Is Iceland right to blast HMRC 'bureaucracy' over minimum wage?

The chain has fallen afoul of the rules over its Christmas club, which staff voluntarily pay into, and its demand that they wear 'sensible shoes'. HMRC's action looks questionable, but its aggressive approach to enforcing the rules is still to be welcomed given Britain's high rate of in work poverty

James Moore
Chief Business Commentator
Wednesday 02 January 2019 13:43
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A classic case of a British regulator over reaching itself? That’s the way grocer Iceland is portraying its dispute with HM Revenue & Customs (HMRC) over the minimum wage.

The frozen food specialist has been told that staff voluntarily paying into a Christmas club savings scheme puts it under the threshold. HMRC has also raised issues with the demand that workers wear ‘sensible’ shoes. The potential bill has been put at more than £20m.

On the face of it, it looks like the chain, and its vocal boss Malcolm Walker, might have a point. Saving of any kind is a far more effective means of covering the cost of the festive season than borrowing at high cost, which is what too many low waged Britons do at rates of interest that are high even after taking into account the efforts of the Financial Conduct Authority to limit them.

The best way to do this is via an interest paying account. But savings rates are low and Iceland staff may welcome the convenience of doing so through their employer.

It holds the money in a segregated account with independent trustees, and lets them withdraw the money on demand without penalty, so the scheme a better bet than many of the commercial Christmas club operations that are around.

If what we’re saying here is that there wouldn't be an issue were the money were first paid into an employee’s bank account and then put into the Iceland scheme via direct debit, rather than being deducted at source as at present, then the case looks questionable.

The ‘sensible shoes’ demand is more complex. Many low wage companies impose dress requirements that load costs onto staff and thus take them under the minimum wage threshold.

Iceland says all its employees have the option of using the ‘safety shoes’ it provides and that are commonly used by its warehouse workers. Most shop staff, however, choose not to.

If it’s as simple as that, one would think that the company would stand a good chance in challenging the ruling. But I don’t believe HMRC is wrong to raise the question.

An option for the company would be to increase pay rates to something closer to the level set by the voluntary Living Wage Foundation. It is aimed at providing workers with a decent basic standard of living. If Iceland did that then the issue might not have arisen.

There will doubtless be more cases like this cropping up, because after years of lax enforcement, HMRC has been given the money to actively enforce the rules.

Mr Walker has called for ‘common sense’ while railing against bureaucracy (of which there’ll be plenty more post Brexit). He'll likely find a sympathetic audience for that.

But even if his company’s challenge is successful and HMRC is proven to have been over zealous in this instance, the fact that it is aggressively pursuing minimum wage cases has to be welcomed.

According to the Joseph Rowntree Foundation one in every eight British workers are in poverty. That’s an ugly statistic. While it won’t solve a complex problem that Government policy in other areas has exacerbated, HMRC’s approach could at least help.

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