Who gets it – and who doesn’t?
- It’s a criminal offence to not pay someone the National Minimum Wage
- It applies to most workers over school leaving age including casuals, part-timers and agency workers
- All businesses must comply – regardless of size
- It doesn’t apply to self-employed people or company directors
Why NMW matters to employers
If your company has underpaid its workers, the consequences could be severe:
Arrears
You must pay arrears to the worker immediately and you may end up paying more than you would have if you had paid the correct amount to start with. In one instance, a national retailer was forced to make back payments of £193,000 for almost 3,500 workers after it required them to be at work before and after opening hours without pay.
Naming and shaming
HMRC will now publicly name any employer, big or small, who breaks minimum wage law.
Penalties and prosecution
On top of the arrears, employers risk financial penalties of up to £20,000.
Criminal prosecution is rare but the most serious cases can be heard in a Crown Court, meaning that there’s a potential for an unlimited fine.
How is NMW enforced?
HMRC have the power to check your wages at any time – it’s your responsibility as an employer to keep records proving compliance with NMW and you have to keep these for 3 years. You could be randomly targeted or a worker’s complaint could trigger an investigation.
Out of the blue, our biggest client received a random minimum wage inspection. The HMRC inspectors spent a full day digging into the payroll and payment records.
We handled the entire assessment on behalf of our client and were happy to host the compliance team at our premises. They delved into the current year’s files as well as the previous three years’ files, picking staff at random and tracing their wages from timesheet to bank account.
We spent the day making them tea and being quizzed in depth, using paper and electronic records to prove compliance. With a good understanding of the business, we could answer HMRC’s questions with confidence.
The client passed the inspection with flying colours.
Where can I get more help?
The rates change in April each year. Rates for previous years can be found at gov.uk.
A good payroll provider will watch out for NMW compliance issues as part of the service.
- ACAS 0300 123 1100 (Mon to Fri 8am-8pm, Sat 9am-1pm)
ACAS gives free impartial advice to employers and workers.
- Pay and Work Rights at Gov.UK
Follow this link to report NMW breaches.
This article updated Oct 2024.
Image credit: University of Liverpool Faculty of Health (CC BY 2.0)
