Tax
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Are you at Risk of a National Minimum Wage Investigation?
In 1998 legislation was enacted that first introduced the concept of the National Minimum Wage (NMW). From 1 April 1999 the legislation required all employers to pay their workers a guaranteed minimum wage which at that time was £3.00 for 18 to 21 year olds and £3.60 for over 22 year olds. The amounts have increased annually and over the years the NMW has been broadened to include apprentices, 16-17 year olds and from 1 April 2016, the National Living wage which applies to over 25 year olds. The current rates can be found at the GOV UK website.
The underpayment of workers is a serious matter and the consequences of breaching the NMW legislation are significant. The NMW is underpinned by investigations undertaken by HMRC that can lead to civil sanctions or criminal prosecutions.
There is an increasing amount of media coverage and public interest in those employers who have breached the NMW legislation and are named and shamed. The naming and shaming of employers applied to investigations which commenced after 1 January 2011 and was aimed at those who at that time knowingly or deliberately failed to comply with their NMW obligations. The minimum amount of total arrears owed to workers was at least £2,000 and the average arrears per worker was at least £500.
However, from 1 October 2013 this was changed to make it easier for the Government to name and shame employers. This means that any employer who is issued with a Notice of Underpayment by HMRC for arrears of more than £100 will be named and shamed, irrespective of whether the underpayment was due to careless or deliberate behaviour (unless they met some quite exceptional criteria). The fact that an employer can be named and shamed irrespective of whether it was unintentional can lead to unwanted adverse publicity and affect its reputation or brand.
The naming and shaming policy is currently under review by the Government, following the recommendation by the director of labour market enforcement, Professor Sir David Metcalf, who recommended that the focus of naming and shaming should be on more serious, rather than accidental and/or technical breaches. It remains to be seen which way the Government will lean.
Other significant impacts can include penalties for non-payment of up to 200% of the amount owed. However, the maximum fine for non-payment is £20,000 per worker. For corporate employers who fail to pay, individuals will be banned from being a Company Director for a period of up to 15 years.
Unfortunately, whilst HMRC’s resources were initially concentrated on tackling those employers who were deliberately underpaying their workers, more recently it seems that HMRC has shifted its focus to breaches of a more technical nature, where employers are often unaware that totally unintentionally they have breached the strict terms of the legislation.
It is therefore important that employers understand the NMW legislation in order to ensure that they are fully compliant with the NMW. We have an excellent track record of assisting clients who are facing HMRC investigations.
If you are already under investigation (it is never too late to seek help and advice), or have just received a letter from HMRC stating its intent to investigate your business, and would like to speak with one of our experienced professionals, please contact us. Alternatively, we can assist if you are uncertain whether there are any issues. We would be happy to have a free of charge no obligation discussion with you to explore how we can help you.
Please contact our team either by:
Sending a message via our Tax investigations contacts
Phone on 020 7063 4639 or 0161 238 9235 or 0121 232 9519
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