National Minimum Wage Regulations

The National Minimum Wage (NMW) regulations are complex and wide-reaching, involving many aspects of pay over and above the headline hourly rate that is paid to staff.

HMRC's compliance activity in this area, and its strict interpretation and application of the regulations, means that many employers across all sectors are being challenged and found to be non-compliant with the law as a result. Most of these cases involve 'technical' errors which are non-deliberate and occur either through a genuine admin mistake or a lack of understanding of how the complex rules apply in practice. ‘Technical’ errors are not restricted to the low-paid, it is not uncommon for middle to high earners to be caught up in NMW breaches because of the way in which HMRC interprets certain rules. 

The most common ‘technical’ errors arise in the following areas:

• Deductions from pay that can reduce the effective hourly rate for NMW purposes (including costs necessarily incurred by employees for work)
• Failure to pay an employee for all time worked (at the heart of which is the definition of ‘working time’)
• Failure to correctly categorise the type of work, and apply the specific rules for each category of worker, which typically involves the incorrect application of salaried worker rules
• Incorrect application of salary sacrifice arrangements
• Failure to pay appropriate age-related or apprentice rates

The penalty regime for non-compliance with NMW regulations is harsh, regardless of whether the error was intentional or not, and the Government routinely publishes the names of employers who are in breach of the rules. It is critical for all employers to take proactive and protective measures in this area to prevent serious financial and reputational damage in the event of a NMW audit from HMRC.

Armstrong Watson’s Employment Tax team has a wealth of experience in supporting employers with NMW compliance issues, both proactively and in respect of an HMRC NMW audit. We can provide a full range of support in this area depending on the employer’s specific requirements and their sector/staff/pay profiles.