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200% fines for NMW underpayment

image shows upward chart for minimum wage
172,000 workers have been paid less than the NMW, HMRC finds.

200% fines for NMW underpayment (Feb 24)

524 employers failed to pay the national minimum wage (NMW) following investigations by HMRC, leading to £16 million in wages repaid to over 172,000 workers.

On top of repayments are HMRC fines, which can be 200% of the underpayment.

Most NMW breaches have been accidental, and top of the list are errors caused by salary sacrifice schemes.

Main reasons for underpayment of NMW

The main reasons for underpayment of the NMW included:

  • Deductions from wages for items such as food, uniform, equipment, childcare costs and salary sacrifice schemes.
  • Unpaid working time, e.g. where additional work was carried out before and after a shift, where clock-in times had been rounded up, where travel time was not paid, and where a salaried hours worker worked in excess of their basic hours.
  • Failure to pay the correct rate to apprentices.
  • Failure to pay the uprated NMW rate.
  • Failure to correctly apply the accommodation offset.
  • Failure to pay a worker in accordance with the correct work type.

Why are salary sacrifice schemes often the cause of NMW underpayments?

Salary sacrifice schemes lower a worker’s gross pay in exchange for a particular benefit, but if the adjusted wages are lower than the NMW, a breach will have occurred.

Many employers wrongly assume that if the employee has opted for the benefit, and may even be better off as a result when the provision of the benefit has been taken into account, the resultant impact on the NMW should not matter.

The fact is that only a very limited list of reasons are permitted to be taken into account if they have the impact of lowering wages below NMW levels. The accommodation offset, that is a charge to the employee’s wages for the provision of accommodation, is one of those limited range of reasons.

What’s happening to NMW and the accommodation offset in April 2024?

You can read about the new rates, or watch our video by clicking here.

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