15th December 2017

Last Friday (8th December), the latest list of employers to have paid employees below the National Minimum Wage (NMW) was released. Standing at around 260 businesses, the list is less substantial than the previous one issued in August 2017, but still highlights an ever-growing and persistent problem for HMRC to deal with.

With indications showing an increase in the frequency of these lists being made public, HMRC has been readying itself for more NMW reviews by more than doubling the resource for this area to £25m in the past three years alone. This added resource will fund new teams to review employers and the particularly complex areas surrounding NMW.

Specific sectors, such as retail and hospitality, have come under intense scrutiny through NMW compliance in recent times, with retail giants Sports Direct and Primark those highlighted for not paying workers their legal entitlement. Both companies have paid staff back to the tune of hundreds of thousands of pounds.

However, UNW Employment Taxes Partner Lee Muter emphasises that there is more than meets the eye to these cases: “Many of the named and shamed companies present in the lists appear to have had ‘technical’ errors, as opposed to wilfully not paying the correct rates to employees. The rules surrounding NMW are extremely complex in some areas, which has led to inadvertent errors on the part of employers.

“The other issue within the operation of NMW is that penalties are often more severe for minor and technical errors, as employers are liable for a penalty of 200% of the initial total of unpaid wages, in addition to being publicly named and shamed. This could be viewed as rather harsh, with other areas of tax allowing a lower penalty rate that has mitigations built in for innocent and careless errors.

“In the past, the reviews have targeted a specific group of sectors, but there seems to have been a shift in enforcement activity that will see a wide range of sectors come under scrutiny from investigation. Sports Direct and Primark may have stolen the headlines recently, but smaller businesses and employers also need to ensure they are NMW compliant to avoid the consequences.”

With a wide range of clients in various sectors, our employment taxes and payroll team provides a varied, tailored service from both an advisory and compliance perspective. For more information on any relevant matter, please visit our employment taxes page or contact Lee Muter at leemuter@unw.co.uk or on 0191 243 6089.

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