Warning to Hampshire businesses over minimum wage crackdown

It also comes following recent announcements from His Majesty’s Revenue and Customs (HMRC) regarding plans to recruit more than 5,000 additional compliance officers to strengthen their enforcement across all areas of tax.

These statistics are taken from a new report by the Department for Business and Trade (DBT) which details HMRC’s enforcement activity during the 2022/23 tax year which saw an increasing number of cases closed and a significant level of arrears identified.

The report includes a focus on HMRC’s newest form of enforcement, the ‘Geographical Compliance Approach’ (GCA) which uses a three tiered method designed to encourage employers to comply with the rules and make payments of NMW arrears due to workers.

The last of these phases is formal enforcement by HMRC, with any arrears identified during this phase subject to 200% penalties and the employer being publicly named for breaching the rules.

Throughout, workers are contacted and encouraged to whistleblow, and the report highlights an increased number of HMRC enforcement cases have been opened due to worker complaint.

During 2024, three further locations have been added to HMRC’s GCA with more expected to be announced in the next 12 months.

Therefore businesses in Hampshire are being urged to review their payroll records, particularly those items listed in letters HMRC commonly sends to employers during the GCA. These are:

Deductions taken from pay that reduce pay for NMW purposes.Unpaid working time, such as time before or after a shift, travel, training and on standby.Rates of pay, with the NMW age brackets recently changing in April 2024.Apprentices, with a focus on study time, whether the apprenticeship agreement is in place for the duration and if the individual qualifies for the reduced rate of pay.General records being available for the six-year period required by law.Other key statistics noted in the report include:

HMRC closed almost 3,200 cases with more than 900 involving arrears.A total of £13.66 million in arrears was identified for more than 108,000 workers and HMRC issued 750 penalties totalling £13.72 million.Nearly 12 million workers were reached by targeted communications campaigns. Targeted enforcement continued to be the primary method of identifying arrears, accounting for 74% of closed cases, up from 71% in 2021 to 2022.The DBT says: “This government is absolutely clear that anyone entitled to be paid minimum wage should receive it. The enforcement of the minimum wage is therefore essential and we are committed to cracking down on employers who break the law in this area in all sectors across the economy.”

Kyle Newton, Head of National Minimum Wage, at UK top 10 accountancy firm Azets, has welcomed the findings as a stark reminder of how common HMRC enforcement of NMW is and warned businesses to review their records ahead of HMRC issuing a letter to help minimise their financial and reputational risk.

He said: “My key take-aways from this report is the sheer scale of HMRC enforcement. Since 1999, 90,000 investigations have been completed and 1.5 million workers have received NMW arrears.”

“HMRC is very much taking a geographic compliance approach which targets employers in a particular region.

“In 2022 to 2023, HMRC sent 17,600 letters to employers across three new locations, Belfast, Cornwall and Watford, so more than 5,000 letters a region.

“This approach has bought NMW enforcement to many small businesses who were unaware they were breaching the rules.”

“I am pleased to see the report provides an overview of the three-tiered approach which demonstrates HMRC are still intending to support employers with compliance and minimise penalties as far as possible.

“However, regardless of penalties, any NMW arrears will lead to an unexpected financial cost for the business, not to mention the additional National Insurance employer contributions and pension contributions."

Kyle added: ”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 businesses facing scrutiny."

Kyle has urged any businesses currently being subject to the geographic compliance approach by HMRC, and perhaps have been contacted by letter, to take professional advice at the earliest opportunity.

Kyle Newton is one of the keynote speakers on the first edition of series three of Azets ’Bang The Drum podcast – find it at https://pod.co/bang-the-drum