Avoid being named and shamed for underpaying National Minimum Wage

We have seen a large increase in HMRC activity on National Minimum Wage (NMW) Compliance in recent months. We have been able to help many clients reduce if not completely mitigate the amounts claimed by HMRC.

We were also recently asked whether it was possible to avoid being named and shamed for underpaying NMW. The simple answer is this is very unlikely once HMRC have issued a Notice of Underpayment (NoU). However, if you can convince HMRC that any underpayments have been remedied before a compliance visit, they will not issue a NoU. So, no report goes to the Department for Business and Trade (DBT) and your name will not be published. To be fair, if you are named and shamed you will be in very good company: Employers ‘named and shamed’ for paying less than minimum wage - GOV.UK (www.gov.uk). From this list you will see that it is not just poorly advised or unscrupulous employers that are falling foul of these rules.

You may think that this only applies to workers earning at or close to the NMW. We have seen problems with workers paid significantly above this rate when there have been cumulative issues. For example, multiple deductions/salary sacrifices. We have also seen problems when employers have been paying the National Living wage (NLW) to all workers regardless of age but have still underpaid NMW.

So, what should you do?

First you need to make sure that you are keeping records of employees and worker’s hours. This is already a legal requirement for NMW. You are also likely to be required to show this information on your monthly PAYE RTi returns soon. So, you need to consider what format this information is held in. One of the common issues we have found is that time recording systems frequently show seven and a half hours as 7:30. But for importing information into software, it may need to be in the format 7.50. This may be straight forward if all workers do a standard day but can become a problem when you have fluctuating hours.

You need to make sure that your staff handbook or other internal documents are not too prescriptive on dress codes, equipment, PPE. If they are HMRC will argue that you need to cover the costs of the items which workers are required to provide. While many workers will choose to buy designer brands, the key is “required” so you may need to manage their and HMRC’s expectations!

You need to be aware, even if it is not company policy, managers, if outlying branches or clients are advising workers that they need to arrive say 15 minutes before a shift starts.

You also need to be aware of any changes in the layouts of premises. For example, a clocking in machine or a changing area being moved, or security procedures being tightened.

These are some of the examples we have seen recently but there are many other ways in which NMW failures can arise.

How can we help?

The good news is that it is frequently possible to demonstrate to HMRC that any errors have in fact already been corrected and so there is no need to issue a NoU. We can give you the inside track on how to mitigate liabilities.

We also recommend that you regularly carry out “self-reviews” before HMRC visit. We can identify your risk areas and help you to concentrate your focus on these.