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A message for employers: HMRC continues to enforce National Minimum Wage compliance with significant penalties

Posted on 15 December 2021

On 9 December 2021, the Government released its second National Minimum Wage Naming Scheme this year, calling out over 200 employers for failing to comply with National Minimum Wage requirements (an increase from the number of employers that were named in August). The listed offenders range from multinational businesses, high street names to sole traders, and includes The Feel Good Group Limited (i.e. The Tanning Shop), House of Fraser Limited, and a number of nursery and childcare services (as set out in the Government's press release).

Collectively, the listed employers failed to pay their employees £1.2 million, resulting in almost 12,000 individuals being underpaid. As such, the employers were required to repay what was owed to their staff, as well as pay financial penalties of up to 200% of what was owed. The latest list of breaches comes as a result of HMRC investigations concluded between 2014 to 2019. 

It is clear that whilst HMRC have previously claimed that its level of enforcement was largely postponed during the pandemic, NMW enforcement has by no means been abandoned. On the contrary, in the 2020 to 2021 tax year, HMRC recovered over £16 million in pay which was due to them and also issued more than £14 million in penalties.

The Autumn Budget announced a series of increases in the NMW, with the National Living Wage set to rise by 6.6% to £9.50 from 1 April 2022 for those aged 23 years and above (the biggest increase to NMW since its introduction).  This will have a significant impact on sectors such as hospitality, retail, administration, hairdressing and health, who typically employ low paid workers and are bearing the brunt of NMW investigations. The latest press release also indicates that the breaches of the NMW Regulations relate to:

  • Deductions that reduce minimum wage (including via enforcing a dress code requirement, food/meals, parking permits/travel costs and salary sacrifice schemes);
  • Unpaid working time through mandatory training, trial shifts or travel time;
  • Failure to pay the correct rate of pay to apprentices (or failure to classify a worker as an apprentice);
  • Failing to increase the NMW rate of pay in line with government rises or paying the incorrect rate;
  • Adopting the incorrect worker type (i.e. incorrectly treating a salaried hours worker as a time hours worker); or
  • Incorrectly treating a worker as self-employed.

The latest list of names demonstrates that the majority of the underpayments are a result of businesses either failing to adopt the correct procedures to ensure that all working time is accounted for and paid for, or simply failing to apply the correct rates. 

Evidently, HMRC are not afraid to adopt robust enforcement actions against employers if they are not compliant with the regulations; since 2015 the budget for minimum wage enforcement has doubled, with the government ordering employers to repay £100 million to 1 million workers.  This is a timely reminder that employers should remain vigilant in carrying out necessary checks across the business, adopting protective measures and maintaining sufficient record-keeping  to avoid the risks of repayments, 'naming and shaming', and significant penalties. 

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