The publication of the names of nearly 500 employers found to have breached employment law has once again placed the spotlight on National Minimum Wage (NMW) compliance.
Household names are among the 491 businesses that failed to meet their legal obligations to around 42,000 workers and have been listed in the Government’s latest publication of the National Minimum Wage Naming Scheme (Round 22).
It carries a clear message: non-compliance with NMW legislation carries serious financial and reputational consequences, with those publicly named fined a total of more than £10 million.
While there are some rogue employers, many businesses are caught out by the rules, often when trying to do something beneficial for their staff, or by technicalities.
Geographical impact of non-compliance
The North West saw the highest number of non-compliant employers, with 80 businesses named, followed by London with 66 and the South East with 53. Scotland accounted for 46 cases, while there were 26 in Yorkshire and 19 in the North East. The figures show that wage compliance is a national concern, not limited to any one industry or business size.
Top reasons for National Minimum Wage breaches
The most common reasons for underpayment of the NMW are:
28% failing to pay the correct rate to apprentices
27% failing to pay the uprated minimum wage
15% failing to pay workers correctly for their working time
Other errors ranged from misapplying the accommodation offset where rent is charged to employees for the use of employer-provided accommodation, and misclassifying work types, to incorrectly identifying worker status and making deductions that reduced pay below the NMW. These deductions often relate to uniforms, tools, meals, travel, and salary sacrifice schemes.
Technical errors can be costly
HMRC’s enforcement activity is not solely focused on employers who deliberately underpay staff. Many are technical breaches, stemming from misinterpretation or misapplication of complex regulations. For example, employers may fail to adjust pay after a worker’s birthday or following the annual rate increase. Others may incorrectly classify salaried workers or overlook unpaid working time such as training, travel, or overtime. These errors can occur even when employees are paid well above the minimum wage.
The consequences of non-compliance are significant. HMRC applies penalties of up to 200% of the underpaid wages, and the reputational damage from being publicly named can be long-lasting. The time and resources required to respond to an HMRC audit can also be substantial, particularly if the business lacks robust systems and documentation.
Proactive compliance and record keeping
With the Government’s upcoming Employment Rights Bill and the establishment of the Fair Work Agency in April 2026, enforcement is set to become even more rigorous.
Businesses should take proactive steps to manage compliance, including regularly reviewing HR and payroll policies to ensure they reflect current legislation, conducting periodic checks of wage calculations, and implementing reliable systems for recording working time. Employers must also ensure that pay increases are applied promptly following birthdays or rate changes, and that any deductions do not reduce pay below the minimum threshold.
Employers must maintain sufficient records (for a minimum of six years) to demonstrate each worker is paid at least the minimum wage for every pay reference period. Failure to do so not only increases the risk of non-compliance but also weakens a business’s ability to defend itself during an HMRC audit.
By identifying and correcting any compliance gaps before HMRC initiates a formal audit, employers can avoid penalties and protect their reputation, where the errors are corrected in line with HMRC requirements.
If you are unsure about your business’s National Minimum Wage obligations, or robustness of existing processes and records, please get in touch for advice and support. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
