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HMRC Investigation into alleged breaches of the National Minimum Wage – what you need to know?

Reasons to choose Wilson Browne

How can they arise?

These investigations can begin when any employee makes a complaint to HMRC that they believe they are not receiving the correct National Minimum Wage. In rare instances, HMRC has reached out to employees directly to request they make a complaint.

HMRC can also approach employers who have previously been investigated to ensure that they are still complying with the National Minimum Wage Regulations, or they can target sectors that have been guilty in the past. This is targeted enforcement. Therefore, it’s imperative that businesses keep following the regulations even after the investigation has been closed.

What are the common issues?

Employers should remember to consider the following points when deciding on wages and policies:

  • Uniform and equipment;
  • Saving schemes;
  • Lottery syndicates;
  • Salary sacrifice arrangements;
  • Rounding time worked;
  • Admin charges;
  • Unpaid time;
  • Travel time;
  • Training time; and
  • Not keeping up to date with increases in rates.

The above points are usually the key focus of an investigation in the first place so employers should ensure they comply with the relevant laws when setting up pay.

What are the penalties?

There are civil penalties. HMRC will demand you pay the outstanding arrears to the employees. Additionally, they will impose a penalty of 200% of the total underpayment, but this can be reduced to 100% provided all unpaid wages are paid within 14 days.

HMRC will name and shame guilty employers under the Naming Scheme. This publishes the names and specific breaches the employers are guilty of.

For employers who have committed continuous breaches, HMRC may deem it appropriate to impose a Labour Market Enforcement Undertaking (LMEU) or Order (LMEO). Employers will be asked to give an undertaking with a number of caveats that ensure future compliance. If an employer refused to enter into an undertaking, or fails to comply with one, a magistrate or crown court will have the power to impose an LMEO requiring the company to take further action. Failing to comply with an LMEO can result in an unlimited fine or a 2 year custodial sentence.

For the most serious non-compliance offences, HMRC can refer cases for criminal investigation.

How can we help?

The investigations can be costly and time consuming, as well as having a detrimental effect on the reputation of the employer – even if the mistakes are unintentional. Our employment law solicitors can work with employers to ensure that they meet the National Minimum Wage Regulations to ensure that those obligations are met, as well as keeping you up to date on the latest changes or amendments.

If HMRC have already commenced an investigation, we can be there to help conclude the investigation as swiftly as possible and make representations to HMRC to help reduce any penalties.

Tom Charteress


Tom Charteress

Trainee Solicitor

Tom is a Trainee Solicitor in the Employment team based in the Northampton office and deals with employment issues in a pragmatic and logical approach.