The National Minimum Wage was introduced in 1999, and the National Living Wage in 2016. The NMW and NLW provide essential protection for lower paid workers, ensuring they are fairly paid for the work completed.
The minimum wage sets the minimum hourly rate of pay that all employers are legally required to pay their workers, subject to their age and whether they are an apprentice.
The Government is committed to taking robust enforcement action against employers who fail to pay staff correctly. The budget for this scheme has increased from 13.2 million to 27.5 million, to pay for more HMRC compliance officers to investigate worker’s complaints.
HMRC enforces a variety of methods to encourage compliance and enforce the minimum wage legislation based around a Promote, Prevent and Respond strategy.
Promote – is based on failure to comply with minimum wage legislation which may be due to insufficient information and understanding, rather than deliberate non-compliance. The aim is to improve the information available to employers on the assumption that employers will comply with the law once they fully understand their obligations.
Prevent – is based on the principle that some employers will deliberately underpay workers, with balancing the potential benefits of underpaying workers against the risk of being caught. The prevent strategy aims to alter employer’s behaviour by highlighting the risks of failing to comply.
Respond – is triggered when HMRC identify non-compliance either as a result of a worker complaint or their targeted enforcement work that draws on HMRC intelligence.
Once underpayment has been identified HMRC issue a NoU (notice of underpayment) which requires the employer to pay the shortfall within 28 days. In most cases they will also impose penalties and pass on the details to the Department of Business and Trade who may name and shame the employer on Gov.uk
In more serious cases HMRC may pursue a criminal prosecution.
Last year a total of 3,310 NMW complaints where reported with 3,004 received via the HMRC online complaint form, 298 via ACAS and 8 through other sources.
In 2021-22 HMRC introduced the GCA (Geographical Compliance Approach) whereby they target employers by geographical region giving HMRC insight within the chosen region.
According to recent reports it is estimated that 2,800 workers in Birmingham alone were underpaid by £775,000 last year. HMRC has written to more than 8,000 employers in the Birmingham area to highlight mistakes around NMW and NLW to help them to get it right and warning of the consequences of breaking the law.
Businesses failing to comply with minimum wage rules could face penalties of up to 200% of their arrears.
By utilising a HMRC recognised payroll software or an accredited outsourced payroll provider can eliminate the risk of under paying minimum wage.
We are pleased to offer payroll services that not only use a HMRC recognised payroll software but also hold accreditations with Professional Passport, The REC and APSCo.