Last updated: 12 Aug 2024 12:00 Posted in:
Small and medium-sized firms in 11 UK cities and regions are being targeted in an HMRC crackdown on non-compliance with the National Minimum Wage (NMW) rules.
Belfast, Birmingham, Bradford, Cardiff, Cornwall, Cumbria, East Anglia, Glasgow, Liverpool, the North East of England and Watford are the focus of a new campaign from the tax authority. Companies found guilty of non-compliance will have to pay NMW arrears to workers in addition to increased National Insurance Contributions (NICs).
Any SME refusing HMRC’s offer of a meeting also risk financial penalties of up to 200% and public naming and shaming.
Many of these businesses could be inadvertently breaking the rules due to their complexity and common misunderstandings around how to accurately calculate NMW beyond an hourly rate of pay.
HMRC has committed more than £27 million to tackling NMW non-compliance, with regional enforcement being its main focus, and is targeting workers paid in excess of £30,000 a year.
Kyle Newton, Azets UK head of National Minimum Wage, commented: “Maintaining compliance with National Minimum Wage is commonly misunderstood, with the calculation made up of several components across five core pillars – it is not just an hourly rate of pay. As an employer, unless you understand these pillars and have policies in place to govern and control each, you are at risk of non-compliance.
“From our experience, it is sometimes the case that enforcement is inconsistent with the circumstances of the targeted business, meaning that often HMRC calculations have applied incorrect assumptions.
“With HMRC continually ramping up enforcement and the Government granting the Low Pay Commission further powers to align NMW rates with real living costs, now more than ever there is a greater probability of business facing scrutiny. Employers should take proactive steps to ensure compliance before a letter lands on their desk.”
Many businesses have already received letters from HMRC as part of a three-stage process.
Targeted businesses will receive an HMRC nudge letter providing a list of common areas that can lead to NMW non-compliance. The next stage is a letter from HMRC offering to perform a ‘health check’. Failure to take up this offer will result in HMRC opening up a formal enquiry.
“With HMRC continually ramping up enforcement and the Government granting the Low Pay Commission further powers to align NMW rates with real living costs, now more than ever there is a greater probability of business facing scrutiny."
Kyle Newton, Head of National Minimum Wage, Azets UK