfettered right to substitute someone else in their place.
Although self-employed individuals are exempt from the right to receive NMW, our client must be wary of incorrectly treating staff as self-employed and withholding employment rights in the process. A number of recent employment status disputes have seen employers penalised for treating staff as self-employed, when they were in fact employees or workers. Therefore, it is important that our client provides staff with the appropriate employment rights based on the true nature of their working relationships.
Volunteers are another group who are exempt from NMW as these individuals voluntarily provide their services free of charge. Our client may issue these individuals with some money to cover expenses and this is usually limited to food, drink, travel or any equipment they may need to purchase.
Although common in many industries, unpaid internships have been under the microscope in recent times with critics arguing these relationships are being used to unlawfully withhold pay from individuals who are actually carrying out the duties of employees or workers. Therefore, our client should keep in mind that it will only be possible to withhold pay from interns when the internship forms part of a further or higher education course (and lasts no more than a year), work experience, or if they are merely shadowing a member of staff and will carry out no work themselves.
Furthermore, our client won’t have to pay NMW to anyone employed under the school leaving age, which means they are free to agree their own rate of pay with those employed during the summer holidays or for weekend work.
Our client may also be unaware that family members who live in their employer’s home are exempt from the right to receive NMW, as are non-family members who share in the work and leisure activities of the home and are not charged for meals or accommodation, such as au pairs.
With this in mind, our client should consider reviewing their pay practices to ensure they are issuing staff with the NMW where necessary. If they do discover that staff have incorrectly been missing out on the NMW then this should be addressed immediately in order to prevent punitive action from HM Revenue and Customs.
 Reproduced from Croner Taxwise