National Minimum Wage

Making sure your employees receive what they are entitled to under the National Minimum Wage regulations isn’t as easy as it first seems.

Changes in how HM Revenue and Customs (HMRC) interprets the National Minimum Wage (NMW) rules has left many employers – large and small – facing substantial fines and being publicly named and shamed. It makes no difference if the company simply made a mistake – if they are investigated and found to have underpaid their staff, the penalties are the same.

Some sectors are more likely to encounter problems in complying with the National Minimum Wage regulations. There is plenty of scope to make mistakes when employees:

• work variable work patterns or variable hours,
• are paid rates of pay designed to be at, or close to, NMW levels
• receive pay that is made up of several elements, particularly if some elements do not count towards NMW.

Business sectors most often affected include hospitality, construction, retail, care, and charities. These sectors are most likely to be the target for HMRC NMW compliance campaigns, but employee (or ex-employee) complaints are also a common trigger.

Whatever leads to an HMRC compliance review, you, as the employer will have to prove you have paid your staff at or above the relevant NMW rates. If you can’t HMRC will assume you are at fault. The best form of defence is always good documentation. Up to six years of employment contracts and policies, time records, and written working practices may be needed as evidence.

Handling an NMW investigation, compensating employees for any underpayments, and paying the hefty HMRC fines could put your business under financial pressure. Appearing on HMRC’s NMW defaulters list leaves you open to media criticism which can be just as costly for your brand. The best way to avoid this is to make sure you have the right policies and procedures in place and follow them rigorously.

We can help you to:

Calculate NMW payments correctly, making sure the methods you use don’t result in an unintentional underpayment to staff.

Review contracts, policies and working practices to make sure they are in line with the NMW rules and don’t give rise to unintended consequences.

Create the right records, so you can respond effectively should HMRC choose to investigate you.

Advise you on how to prepare for and handle a NMW compliance review.

Defend you if you are taken to tribunal over underpayment of NMW.

Get in touch with our employment tax advisory team to find out more about how they can help you stay on top of National Minimum Wage regulations.