The intricacies of calculating the national minimum wage (NMW) is already something most employment lawyers and HR professionals dread as it's unnecessarily complicated. One of the many knotty areas is what deductions should be made to workers’ income to calculate if NMW is being paid. In Augustine v Data Cars Ltd the Employment Appeal Tribunal (EAT) sought to provide guidance on deductions but its decision only seems to have further muddied the waters.

By way of background, certain deductions from wages or payments by a worker must be taken into account when calculating a worker's hourly pay as these deductions or payments will reduce the amount of the total earnings for NMW purposes. The worker must still be left with at least the NMW after these deductions and payments have been taken into account.

In this case Mr Augustine worked for Data Cars Ltd as a mini cab driver. Initially he provided his own vehicle, but he then rented a vehicle from a company associated with Data Cars. In addition, he bought a Data Cars uniform.

He brought claims in the Employment Tribunal, claiming he was an employee of Data Cars and that he was therefore entitled to the NMW. The Tribunal agreed. There was then a dispute as to whether, for the purposes of the NMW calculation, certain payments made by Mr Augustine fell to be deducted, including payments in for the vehicle and uniform.

The Tribunal found that the cost of car hire and the purchase of the uniform were both optional expenses, as Mr Augustine could use his own car and the uniform was not obligatory.  Therefore these costs did not need to be taken into account when calculating the NMW.  The decision was appealed. 

On appeal, the EAT held that both the cost of the car hire and the uniform were deductions. The EAT held that the test is whether the expenditure is “in connection with employment” (and not reimbursed by the employer). They found that the expenditure does not have to be a requirement of employment and it does not have to be necessarily incurred nor wholly or exclusively incurred in connection with the employment. It was therefore irrelevant that Mr Augustine could use his own car or that the uniform was not obligatory. He plainly hired the car and wore the uniform in connection with his employment.

This is potentially a worrying decision for employers as it muddies the water further as to what costs should be taken into account as deductions when calculating the NMW, if they simply have to be shown to be expenditure in connection with employment. There's a risk that a wide range of costs could be said to be in connection with employment.