Be aware of the changes to the National Minimum Wage

H M Revenue & Customs are currently running a project surrounding the National Minimum Wage whereby they are selecting businesses at random to undergo a National Minimum Wage inspection. There are now more than 400 National Minimum Wage compliance officers, so the chances of an inspection taking place is far more likely. HMRC are currently targeting specific sectors such as the hairdressing and hospitality industry.

In this blog I explain the process of how you could be approached, what to expect from an inspection and the implications if you are found not to be paying the National Minimum Wage.


What is the process?

The process commences with a letter from HMRC confirming the National Minimum Wage inspection and the proposed date and location (this is always the business premises). Usually the meeting is held a couple of weeks after receiving the initial correspondence. The letter details how the meeting will be conducted, the records they will need to see and what will happen after the check has been completed.


What records will HMRC need to see?

When HMRC visit the premises, they will be required to see your records for the last 3 years. This information could include:

  • Copies of payslips
  • Records of timesheets
  • Evidence of payments made (for example bank statements)
  • Contracts of employment
  • Personal Details (Full names, address, dates of birth)

As part of the inspection HMRC will also select certain employees to interview to determine the hours they work and to help inform their conclusions.


How is the inspection conducted?

The inspections last around 3 – 4 hours and usually two inspectors will attend and will ask several questions about the organisation and their payroll. Here are some example questions:

  • What are the opening hours of the business?
  • What is the recruitment process?
  • Are there any part time workers?
  • How are payroll records kept?
  • Are there any contracts of employment?
  • Do the workers have regular breaks?
  • Do the workers receive training? If so, who pays for the training?
  • Is equipment provided, if so, who pays for this?
  • Do you employ any apprentices?

These are just a few examples of the types of questions that may be asked.


What happens after the inspection?

 After the inspection has been conducted you will receive a letter containing a copy of the meeting notes. These notes provide a summary of the key points discussed. The letter will then request that you forward copies of payslips and timesheets on to the inspector. Usually they will select certain employees for this and request different pay periods for each employee. Alongside these dates they generally request the week prior to the National Minimum Wage increase and the week after for all employees. This is so they can establish whether the minimum wage was increased at the correct time.

After you have sent the requested information HMRC will then be in touch to provide the outcome.


What happens if you are found not to pay the National Minimum Wage?

If any underpayments are found, then a formal notice of underpayment will be issued. This details how much the business owes each worker and gives the employer the right to appeal. If the underpayments are due to workers, then there would be a penalty which is currently 200% of the underpayments. If the arrears and the penalty are paid within 14 days of receiving the notice of underpayment, then the penalty will be reduced to 50%. Along with any financial implications if underpayments of more than £100 are found then your company would be publicly named and shamed for non-compliance.


This blog should have highlighted the importance of paying the National Minimum Wage and made you aware of what to look out for should you receive a letter. If you require any assistance with payroll services, then please contact our dedicated payroll bureau on 01472 604628.