Students, Work Experience and The National Minimum Wage

Compliance? Think boilers not boilerplate

Schools are spending more and more time on the administration that results from apparently endless government legislation. As the state ‘shrinks’ so the paperwork swells. Keeping abreast of statutory requirements is costly because people have to be employed to do this, but much more costly if businesses, and in this arena, schools are businesses, fail to keep up. The demands of health and safety are, quite rightly, heavy, and safeguarding is not a duty that can ever be neglected. Schools are well aware of this and do their very best to keep all boxes properly ticked and all requirements under review.

The battle for hearts and minds has been won, even if there are occasional lapses. But there are other areas which are, perhaps, less familiar, not that they are less important. Good advice from lawyers and HR consultants is a valuable form of maintenance, and, like maintenance of plant, can have some very nasty consequences if neglected. 

C&CR asked Simon Henthorn, head of education at the law firm Doyle Clayton, to explore one of these legal boiler rooms. 

Employers who fail to pay their workers the National Minimum Wage (NMW) risk being named and shamed, as well as receiving financial penalties and having to pay the arrears owed. In February 2016 alone, more than 90 employers experienced this process. It is not as if they had not been warned, since a similar number were named and shamed in October 2015 and in both months, schools were on the list. Since the scheme was introduced in October 2013, 490 employers have been named and shamed, owing over £3m to their workers and being subject to fines totalling more than £1.1m.

Whilst in some cases failure to pay the NMW is deliberate, in the vast majority it is due to a lack of understanding of what the law requires. In particular, there is confusion over  who counts as a worker and is therefore entitled to the NMW. For instance, many schools offer work experience to gap year students to assist with lessons or to provide cover in boarding houses. They may be provided with lodging and pocket money, or they may be treated as an employee and paid a salary. Whether these roles attract the NMW will depend on whether the people doing them are classed as workers and, if so, whether any exemption applies.

Who is entitled to the NMW?

Anyone who is a worker is entitled to the NMW, provided they are ordinarily working in the UK and are over compulsory school age. So, are work experience students workers? If they are simply work shadowing (ie observing) others at work but not actually doing any work themselves, then they will not be classed as a worker and will not be entitled to the NMW. However, most people undertaking work experience placements do more than simply observe: they are given tasksto perform and this makes them a worker entitled to the NMW.

But aren't they simply volunteers? In most cases they will not be. A person will only be classed as a volunteer if they have no obligation to work – they can come and go as they please – and if they are not entitled to any financial reward or other benefit for the work they do beyond the payment of reasonable out of pocket expenses.

There is a specific exemption for workers classed as ‘voluntary workers’ who are not entitled to the NMW. These are workers employed by charities who, though contractually obliged to work, receive no monetary payments other than reimbursement of expenses incurred in performing duties; and no benefits in kind other than the provision of reasonable subsistence and accommodation. There must be no element of profit for the worker in terms of what they receive. Schools that are charities may be able to rely on this exemption but should beware as it is construed narrowly.

Finally, there is one further exemption that may also be relevant to schools. Students undertaking work experience as a required part of a UK-based further or higher education course are not entitled to the NMW, provided that their placement does not exceed one year.

Work experience students from outside the EU

In the case of workers coming to the UK on a Government Authorised Exchange visa, employers must strictly adhere to the terms of the visa, some of which only permit volunteering with no payment, whilst others allow work and therefore do require payment of the NMW.

How much is the NMW?

From 1 April 2016, a new NMW rate, known as the National Living Wage, was introduced for workers aged 25 and over. The NMW rates increase on 1 October each year. The current rates are as follows:

National Living Wage – workers aged 25 and over – from 1 April 2017 £7.20 per hourStandard adult rate – workers aged 21 to 24 £6.70 per hourDevelopment rate: workers aged 18 to 20 £5.30 per hourYoung worker rate: workers aged under 18 but above compulsory school age (other than apprentices) £3.87 per hourApprentice rate: apprentices under 19 years of age, or aged 19 and over but in the first year of their apprenticeship. £3.30 per hourWhere free accommodation is provided, there is a limited accommodation allowance which can count towards the NMW at a current rate of £5.35 per day.

What happens if you get it wrong?

HMRC is responsible for enforcing the NMW and employers who fail to comply face potentially severe penalties. HMRC can carry out an investigation of its own volition or following a complaint by a worker. If HMRC finds that an employer has not paid the NMW, it will serve a notice of underpayment requiring the employer to pay the arrears to the workers concerned and to pay a financial penalty to the Secretary of State within 28 days. The financial penalty is currently set at 200% of the total underpayment for each worker, subject to a minimum of £100 and to a maximum of £20,000 per worker underpaid. If payment is made within 14 days, then the penalty is reduced by 50%.

As well as financial penalties, employers will be named and shamed if they are found to owe over £100, subject to limitedexceptions. In some cases, including deliberate failures to pay the NMW, a criminal prosecution is possible and company directors may also face disqualification.

Just as boilers and electrical systems need inspection and maintenance, so do a school’s legal obligations. A proactive approach is essential in both cases, but that takes time and money. Setting up a system of regular compliance ‘health checks’ is a sensible approach to all aspects of a school’s immensely wide-ranging responsibilities. Whether conducted in-house or by consultants, it is nevertheless time and money well spent.