Why do companies like Argos fail to pay the minimum wage?

This morning Argos became the latest household name to be "named and shamed" by HMRC for failing to pay tens of thousands of staff the legal minimum wage.

Unions always publish comments in response to these half-yearly lists questioning the moral scruples of the employers concerned. Today was no exception with the TUC branding them "wage-dodging".

Clearly some of the 233 firms on the latest list are trying to get away with blatant underpayment – it only stands to reason.

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But most firms, especially the larger brands that make the headlines, are not simply setting pay rates below the legal minimum.

So how do the likes of Argos and, previously, Debenhams, John Lewis and the clothing retailer Monsoon end up in this position?

What is the national minimum wage?

It depends on your age. If you're over 25 you're entitled to the "national living wage", currently £7.50, and on a path to reach 60 per cent of median earnings, or potentially £9 an hour, by 2020.

If you're under 25 you'll fall into one of several "national minimum wage" brackets: £7.05 for those aged 21-25, £5.60 for 18-20s, £4.05 for 16-18s and £3.50 for first-year apprentices, irrespective of age.

What did Argos do wrong?

It paid a rate that was nominally above the legal minimum, but it required staff to attend briefings before their shifts and to stay behind for bag searches after-hours without including this time in the calculation, says the BBC.

This means 37,000 staff were paid a combined £2.4m less than they should have been.

Does all time spent on work premises need to be included?

No, but all the time an employee spends at the discretion of the employer must be included.

So break times don't count towards the minimum wage calculation, but time spent in work briefings, having possessions searched, waiting for meetings to begin or to collect goods, or delays while a machine is broken down all count.

Government guidance even says that time spent being available at work when your employer allows you to sleep should be counted as working hours for the purposes of the law.

For those who travel as part of their work, time spent commuting to and from home, including for first or last appointments, doesn't count, but all other travelling does.

Who else has breached the rules?

Sports Direct is probably the most famous case, coming as it did from a newspaper expose and prompting a damaging investigation by the parliamentary business committee last year.

It was similarly found to be breaching rules by forcing staff to hang around for unpaid searches, as well as by excessive docking of pay for lateness.

Others include the venerable John Lewis and the department store Debenhams, both of whose breaches were the result of payroll errors that related to how wages are averaged over the year.

How should pay be calculated?

The government's minimum wage calculation instructions state an employer must work out the total number of hours worked or contracted and then divide this by the wages paid out in any and all pay "periods".

It further states that the minimum wage must be met or exceeded on average for every pay period, defined by the method of pay (so per week or month) and not just over a year.

In John Lewis's case, it paid staff the correct amount over the year. But because it averages pay to give equal installments in individual months in which certain staff work more hours, their pay had averaged below the legal minimum.

Debenhams didn't give details, but cited similar "technical errors" in its payroll systems for underpaying 15,500 workers by an average of £11.37.

An interesting example is given by the government of a hypothetical employer who employs someone during term-time but pays them over the whole year.

In this example the firm would need to work out total contracted hours and divide this by the number of pay periods (say, 52 weeks) and then ensure the wages for each installment equated to an hourly rate that meets or exceeds the minimum wage.

Where else can employers go wrong?

They can break the law by making deductions from pay that aren't allowed, for example to recover money spent for the company's benefit like travelling expenses, or for equipment needed for work like tools or uniforms.

That was what went wrong at Monsoon in 2015 when it was found to have underpaid workers by a total of £104,500 by deducting the cost of discounted clothing it required staff to buy to wear while at work.

...

What about the gig economy?

This is a bit of a sore point and has been the subject of a number of employment tribunal cases, many of which are ongoing.

If you're classified as self-employed, the minimum wage doesn't apply. You're effectively a business in your own right and the law determines that you can set your charges to cover your costs and provide a decent wage.

So you cannot claim to have worked extra hours that have reduced your rate of pay, or complain about deductions made.

The issue is that many people working for the likes of Deliveroo or courier firms like CitySprint or Hermes, or who deliver and drive for Amazon or Uber, don't consider themselves self-employed.

Many have gone to tribunals to prove they are completely dependent on the firm that gives them work and so should be given the employment status of "workers", who are entitled to the minimum wage. Of course the firms involved reject this.

A government-commissioned review has proposed clearing things up and giving gig economy workers more rights, but they could still be paid below the minimum wage if they knew that was going to be the case before accepting the work.