HMRC cracks down on NMW: But are employers being failed?

HMRC enforcement teams have recovered £15.6m for over 200,000 workers not paid the national minimum wage (NMW) in 2017/18. These figures are up almost 50% from the amount reclaimed last year.

The figures would seem to be a significant victory for HMRC’s online complaints service launched in January 2017. The number of worker complaints around NMW has soared by 132%. The government is also set to launch its annual marketing blitz encouraging employees to report NMW violations.

In March, the Government released a list of 180 businesses for not paying the NMW. The list featured prominent names like Wagamama, TGI Friday and Marriott Hotels. The hospitality industry, in general, seemed at odds with the regulations.

The official tone on NMW enforcement has been combative. Commenting on the figures, the business minister Andrew Griffiths warned: “Short-changing workers is a red line for this government, and employers who cross the line will be identified by HMRC”.

Penny Ciniewicz, HMRC’s director general of customer compliance echoed Griffith’s sentiments. “HMRC is committed to getting money back into the pockets of underpaid workers, and these figures demonstrate that we won’t hesitate to take action against employers who ignore the law.”

But RSM’s head of employment solutions Bill Longe argued that most NMW infractions are made through error, not a Dickensian refusal to pay workers decently.

“While HMRC is to be applauded for its efforts in helping to ensure workers are paid the wages they are legally entitled to receive, it is evident most employers are taking their responsibilities very seriously indeed," Longe told AccountingWEB.

“Admittedly, there will always be a few bad apples seeking to flout the law but in our experience, the vast majority of employers are not making deliberate errors and are being caught out by the complexity of the rules.”

Employer mistakes, said Longe, means “we need more than just a stick”. Longe’s point carries weight. The most prominent examples of NMW enforcement have been errors, rather than outright underpayment.

In Wagamama’s case, the company did not consider its employee dress code as a uniform requirement and therefore didn’t offer employees a stipend to offset the impact on salary. Marriott Hotels were caught out for incorrectly factoring in the costs of late-night cabs and accommodation.

“The NMW is actually regulated by The Department for Business, Energy and Industrial Strategy, but enforcement is left in the hands of HMRC," said Longe. "The tax authority has no powers other than simply ‘if it’s wrong, we’ve got to correct the error’. If employers have difficulties with NMW, it would be helpful if the authorities were more supportive.”

The UK’s new director of labour market enforcement, Sir David Metcalf, made similar recommendations in his first Labour Market Enforcement Strategy Report. While Metcalf suggested a “significant increase in the size of civil penalties for the non-compliant”, he noted the need for better support services.

“I believe that the enforcement bodies can generally improve their support and education of employers to reduce ‘accidental’ non-compliance," said Metcalf.

“For HMRC and BEIS, this will include placing greater emphasis on developing a supportive and compliance-based approach to enforcement by further developing their triage and risk assessment processes, improving employer guidance and adopting a more supportive approach to employers seeking help and advice.”