Is it time to review your NMW processes and controls?

The employers named were found to have failed to pay their workers almost £5 million in a clear breach of National Minimum Wage (NMW) law, leaving around 63,000 workers out of pocket and £7 million in penalties being levied.

Whilst big UK retailers topped the list for breaches, there was a diverse mix of businesses included in this naming round including the hospitality, processing and care sectors. Amongst other things the data covered the outcome of enquiries concluded during 2017 to 2019, with some of those enquiries starting out as far back as 2011.

Regions with the greatest number of employers named included the North West (26 employers), South East (24) and Yorkshire (23), with the main causes of underpayments being:

• 79 employers making deductions from pay (39% of 202 employers named)
  • e.g., Salary sacrifice reductions, training costs, uniform, travel permits
• 78 employers failed to pay workers for working time (39% of 202 employers named)
  • e.g. , rounding up time for lateness, mandatory training and travelling time, pre-and-post shift working time
• 42 employers paid the incorrect apprenticeship rate (21% of 202 employers named)
  • e.g., incorrect classification, aged 19 or over and failure to uplift pay rate after first year completed, missed uplift of pay on completion of apprenticeship.

The full article, which includes the education bulletin explaining more reasons as the causes of underpayments in this naming round, can be found here More than 200 companies named for not paying staff minimum wage - GOV.UK (www.gov.uk)

With HMRC enforcement activity ramping up across the UK, now is a good time to check your processes and controls are meeting NMW compliance regulations. 

Don’t get complacent – the majority of employers are caught out on technicalities - not from deliberately paying below the NMW rates.  It is even possible to be caught out in respect of non-low paid employees. For example, salaries received in excess of £50k with large, one-off salary sacrifice reductions, such as additional contributions to a pension scheme, could result in a NMW breach. Each naming list is supported by an educational bulletin, which explains the main reasons for underpayment, and this edition focuses on unpaid working time. 

However, since the conclusion of these investigations and enhancements made by employers to reward and remuneration packages, new risks have emerged resulting in HMRC evolving its risk profiling and data analytics techniques. One other point to note, is that the changes in the NMW legislation back in April 2020 for salaried workers are yet to be reflected in concluded enquiries. Current investigations are focussing on the detail of salaried working arrangements and time keeping records to support actual time being worked in comparison to contractual hours being paid for.

If you have any concerns in relation to your NMW compliance, we have developed a NMW Assessor Tool which provides a high-level risk rating score and a report based on the responses to 20 questions – it’s free and easy to complete, and comes with the offer of a complimentary follow up call to discuss any findings – it’s a great starting point to address any risk highlighted. 

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