By Esmée Hardwick-Slack
The supermarket Iceland Foods has come under fire recently for a scheme which allows staff to voluntarily set aside money from their weekly wages and claim it back at a later date (usually around Christmas). HMRC has told the company that the payment scheme means staff are technically falling below the minimum wage threshold.
The current (April 2018) rate for minimum wage is £5.90 for 18 to 20 year olds, £7.38 for 21 to 24 and £7.83 for over 25s, this is due to increase in April 2019.
The tax authority is claiming that because Iceland staff voluntarily had sums deducted and put to one side from their weekly wage packets, their pay technically had fallen below the minimum wage rate. The alleged underpayment is of around £3.5 million a year for six years, even though staff made th choice to participate in the scheme and received all the money they had put to the side.
HMRC has also accused the supermarket of breaching minimum wage through its issued guidance for shop floor staff to wear “sensible shoes” with their uniforms. Those who have bought their own footwear would have fallen below minimum wage in the weeks that the shoes were purchased. HMRC wants the supermarket to refund store staff for two shoe purchases a year, at a value of £20 each, going back six years, or they could face a fine.
Iceland does however provide safety shoes free of charge. These are typically used by warehouse staff, but can be requested by any employee, although store staff are not required to wear them.
Sir Malcom Walker, Iceland founder and chief executive, has described the dispute as “just madness”. Claiming that he will fight HMRC’s claims and will be prepared to go to court. However, if he loses, the retailer could face a bill of £21 million.
Iceland was founded in 1970, and has since become one of Britain’s top ten supermarket chains with over 25,000 employees.
Richard Walker, managing director of Iceland, said: “The frustration we have is that we are not Starbucks, Apple nor Amazon. We are British born and bred, we are based onshore and we pay our taxes – we paid £1.3 billion over the last decade. It is just because we are visible and easy to have a go at.”
Chairwoman of the Treasury Committee has said that the decision taken by HMRC appeared to be “perverse” and risked dissuading the company from assisting its employees. A select committee of MPS – which has the power to summon senior figures such as the chancellor and HMRC’s chief executive – is examining the case.
John O’Connell, chief executive of the Taxpayers’ Alliance, said “This is yet further evidence of the dangers of an over-complicated tax code. This government’s focus should be on simplifying the tax system.”
Iceland are not the only large company to have fallen foul of technical breaches of minimum wage regulations, Monsoon, Accessorize, Argos and Wagamama, have all been left with hefty fines from HMRC.
Do you think Iceland are right to be fined? Or does the voluntary scheme benefit employees? Let us know in the comments & don’t forget to follow us on Twitter and Facebook for more articles like this!