Navigating HMRC’s National Minimum Wage Compliance: An essential guide for SMEs in East Anglia

Our region is one of 12 locations currently being targeted by HMRC as part of a ‘crackdown’ on perceived National Minimum Wage (NMW) non-compliance.

With a focus on small or medium sized enterprises (SMEs) in particular, the tax authority has committed more than £27 million to tackle the issue as part of a wider national enforcement strategy.

Specifically chosen as focus areas based on information that highlights both higher numbers of complaints from local workers and the increased probability of underpaid workers – East Anglia joins businesses in Bradford, Belfast, Birmingham, Cardiff, Cumbria, Cornwall, East Midlands, Glasgow, Liverpool, the North-East and Watford who are under scrutiny.

In addition, this targeted enforcement is not just looking at lower-paid workers, but focused on those who earn over £30,000 per annum. Meaning that a large percentage of the region’s SMEs could find themselves caught up in the activity – with those found to be in violation of the legislation not only required to pay National Minimum Wage arrears to workers, but also any associated National Insurance contributions

However, it’s likely that many businesses could be inadvertently breaking the rules due to their complexity.

Often misinterpreted, the rules are more complex than just simply the hourly rate of pay, with pension deductions and unpaid working time such as travel time for business, rounding of clock-in times and additional work before or after the set working hours, also to be considered.

HMRC published their updated National Minimum Wage rates in April 2024 and it’s important employers ensure all employees are paid in accordance with these new rates, based on employee age and status as follows:

So how will you know if you’re affected?

HMRC are approaching this from both an employee and employer approach to build awareness.

Employees are being contacted directly through letters and the launching of a series of social media campaigns encouraging employees to check their pay.

And many East Anglian businesses have already received letters from HMRC as part of its 3 stage action process to check compliance.

• This initial letter is sent to businesses in the first instance to provide guidance on how to avoid National Minimum Wage non-compliance. It includes a checklist of business areas to address that can lead to breaches.
• Following this a second letter may be sent from HMRC offering to perform a free health check for your business.
• If this health check offer is rejected, then it’s likely that a formal enquiry will be opened that comes with the risk of financial penalties of up to 200% and public naming and shaming.

HMRC have said that “This is part of our routine National Minimum Wage outreach activity across the UK, offering targeted support, helping business to identify risks and ensure their workers are paid what they are due under minimum wage rules. We will always take action against employers who fail to meet their legal obligations and it is really important that people who think they may be underpaid to report it”.

What action can you take?

Given HMRC’s increased scrutiny, Jon Lee, Scrutton Bland’s Payroll Manager, explains how we can help you as an employer to meet NMW compliance.

Through the use of our payroll software, you can:

• Automatically assess your employees for any NMW violations during each pay run based on their gross pay, number of hours worked and any deductions such as pensions or other salary sacrifice schemes.
• See any employees who fall below the required rate of pay flagged on an exception report.

Our dedicated team of payroll professionals are then able to immediately alert you to issues before the pay run is finalised and submissions are made to HMRC.

And, as our software is automatically updated whenever new legislative changes are issued by HMRC, you can ensure full compliance when running  your payrolls.

Whilst this enforcement may well seem daunting, we’re here to help with proactive steps to ensure you don’t fall foul of the legislation. To talk more about the impact on your business reach out to Jon by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk