Hi there, this is my first time here but looking for opinions on my situation and any advice would be welcome.

Where do I start, well… Since 13/08/2012 I have been part of a family business started by my two sisters, who were trading 9 months before i joined and it is a food retail outlet. I agreed to join because they wanted to expand and offered me a potential stake in the business. Now we agreed i joined as an employee, and baring in mind I potentially had a stake in the business we agreed i get paid the same wage as my sisters (but they could make drawings from the business), which was £140 per week (I now know this was to prevent them paying tax). So as a consequence they agreed with their accountant that they should write on their documents that i was down for working 23 hours a week, again this had to be acceptable to safe guard the business profits. I was and have been working 51 hours a week from 13/08/2012 - 31/05/2014.

I was ok with the hours and pay because of the exciting prospect of having a stake in the business and a good future. It was coming past the 1st year mark of me being there and I was starting to just wonder why we haven't discussed anything about me joining as a partner. I kept this to myself trying not seem money grabbing or selfish. It came to the point where i had to ask, I just wanted clarity of their plans and to protect myself, because of the amount of time I had already invested. We sat down and they said I wasn't ready and I need to invest more time into it to become more deserving. I guess 51 hours a week not including overtime, living and breathing the business was not enough.

I tried even harder and started helping with the books and admin, to prove myself in other areas of the business, and again time past and nothing else was said. I asked the question again, about them having any inclination on time scale, but to no avail, which leads to when i left. Being a family business there was always friction within the shop and it was very testing, with often break downs of either one of my sisters. That coupled with them not giving me any indication or intentions of me joining the business, I decided I no longer want to be a partner of the business. So i couldn't accept the wage i was currently on so managed to negotiate £200 per week, which was now taxed so worked out at £186.51, that wage was between 22/04/2014 – 02/06/2014. On 02/06/2014 my sister starting laying into me and berating my personal life, and I obviously gave some back, and she hit me. I left that very day and haven't returned since and start a new job on Monday. No one not even my mum has tried to contact me.

I have given nearly two years of my life for them and their business, with no appreciation of the amount of effort i have put in. I've decided to take action get back what i have invested. Here i have a breakdown of what i was paid and what i should have been paid following the minimum wage limit.

Wage Based On Current and Previous Minimum Wage Rate

Previous Min Wage Rate 2012 – 30/09/2013 £6.19

Current Min Wage Rate 01/10/2013 – 2014 £6.31

Hourly Rate Weekly Weeks

Wage Worked Worked @ £6.19 Between 13/08/2012 – 31/09/2013 £6.19 51 £315.69 56* £17,678.64

Hourly Rate Weekly Weeks

Wage Worked

Worked @ £6.31 Between 01/10/2013 – 02/06/2014 £6.31 51 £321.81 35* £11,263.35

Total Wage Earned = £28,941.81

Between 13/08/2012 – 02/06/2014

Actual Wage Payed

Hourly Rate Weekly Weeks

Wage Worked

worked @ £2.75 Between 13/08/2012 – 21/04/2014 £2.75 51 £140.00 89*

Wage Earned In That Period

£12,406.00

Hourly Rate Weekly Weeks

Wage Worked

Worked @ £3.66 Between 22/04/2014 – 02/06/2014 £3.66 51 £186.51 6*

Wage Earned In That Period

£1,119.06

Total Wage Earned = £13,525.06

Between 13/08/2012 – 02/06/2014

Deficit Between Minimum Wage and Wage Received

Total Wage Earned On National Minimum Wage = £28,941.81

During Period 13/08/2012 – 02/06/2014

Total Wage Earned On Actual Payed Wage = £13,525.06

During Period 13/08/2012 – 02/06/2014

Total Deficit Between National Minimum Wage and Wage Received = £15,416.75

(Hope you can sort of understand that, the headers are in the wrong position, I would of screen shot the spread sheet but I'm unable to post images)

As you can see, I have been grossly underpaid. I haven't included Holiday pay, sick pay and lieu hours, because I have never received any.

My question I have is, how can HMRC help me prove that i have worked 51 hours a week, because on paper it's only 23 hours (they sorted that with their accountant at the start). I would have a huge amount of witnesses and their accountant, but is that enough to justify, or have I been legitimately exploited?

Sorry to hear about that. It sounds like were clearly an employee so I think you should be covered by minimum wage legislation.

I don't think HMRC will be able to help you prove anything. HMRC will only know what they have been told on paper. The judge would have to decide what hours you worked on a balance of probabilities based on the evidence presented to him.

Even if the judge does decide you were underpaid by 15.5k, do you think the company could afford to pay this?

Hi, thats exactly what I fear with regarding HMRC, but i have just rang the minimum wage helpline through the .gov website. They said it wouldn't matter what if they have me down as 23 hours, it's what hours you actually worked. I'm guessing he meant if I can prove it. The more i research it, the more I am starting think it could lead to a court case.

Well they made a net profit of £21,000 last financial year, not sure what that means with regards them being able to afford it though.

If they made a net profit of 21,000 then the company is legally able to afford the claim, assuming they make a similar profit next year. The personal allowance last year was just under 9,500 so the sisters would have taken home roughly 20k each. It is standard tax planning to take the maximum amount permissible from the company in wages in order to maximise each director's personal allowance exemption from income tax, and take everything else out through the company paying a dividend which minimises national insurance exposure.

I imagine you'll encounter resistance as the sisters will be wanting to pay that money to themselves in dividends. If the company makes the same profit next year a 15k claim by you would mean they take home about 12.5k each instead of 20k.

Unless the sisters are willing to resolve this amicably then yes, it will mean a court case. Realistically in a situation like this where only a single employee is involved it will have to be a case you bring yourself - you can't rely on HMRC or anyone else to do it for you. Frankly it is not that difficult to bring a county court case, but obviously would be stressful and cause strain in the family.

If that is the way he was treated, does it matter if they can afford it or not, I would go for it.

Thanks for the replies, I have to leave my computer now, but will reply later this evening. Thanks for the help so far.

If they made a net profit of 21,000 then the company is legally able to afford the claim, assuming they make a similar profit next year. The personal allowance last year was just under 9,500 so the sisters would have taken home roughly 20k each. It is standard tax planning to take the maximum amount permissible from the company in wages in order to maximise each director's personal allowance exemption from income tax, and take everything else out through the company paying a dividend which minimises national insurance exposure.

 

I imagine you'll encounter resistance as the sisters will be wanting to pay that money to themselves in dividends. If the company makes the same profit next year a 15k claim by you would mean they take home about 12.5k each instead of 20k.

 

Unless the sisters are willing to resolve this amicably then yes, it will mean a court case. Realistically in a situation like this where only a single employee is involved it will have to be a case you bring yourself - you can't rely on HMRC or anyone else to do it for you. Frankly it is not that difficult to bring a county court case, but obviously would be stressful and cause strain in the family.

Thanks steampowered with the information regarding their dividends and in theory being able to afford it. A court case as you say would cause huge stress on the family, but from my perspective I have more or less been cut off. My mum and sisters have always been closer than I have with them, and when this happened my mum especially has focused on me leaving them in the lurch, rather than the reason why I have left in the first place. I feel I have nothing to lose with regards to family because that has already been lost.

I have just found some new information, but doesn't necessarily make it any clearer. I have found that on my payslips that I requested yesterday, they do not include any hours worked or the hourly rate. I assumed and thought that they displayed 23 hours. Now they don't legally have to display that information on the slip, but with there being no proof (on paper) of the amount of hours I worked, how would HMRC be able to come to the conclusion that I only worked 23 hours, when I really worked 51 hours per week.

I didn't mean that HMRC would come to any conclusions about the number of hours you have worked.

What I am trying to say is that HMRC is unlikely to open an investigation. HMRC has very limited resources. A case like yours which involves a single employee in a family business will not be a priority for them. You can report it, sure, you should not bank on HMRC taking action. If you want a reliable way to claim the money your only real option is to file a county court claim.

I understand, if i do decide to take it to court, then there would be upwards of £3,000 worth of tax that would be owed by myself, if I won the case. Therefore would HMRC get involved then?

Hello there.

I don't understand the connection between winning a case and owing tax. Would you be able to elaborate please?

HB

Hi HB, because my claim would be about wage being owed and if I win the claim therefore I would surely have to pay the tax on wages earned, so 20%.