National Minimum Wage – geographical targeting of employers in Dorset and Hampshire

Ensuring National Minimum Wage (“NMW”) compliance can be complex for many employers. We have become aware that, as part of its geographical targeting of employers, HMRC is currently targeting employers in Dorset and Hampshire. This is part of its continuing programme of challenging employers to ensure that they are paying at least NMW. The current campaign involves HMRC issuing letters to all types of employees asking them to review payments made to their employees over the last 6 years and to either provide assurance that they have paid NMW correctly or carrying out a self-correction programme. 

There are 4 categories of work for NMW purposes. Each category has its own calculation method for NMW, including what can be included in pay. 

• Salaried hours work
• Timed work
• Unmeasured work
• Output work 

Incorrectly categorising worker types can lead to underpayments of NMW.

• Problems can arise in cases where a worker has to perform pre‑work tasks such as, loading up computers or working beyond their contracted hours. All time should be included as working time for NMW purposes.
• If you have “rounding” in your payroll system to account for any overtime, this is not accurately reflecting actual working time. (An example of this is where individuals are only paid overtime when they work 15 minutes or more above their contracted hours.) Any time in excess of employees’ normal working hours counts as working time for NMW purposes. Not taking this into account can lead to NMW underpayments.
• The concept of TOIL does not exist for NMW purposes. Therefore, ignoring salaried work, which has its own strict criteria, employers must monitor additional time worked to ensure that it is taken back in the same or following pay period to evidence NMW compliance and avoid underpayments.

• Salary sacrifice always reduces pay for NMW purposes.
• Deductions from pay (with a few exceptions) need to be taken into account when deciding whether NMW had been paid. Examples include uniforms, costs associated with a dress code, and administration fees where you are processing attachment of earnings orders.

• Repay arrears at current rates of NMW,
• Penalties of up to 200% of arrears (capped at £20,000 per worker),
• Being publicly named and shamed for failure to have paid NMW.

Caroline Jones, Head of Employment Tax will be running a webinar for employers in the next few weeks (date TBC) to alert you to the complexities and answer your questions. 

We can help you with a variety of Employment Tax areas including:
•    Conducting payroll audits to ensure accurate worker categorisation has been used and that NMW has been paid.
•    Reviewing employment contracts and handbooks to establish the correct worker type.
•    Identifying any workers who may be at risk of being underpaid.
•    Guiding you through the process of self-correction, where underpayments may have arisen.
•    Providing advice to help you strengthen record-keeping around hours, deductions, and pay calculations.

Should you have any employment tax queries, further information is available on our employment tax page. 

Alternatively, please do not hesitate to contact Caroline directly at [email protected]