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HMRC Employer Bulletin: navigating what constitutes a National Minimum Wage breach

Posted on 14 December 2018

HMRC Employer Bulletin: navigating what constitutes a National Minimum Wage breach

HMRC have released their bi-monthly Employer Bulletin which is intended to give employers the latest information on topics and issues that may affect them.

In an effort to help employers avoid making mistakes HMRC have included a list of the 10 most common mistakes employers make when paying the National Minimum Wage (NMW).  Whilst this is helpful, the focus on technical issues as opposed to more guidance on HMRC's general attitude to purported NMW breaches – which in our experience is decidedly bullish – arguably makes this of limited use to employers. 

One such top 10 mistake is as follows:

"Making wage deductions that are deemed to be for the employer’s “own use or benefit”, for example a Christmas club saving scheme. It doesn’t matter that the worker can choose to buy into the scheme and the employer doesn’t have to make a profit from it" (emphasis added).

However, the underlying NMW Regulations which govern its operation refer to "Deductions or payments for the employer’s own use and benefit" (emphasis added).  The legislation requires a 'two-stage' test, for an employer to have used and benefitted from the deduction made.  HMRC are interpreting the legislation as meaning either would be sufficient for an employer to be in breach – this is not supported by the legislation. This is an example of the complexity of the rules, how they are applied and why employers both large and small can find themselves under scrutiny.

A major positive for employers is that if errors are identified and self-corrected before HMRC's intervention, HMRC cannot invoke a notice of underpayment (which could lead to a penalty of 200% of the underpayment).  There would also not be any 'naming and shaming' which would otherwise take place if an employer is in breach.

Other examples included within the top 10 that can lead to such "technical" breaches are:

  • "Making wage deductions for items or expenses that are connected with the job.  This could include, for example, safety clothing, uniforms, tools etc."
  • "Not paying for all the time worked such as time spent travelling, training or downtime at the employer's disposal"
  • "Not paying for additional time worked such as time spent clearing security checks once a worker's shift has finished."

If you have any concerns or uncertainties about your position, or have been contacted by HMRC in relation to NMW, we can apply our experience and expertise to help you resolve any issues.

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