HMRC continue to shine a spotlight on National Minimum Wage compliance

While we continue to await legislation on how the Fair Work Agency will enforce the employment rights bill in the future, e.g. compliance with holiday pay and statutory pay, one area where there is no uncertainty is the National Minimum Wage.

Since public naming and shaming was introduced in January 2011, HMRC has consistently (and in many eyes, aggressively) enforced compliance with the National Minimum Wage.

Failure to comply with the National Minimum Wage can result in your organisation’s name being published on this list, payment of NMW arrears to the worker, and a penalty of up to 200% of the arrears (with a minimum penalty of 100%).

There are a number of current strands of HMRC enforcement:

1. Large & complex business
2. Sector focused
3. Worker complaint led
4. HMRC’s most recent strand – geographic compliance (targeting all employers, albeit mainly small to medium sized, in a particular city or area.

Any of the above could apply to Charity organisations though the third and fourth strand are most common.  HMRC has undertaken sector specific activity in areas which may impact charities and non-profit organisations, for example it undertook a recent exercise in the “arts and Leisure” sector and you may have received a letter from them encouraging you to undertake checks.

What areas may pose a risk to charities in complying with the National Minimum Wage?

Typically, in our experience, the following areas pose most risk to charities and non-profit organisations, but this is not exhaustive:

1. Apprentices
   1. HMRC challenge whether agreements are in place for the entire period (where you pay the lower hourly apprentice rate)
   2. They must be paid for all study time
   3. The lower rate can only be paid to those aged 19 or younger, or in their 1^st year of employment.

2. Deductions taken via payroll (or expenses incurred in connection with employment)
   1. Unless passed to a third party these reduce pay for NMW, so make sure you have checks in place
   2. Salary sacrifice always reduces pay for NMW purposes
   3. Watch out for tools, uniform/clothing costs
3. Volunteers, work experience, internships, and unpaid roles
   1. The risk here is whether the unpaid worker is a worker for NMW purposes
   2. If they receive fixed cash sums irrespective of costs incurred or receive benefits, e.g. a thank-you voucher, these goodwill gestures may make them a worker for NMW purposes and they must then be paid for all working time.

4. Working time
   1. Be mindful of the time spent getting ready for shifts, handover meetings, or unpaid overtime.
   2. Complex rules for salaried workers where unpaid overtime

In addition to the above, it is worth reviewing HMRC’s checklist for employers, which details the most common errors which can lead to NMW underpayments.  In other words, there are 17 reasons more than an hourly rate of pay!

Calculating the minimum wage – A checklist for employers – Guidance – GOV.UK