National Minimum Wage (NMW): HMRC’s latest enforcement activity

HMRC have launched several new projects to reinforce NMW compliance for large and complex employers: the repeat visit programme and the employer support programme. These are at a relatively early stage – but they underline HMRC’s commitment to ensuring that employers comply with their obligation to pay employees at least NMW. This article covers the highlights from our recent discussions with HMRC on the new initiatives together with steps employers could take in response.

As outlined in our earlier article, the repeat visit programme is aimed at employers that have already been subject to an NMW investigation, and is essentially a follow up check of pay and record keeping to ensure that workers are paid at least NMW. 

HMRC have confirmed to us that their Special Enforcement Team have started to select businesses that were subject to previous NMW investigations, and to re-visit them to assess:

• What changes have been implemented in response to advice and recommendations given by HMRC in the previous review; and
• Their general NMW compliance (i.e. an assurance check of record keeping, workers’ pay and working practices).

It was confirmed that HMRC have already commenced interviewing individual workers, and will then progress by reviewing the employer’s systems, processes and records as part of their enquiries.

Whilst there are similarities to traditional reviews, HMRC have confirmed that officers will provide compliance support if any new issues are identified. Whilst there are no guarantees, this suggests that penalties and naming might not be enforced in respect of any new issues identified.

Penalties and naming are more likely to apply if employers failed to act on HMRC’s previous advice on issues highlighted in past reviews and that failure has led to NMW underpayments. We expect that the discovery of ‘repeated’ errors would lead to robust enforcement action extending beyond penalties and public naming.

In addition to reviewing correspondence relating to previous reviews, we expect the repeat visit to include a review of compliance with the complex area of salaried hours work following the regulatory updates introduced between 2020-22. We have supported many employers during HMRC reviews and, in our experience this area was not thoroughly reviewed so there may be an argument that this is a new issue if identified during the course of a repeat visit.

The employer support programme is still in development. When launched – which we expect to be around July 2023 – it will involve an offer of advice and support to ‘large and complex’ employers (i.e., employers with high numbers of workers or which have a complex national or global group structure). Participation will be by invitation and, whilst involvement is voluntary, we understand that HMRC strongly recommend that invited employers participate and involve their agents in the review. 

The programme is expected to include discussions of current and future NMW compliance, a walkthrough of pay and record keeping systems, and a review of selected payroll and other employer records.

If HMRC identify any historical issues, we understand that they will offer advice and encourage employers to identify, quantify and declare NMW arrears. Whilst HMRC have indicated that they do not intend to take enforcement action which leads to naming or impose penalties, depending on the specific facts of any NMW violations, this cannot be guaranteed.

HMRC confirmed to us that the above programmes will each involve 20-30 employers over the next 12 months. Participation might increase in subsequent years.

However, regardless of whether they are approached by HMRC to participate in any of these new projects, all employers should proactively assess and manage their NMW risk to ensure they comply with their legal obligations, protect their reputation as an employer of choice, and have a fully engaged and properly rewarded workforce.

HMRC’s geographical compliance approach is run by the Promote team and involves an offer of advice and support for small to mid-sized businesses. This initiative targets employers operating in certain sectors within specific regions / postcodes. We are aware that this approach is currently active with letters being sent to employers operating in the Belfast, Cumbria and Bradford areas.

We understand that this approach will be part of the employer support programme warning employers about NMW risks in their sector/geography. Participation is voluntary (although strongly recommended by HMRC) and HMRC may follow up with a review to understand whether employers have acted upon the advice provided by HMRC.

Please contact the authors or your usual contact in KPMG in the UK to talk through how HMRC’s new initiatives might affect you. Our team of employment tax, legal and payroll experts can provide support on all aspects of NMW risk assessments, compliance, and remediation. 

For further information please contact:

• Josiah Greenall
• Gareth Dennett