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

10th May 2018
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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.”

Replies (4)

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By Francois Badenhorst
10th May 2018 14:16

An earlier version of this piece mistakenly said the DWP is responsible for regulating the NMW. It's actually The Department for Business, Energy and Industrial Strategy.

The article has been amended to reflect this fact.

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By Duggimon
17th May 2018 09:57

The NMW remains too low and while businesses may have accidentally broken the rules, they have not accidentally been paying their employees as little as possible, that is a very deliberate decision.

I can't muster up any sympathy for any of these people who have been caught and forced to shell out since their approach to compliance has been, and remains, how little can we pay our staff while remaining compliant.

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Replying to Duggimon:
By Accountinator
17th May 2018 11:36

Well said! I couldn't have put it better myself

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By Kate Upcraft
18th May 2018 22:11

I’m sorry but I’m with Francois, the NMW Regs were designed quite righty to protect the vulnerable employee from the exploitative Employer. To have companies named and shamed for asking employees to wear black trousers or black shoes or saying you’re paid £50,000 in 12 monthly instalments and that’s illegal maybe technically wrong in which case the legislation needs root and branch reform to deliver what it was intended to, not just a revenue raising exercise that allows HMRC to pat themsjeves on the back and get more and more resources. There are numerous barking examples of technical infringements, so can HMRC or BEIS use some of their budget to review the regs or explain how employers are supposed to comply and yet continue to deliver economic success for UK plc, I believe that’s what public servants are required to do

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