United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Mr Joshi, the Appellant in person, assisted by Mrs Joshi
For the Respondent	No appearance or representation by or on behalf of the Respondent


 


HIS HONOUR JUDGE J BURKE QC

1. This is an appeal by Mr Joshi against the Decision of the Employment Tribunal sitting at Exeter and chaired by Mr Hollow. By that Decision the Tribunal found that the Applicant before them, Mr Sandercock, was an employee of the Respondent before them, Mr Joshi, and ordered Mr Joshi to pay £155 in respect of failure to give notice on termination of Mr Sandercock's employment, £697.50 in respect of payment for holidays not taken, and £720 in respect of wages paid during the course of Mr Sandercock's employment at a rate less than that provided for by the National Minimum Wage Regulations 1999.
2. Mr Joshi appeals only against the last of those three Orders, that is to say the Order in respect of underpayments of wages, as compared with the minimum rate required by those Regulations and the grounds of his appeal can be very shortly stated. They are simply that on the findings of the Tribunal, Mr Sandercock was paid from the start of his employment £140 per week which, during the course of his employment, rose to £155 per week. Those payments were, as agreed between Mr Sandercock and Mr Joshi, paid net of any deduction of tax and national insurance contributions. Mr Joshi agreed to pay all those deductions.
3. Mr Joshi submits that the hourly rate payable under the National Minimum Wage Regulations is a gross rate and that if one takes the gross rate which is represented by a net payment of at first £140 per week and then £155 per week, the total gross remuneration in Mr Sandercock's case exceeded the National Minimum Wage rate throughout the thirteen months of Mr Sandercock's employment, except for a period of eighteen weeks from 1 October 2001, in which the gross remuneration was 11p per hour below the national minimum rate. It fell below that rate because that rate was increased; it ceased to be below that rate because Mr Sandercock's wage was increased to a point at which his gross remuneration was restored to its previous position above that provided for by the National Minimum Wage Regulations.
4. Mr Joshi has sent in a calculation which demonstrates that, during the eighteen week period to which we have referred, there was an underpayment to Mr Sandercock, as compared with what the National Minimum Wage Regulations required, of £79.20. That calculation also demonstrates that in the period prior to 1 October 2001, Mr Sandercock was overpaid, as compared with the National Minimum Wage rate, as he was, in the period from 4 February 2002, when his wages were increased, to 15 March 2002, when his employment came to an end.
5. Mr Sandercock is not present and is not represented in this appeal. Mr Joshi and Mrs Joshi have appeared (Mrs Joshi on Mr Joshi's behalf). Mr Sandercock's solicitors have invited us to proceed on the basis of written submissions which we take to be those set out in their letter to the Employment Appeal Tribunal of 5 December 2002; and we have looked at that letter with care and at other letters which they have written. The solicitors say that tax and national insurance are irrelevant, and that the Regulations do not provide for any payment that Mr Joshi may have to make or may have had to make by way of tax or National Insurance to be incorporated in the calculation of the hourly rate; that in this case, Mr Joshi agreed to pay National Insurance and tax, and there is no doubt at all on the Tribunal's findings, which have been since confirmed by the Chairman, that the amount of £140 and £155 paid to Mr Sandercock was net pay. The solicitors do not suggest that Mr Sandercock is liable to pay tax or National Insurance on the sums which he actually received.
6. The ordinary National Minimum Wage rate is set out in Regulation 11 of the 1999 Regulations. It is now £4.20 per hour; it was £4.10 per hour, from 1 October 2001 - 1 October 2002, and before that it was £3.70 per hour. There are provisions in the Regulations for lower rates to apply in specific circumstances, none of which apply to this case. The Regulations, by Regulation 14, set out how it is to be determined whether the National Minimum Wage rate has been paid; the method, and we need not go into detail, requires the hourly rate paid to a worker to be ascertained by dividing the total paid to him by the number of hours worked in a pay reference period, which, for the purposes of this case, would be one week.
7. There are various provisions as to what should be deducted for the purpose of the calculation and what should not be deducted for the purpose of the calculation from the actual payments made; but one thing is quite clear: there is no deduction for payments of tax or National Insurance; that, of course, is because from sums actually paid over to an employee - and Mr Sandercock is an employee - are received, those deductions will already have been made by the employer. It is equally clear that the rate determined from time to time as the National Minimum Wage rate under Regulation 11 of the 1999 Regulations is a gross rate and not a net rate.
8. The Tribunal, having found that the remuneration actually paid to Mr Sandercock constituted net remuneration, was in error in treating those payments as the basis for a calculation as to whether Mr Sandercock had been paid less than the rate required by the National Minimum Wage Regulations. The Tribunal should have worked out what the gross remuneration was and applied the Regulations to the gross remuneration, and not to the net remuneration. We are entirely satisfied that if they had done that, they would have realised, as Mr Joshi's calculations set out, that there was no underpayment, as compared with the National Minimum Wage rate for the whole of Mr Sandercock's employment, save for the eighteen weeks which we have identified and that that underpayment amounted to £79.20 gross.
9. Therefore, this appeal must be allowed to this extent, that the Order for payment of £720, as constituting money due under the National Minimum Wage Regulations, is set aside and replaced by an Order for payment of £79.20.
10. It is clear from the correspondence and from what Mr and Mrs Joshi have said today, that there is some lack of clarity between the parties as to what is now outstanding; and we think it might be helpful to both parties if, very simply, we set out what, as we see it, is outstanding.
11. The Tribunal ordered the payment, as we have said, of £155 in relation to lack of notice, and £697.50 in respect of holiday pay. We have found that, under the National Minimum Wage Regulations, a further £79.20 is payable. Thus the total payable to Mr Sandercock by Mr Joshi, not taking into account any payments so far made by Mr Joshi, is £931.70. Mr Joshi has paid, and this appears to be common ground, £678.24. Thus there is still outstanding from Mr Joshi to Mr Sandercock the sum of £253.46.
12. We hope that that clarifies the position; and we have only one more thing to say; that is that the £79.20 is calculated on a gross basis. It is not entirely clear to us whether Mr Joshi is obliged to deduct tax before he pays that, or whether it is taxable in the hands of Mr Sandercock. We suspect that the former is right, but are not in a position to determine which of those two alternatives is right. No doubt, a telephone call to Mr Joshi's accountant will tell Mr Joshi which is right.