There are various levels of national minimum wage (NMW) and national living wage (NLW) depending on an individual’s age.
HMRC is responsible for reviewing whether organisations are paying the correct NMW and/or NLW and have various powers to fine or sanction (including criminal convictions) those who pay less than the relevant NMW/NLW. A naming and shaming scheme was introduced on 1 January 2011 and now those who underpay the NMW/NLW can find their names being put online, along with the amount they underpaid. Some of the bigger names include:-
- Debenhams (2017) fined £63,000 for underpayment of wages which they put down to a payroll miscalculation
- Iceland (2019) who underpaid £21M following a salary sacrifice scheme
Whilst the enforcement of NMW/NLW is not new, HMRC have been much more vigilant which has earned the ire of certain sectors. For example, the British Retail Consortium (BRC) wrote a letter to HMRC on behalf of retailers citing that:-
- they were being unfairly targeted;
- the rules were unjust and unreasonable;
- the rules tended to focus on those who had inadvertently breached NMW/NLW.
HMRC’s response was unsympathetic and simply stated that they will continue to take action against those who are found to have breached the NMW/NLW provisions.
Responding to HMRC’s letter, Helen Dickenson, the Chief Executive of BRC stated that HMRC needed to take a more flexible approach and ‘reset their engagement’ with employers in order to facilitate stronger relationships between the parties.
NMW/NLW can cause issues for employers, regardless of size and it can be surprisingly easy to get wrong. Some of the main causes include the cost of uniforms, processing tips and salary sacrifice schemes. All of which, if not carefully considered, could potentially push employees and workers underneath the NMW/NLW thresholds.
In light of this, it would be worth reviewing any practices or schemes you have in place to ensure that you do not end up on HMRC’s naming and shaming list.
Alternatively, if you are considering introducing a new scheme or policy that involves individual’s wages, care needs to be taken to identify areas of risk. Remember, as from 6 April, employers must provide an itemised payslips to all workers (yes workers, not just employees) and payslips for hourly paid worker must include number of hours worked.
If you have any questions about the topics discussed in this article, do not hesitate to contact a member of the employment team.