HMRC has stepped up enforcement of National Minimum Wage (NMW) compliance, resulting in £13.7 million in fines imposed on employers during the 2022/23 tax year.
This enforcement action follows the Government’s increasing focus on NMW breaches, supported by a doubling of HMRC’s enforcement budget to £27.8 million compared to 2015/16.
A recent report from the Department for Business and Trade (DBT) highlights the impact of this enforcement, showing that more than 108,000 employees were given NMW back pay following investigations into non-compliance. HMRC closed almost 3,200 cases, 900 of which revealed unpaid wages. The report highlights HMRC’s increasing use of the Geographical Compliance Approach (GCA), a targeted three-pronged enforcement method designed to help employers in specific regions comply with NMW regulations.
Under the GCA, employers are encouraged to address NMW arrears voluntarily, but if problems persist, HMRC can impose penalties of up to 200% of the arrears owed. Three more regions (Liverpool, East Midlands and a yet to be announced region) will be added to the GCA in 2024, following the addition of locations such as Belfast, Cornwall and Watford.
Commenting on the report, Kyle Newton, head of National Minimum Wage at Azets, said: “The sheer scale of HMRC enforcement shows how widespread NMW non-compliance is. Businesses must check their payroll records and ensure they are compliant before they face unexpected fines and reputational damage.”
The government remains clear on its position, with the DBT stating: “Enforcing the minimum wage is essential, and we are committed to cracking down on employers who break the law across all sectors.”
The fines and late payments identified by HMRC over the past year reflect increased awareness among employees about their rights, driven in part by campaigns such as “Check Your Pay” and direct communications from HMRC to millions of employees.
Businesses across the UK are being urged to take proactive steps to ensure compliance with the NMW, especially in light of expected increases to the minimum wage, which is expected to exceed £12 per hour by April 2025. working time practices may face further penalties, including public naming by HMRC.
As HMRC’s enforcement activity continues to grow, businesses should review their payroll audits and seek professional advice to limit financial and legal risks.