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Dealer's employee car lease scheme broke minimum wage rules

Pendragon has been hit with a £35,000 fine by Her Majesty’s Revenue & Customs (HMRC) after deductions from staff pay took 40 employees below the national minimum wage.

The UK’s biggest car dealer made deductions from employees’ pay packets to cover the cost of a lease car, as well as a range of other benefits.

However, the Nottingham-based business was summonsed to an employment tribunal in Sheffield last month, where an HMRC claim that the company had underpaid workers was upheld.

The company has now been ordered to pay a total of £30,254.68 to the 40 staff and a penalty of £5,000 was also imposed.

There are different levels of the national minimum wage depending on employees’ ages and whether they are an apprentice.

The current rates (from October 1, 2011) are: £6.08 – the main rate for workers aged 21 and over; £4.98 – the 18-20 rate; £3.68 – the 16-17 rate for workers above school leaving age but under 18; and £2.60 – the apprentice rate, for apprentices under 19, or 19 or over and in the first year of their apprenticeship.

Pendragon was making deductions from the wages of employees under the heading of “motorway” to pay for a lease car from Pendragon Contracts, its leasing division.

However, the company had argued that the alleged deductions did not amount to deductions and were actually payments made by the employees to the employer for their own use and benefit. It added that the sums had been collected from the net pay of the employees purely for “administrative simplicity”.


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  • Irishboy4 - 30/04/2012 20:13

    The statement ''From net pay'' would seem to indicate a route to paying less employee and employee NI and tax as well? It is also about time the Inland Revenue investigated the supposed lease/purchase scheme used by Mercedes in the UK, which in reality is a way round the BIK and their best source of used cars.

  • racer47 - 30/04/2012 21:51

    Sounds like someone has an issue with Mercedes . . or is jealous. All Manufacturers in the UK operate Employee Car Ownership Schemes, and additional loan car schemes, usually funded by an interest free loan from the Manufacturer. The Inland Revenue Audits these schemes (and I was on one for years) and the employee is still liable for P11D against the Interest free element of the loan (which used to work out about £1600 a year for cars with a lower on the road cost than Mercs, so a Merc employee would pay more.

  • Bibi - 17/12/2012 13:11

    If this was an administrative simplicity, who filed the how did this get in court? Were the employees aware of this admin simplicity or they were not notified at all. If this was an agreed deal between car leasing company and it's employees, does HMRC have the right to impose a fine on it? I had a deal with and this kind of simplicity was never made...