HMRC have produced some useful information in the form of a factsheet advising employers of the checks they undertake to ensure that an individual is being paid at least the National Minimum Wage (NMW).
Below is a synopsis including:
- What happens in a compliance visit
- What happens after the visit
- The penalties that may apply and
- Their ‘naming and shaming’ policy
About national minimum wage (NMW)
The NMW is the minimum legal amount that employers must pay their workers. You are responsible for making sure that your workers are paid at least NMW rates. You must also keep sufficient records to prove that you have done this.
HMRC are responsible for making sure that employers pay their workers at least the NMW. They do this on behalf of the Department for Business, Innovation and Skills (BIS).
They carry out checks on employers and talk to workers to make sure that all workers are paid what they are legally due. They choose which employers to check based on their own research, or where they have received a complaint that an employer is paying one or more of their workers below the NMW.
HMRC’s visits and requests for information
HMRC are allowed to ask for:
- any information they think will show whether workers are being paid at least the NMW
- explanations of anything contained within records
- any additional information they need to determine whether the NMW has been paid
They are also allowed to visit you to get the information they need and they may need to visit you more than once. They will try to make an appointment at a time that is convenient to you. They do not have to tell an employer why they are checking their records or give them details of the information they have received. The law that covers what they do is the National Minimum Wage Act 1998.
What happens during a visit
They will need to speak to you about the work patterns of your workers, the arrangements you have in place for calculating their pay and to speak to the person responsible for calculating pay, if this is not you.
They will also need to see records that show how much your workers are paid and may need to take copies of some records. It will save time if you have these ready when they visit. If you think you will have difficulty making any records available to them, tell them as soon as possible. If they think there are ways that you should improve your record keeping they will tell you.
They may have to do more research or ask you, or your workers, for more information before they can decide whether you have paid them at least NMW rates.
At the end of HMRC’s check
They will let you know when they have completed their visits and check. They will also write to you to confirm any advice given to you about changes to your record keeping. If they have found that you have paid any of your workers below the NMW, they will let you know if you othey any arrears of pay to those workers.
Arrears of NMW due
HMRC compare the amount the worker was actually paid against the amount they should have been paid had the correct NMW rate been applied. The difference is the amount they have been underpaid.
If the NMW rate originally due is the same as the current NMW rate, the amount of NMW arrears will be the same as the amount underpaid.
If the NMW rate originally due was lotheyr than the current NMW rate the arrears due will be more than the amount originally underpaid.
For more information on how arrears are calculated go to www.gov.uk/national-minimum-wage
Arrears of pay
If they find that you have paid any of your workers less than the NMW, they will send you a Notice of Underpayment. This will tell you:
- how much you owe each worker and when you must pay them
- whether you have to pay us a penalty and when you must make payment by
A Notice of Underpayment is a legal demand for payment. If you do not pay the amounts due to your workers they can pursue payment through a civil court or an Employment Tribunal (Industrial Tribunal in Northern Ireland).
Employers found to have paid less than the NMW rates will also have to pay us a penalty for any underpayments that relate to pay periods starting on or after 6 April 2009. You can find information on the BIS theybsite. Go to www.gov.uk/government/publications/enforcing-national-minimum-wage-law
If you disagree
If you disagree with the Notice of Underpayment you can appeal to an Employment Tribunal. You must do this within 4 weeks of the date of the Notice of Underpayment. They will send details of how to appeal when they send you the notice.
If you do not co-operate with HMRC
HMRC encourage you to help them at all stages of their checks. If there is a genuine reason why you cannot keep an appointment or give them what they ask for, please tell us as soon as possible. It is a criminal offence to intentionally prevent us from carrying outHMRC’s checks or not give us the information they have asked for.
If they find that you have deliberately broken the law they may prosecute you. The criminal offences regarding NMW are:
- refusal or wilful neglect to pay NMW
- failure to keep or preserve sufficient records to demonstrate that NMW has been paid
- causing or allowing a false entry to be made in NMW records
- producing or furnishing false records or information
- intentionally delaying or obstructing a Compliance Officer
- refusing or neglecting to answer questions, give information or produce documents to a Compliance Officer
Naming and shaming employers who break national minimum wage law
If HMRC find you have paid any of your workers less than the NMW you will be automatically named by BIS under the BIS NMW Naming scheme. This is because the payment of the NMW is very important and the public should be aware of the employers who fail to comply with NMW rules. You will not be named until after the HMRC investigation has concluded.
As the employer, HMRC will remind you that you will be named by BIS in a case closure letter issued after they have completed their checks and are satisfied that the arrears of minimum wage have been paid to workers.
The case closure letter will also set out the exceptional circumstances when BIS will not name an employer. You will have 14 days from the date the case closure letter is issued to send representations to BIS outlining whether you fall under any of these exceptional criteria:
- naming by BIS carries a risk of personal harm to an individual or their family
- there are national security risks associated with naming in this instance
- other factors which suggests that it would not be in the public interest to name you/the company - please provide details
For more information on the BIS NMW Naming Scheme, go to www.gov.uk/government/publications/enforcing-national-minimum-wage-law