The Respondent company operated a savings scheme. Its workers voluntarily paid contributions into the fund, which were deducted from their wages, to help them save for holidays. It was a laudable purpose. The company retained those deducted sums in its main trading account, and paid them upon request to its workers so that they had a convenient lump sum to pay for a holiday. However, in the case of some of its workers, the deductions pushed their wages below the national minimum wage. The appellant, HM Revenue and Customs, served a notice of underpayment on the company requiring it to pay arrears of the national minimum wage to the workers named in the notice. The company appealed the notice to the ET which had to decide whether these deductions were for the company’s “own use and benefit” for the purposes of Regulation 12(1) of the National Minimum Wage Regulations 2015. It decided they were not, and rescinded the notice. HMRC appealed.

The EAT allowed the appeal, holding that the ET had erred in law in its interpretation of Regulation 12(1) and, contrary to previous case law, in failing to adopt a purposive approach. The EAT reached the contrary conclusion: because the deductions were held in the company’s main trading account, they were at its disposal and were for its use and benefit. The EAT also overturned the ET’s judgment that, when the company paid the savings to the workers, those payments constituted “additional remuneration” for the purposes of section 17 of the National Minimum Wage Act 1998, which went towards extinguishing or reducing its liability to pay them arrears of wages. Consequently, the EAT restored the notice of underpayment.