Don’t fall foul of minimum wage with unpaid trial shifts in the hospitality industry

In a series of articles we are looking at how even employers who fully intend to pay their staff National Minimum Wage (“NMW”) are being caught out by the complexities of the legislation. HMRC are currently “naming and shaming” offending employers. As well as having to make up the underpayment, employers can be fined up to 200% of the money that is owed to the worker (up to a maximum of £20,000 per worker). It is clearly costly to get it wrong.

Understandably employers are keen not to fall mistakenly foul of the NMW legislation. Having considered the issue of uniforms, in this article we look at trial shifts and inductions.

Trial Shifts

There has been a lot in the press recently about employers using unpaid trial shifts.  A trial shift can be a useful way to assess how an employee will perform in the job and under pressure. Equally it has been reported that some businesses have been requiring candidates to work 40 hours of unpaid shifts or have used candidates to cover staff sickness absences. There is a point at which valid recruitment processes become exploitation.

Is an unpaid trial shift legal?

According to ACAS the practice of requiring applicants to work an unpaid trial shift is not illegal as long as the unpaid shift is part of a “genuine recruitment process” and as long as the shift does not last for more than a few hours. It should be possible to form a view as to whether a new barman or waitress is suitable for your business after a short trial of an hour or two. ACAS advise that after that, for example if a candidate is asked to work a full shift or even multiple full shifts, then they should be paid the NMW for the hours worked. After a few hours the relationship is more arguably an employment one and at that point it is safer to pay NMW.

Updated guidance from BIS

The Government has published updated guidance for employers on calculating the NMW which includes guidance on unpaid work trial  periods.

The guidance makes it clear that HMRC will assess trial shifts on a case by case basis.  It is important to look at whether the point of the trial is testing the individual’s ability for recruitment or to provide value to the employer.  If the individual is required to work a whole shift or a series of shifts then this is likely to be of value to the employer and therefore the NMW will be due.  Equally if the individual is not observed or given any guidance during the trial then it is more likely that they are providing work for which the NMW should be paid.

HMRC will also look at whether the length of the trial was proportionate to the need to test the individual’s ability.  For example, it might be reasonable to ask a teacher to be in school for a whole day and to teach various lessons under observation.  It is unlikely to be proportionate to ask an applicant for a bar job to work a whole Saturday night shift unsupervised.

If an individual is asked to work in a simulated environment for a short amount of time e.g. a chef is asked to produce taster dishes then this is unlikely to attract the NMW.

The guidance gives useful example scenarios and can be found here. HMRC will take action where they believe workers are being exploited under the cover of recruitment.

How to make a payment

If you feel it is appropriate to pay someone for the trial they have worked, it may be too much of an administrative burden to put them on the payroll for a few hours if you are not planning to offer them a job. However, it is perfectly acceptable to pay a candidate cash in hand for the hours they work and then give them a self-reporting certificate so that the individual is responsible for any tax or NI that may be due.

Good Practice

Employers should:

• inform a candidate about how long the trial period is going to last;
• tell a candidate what they will be expected to do on the trial shift;
• make sure the applicant understands that the trial shift is unpaid;
• keep written evidence of this in case of a subsequent HMRC audit.

Cautious approach

Once you offer a job to an applicant you must ensure that they receive the NMW once they start working for you. The NMW calculation is made over a pay reference period and you will need to ensure that the hourly rate does not fall below the NMW in the first pay reference period because of the unpaid trial shift that the employee worked, or induction or training sessions that they attended. Some employers in the drinks and hospitality sector have reported to us that they prefer to pay applicants for a short trial shift rather than risk falling foul of the NMW legislation, particularly with all of the HMRC audits that are being carried out currently and the focus on the hospitality and leisure sector.

Avoiding discrimination

It is also important to ensure that your recruitment process is the same for all applicants. You should ask all of them to work the same trial shift and either pay all of them or none of them in order to avoid claims of discrimination.

On-boarding, briefings and training

The on-boarding process of inductions and training will be regarded as working time and should therefore be paid at no less than NMW rate. Where staff have to travel to training then their travel time should also be paid at NMW rates.