HMRC is increasing National Minimum Wage compliance checks: What employers need to know
As part of its increasing spotlight on National Minimum Wage compliance, HMRC has been contacting employers to discuss their payroll processes and working practices. It’s important to note that these initial conversations are not formal investigations, but they can lead to more in-depth reviews if potential risks are identified.
In summary:
- HMRC is increasing NMW compliance activity, including regional campaigns that are reportedly moving into the Home Counties.
- Enforcement of NMW rules will transfer from HMRC to the new Fair Work Agency in April 2027, which is expected to take a broader approach to employment rights compliance.
- Employers should review their payroll and working practices now to reduce future risk.
What HMRC is asking employers about and the common compliance risks
HMRC’s enquiries typically focus on the following elements:
- Business operations
- Workforce structure
- Employee working patterns
- Pay rates
- Payroll processes
- Record keeping
- Payroll deductions
- Overtime
- Travel time between sites
- Apprentices
- Employer-provided accommodation
- Salary sacrifice schemes
- Mandatory training
- Work clothing requirements
Most issues can arise unintentionally due to operational practices rather than deliberate underpayments, such as:
- Unpaid work undertaken before or after shifts
- Unpaid time spent opening or closing premises
- Training completed outside paid working hours
- Unpaid travel between work locations
- Work clothing costs covered by employees
- Accommodation arrangements that may affect NMW calculations
Observations
We have seen a noticeable increase in clients receiving HMRC compliance letters, and recommend that employers who receive these engage early, so that they can address any concerns before they escalate, as well as proactively identify and resolve any issues.
The upcoming Fair Work Agency, which will take over from HMRC for NMW enforcement in April 2027, is expected to increase scrutiny of employment compliance more generally, meaning strong payroll controls and compliance procedures are going to play an increasingly important role.
Final thoughts
National Minimum Wage compliance extends beyond paying the correct hourly rate. Employers should regularly review their payroll processes, deductions, working practices, salary sacrifice arrangements and record keeping to identify and address potential risks before they lead to costly liabilities. If you are an employer, and would like to know more about your position, contact a member of our team using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.
Sign up to receive exclusive business insights
Join our community of industry leaders and receive exclusive reports, early event access, and expert advice to stay ahead – all delivered straight to your inbox.