National Minimum Wage Compliance

    In recent months Abbey Tax has experienced a significant increase in the number of calls concerning the National Minimum Wage/National Living Wage from advisers seeking advice and support in relation to this complex area.

    The National Minimum Wage is governed by the National Minimum Wage Regulations 2015. 

    On 6 April 2015, the National Minimum Wage (NMW) Regulations 2015 (“the 2015 Regulations”) came into force. The original regulations were formed in 1999 and the current regulations bring together the numerous changes made to those Regulations since April 1999.

    On 1 April 2016 the National Living Wage (NLW) was introduced.

    In 2016/17 HMRC identified over £10.9m in unpaid earnings, compared to £4m per year between 2009/10 to 2014/15.

    It is clear from the below that NMW compliance is extremely high on the government agenda:
    • The number of workers where HMRC has identified arrears more than doubled in 2015/16 to 58,000, and increased again in 2016/17 to a record 98,000 workers. This compares to an average of around 25,000 workers per year over the preceding six years.
    • The introduction of the NLW for workers aged 25 and over in April 2016 led to a larger number of workers covered by any of the NMW rates, thereby increasing the ‘at risk’ population so far as HMRC are concerned.
    • HMRC currently has over 400 compliance officers dedicated to the enforcement of NMW. HMRC has confirmed that the extra resources invested in NMW enforcement will result in more investigations.
    • In recent years, HMRC has focused on the hospitality, hair and beauty, social care and cleaning sectors. HMRC has also investigated an increased number of large employer cases where a single NMW risk can apply to a large number of workers.
    • Penalties charged as a result of NMW interventions have shot up from £127,367 in 2014/15 – relating to 151 closed cases, to £733,716 in 2015/16 – relating to 1091 closed cases, and in 2016/17 the penalties charged amounted to £2,534,618 from 1473 closed cases.
    Given that all complaints by members of the public to HMRC are investigated, coupled with the punitive penalty regime, it is a risk area that advisors should be discussing with their clients. 

    HMRC doesn’t discriminate, and any of your clients, no matter what the size of the business, could find themselves subject to scrutiny and face the stress and anxiety of dealing with a visit from HMRC. The first notification your client will have of this will be a letter headed ‘National Minimum Wage and National Living Wage’. In the majority of cases, these stem from, or may be conducted as part of, an Employer Compliance Review.

    We have a proven track record of successfully resolving disputes and have built up a wealth of experience in this specialist area. Currently, we are assisting clients that already have NMW/NLW enquiries ongoing as well as assisting those who, whilst not under enquiry, are concerned by the complex nature of the legislation and wish to ensure their compliance with the NMW/NLW guidelines.

    Jacqui Mann and Nigel Nordone are experienced tax professionals, as well as being ex-HMRC inspectors. Both specialise in PAYE and status matters and, as such, they are well placed to assist you and your clients with a view to minimising risk, and supplying peace of mind.

    For further information on how to protect your clients or how we can assist you with issues surrounding tax status and compliance visits, please contact Nigel Nordone or Jacqueline Mann on 0345 223 2727.