30 | TECHNICAL
Breaking a SWEAT: navigating salaried work excess annual time as minimum wages rise
F rom 1 April 2026, the national minimum wage (NMW) and national living wage (NLW) will once again rise, and with these new rates comes renewed compliance scrutiny. The NLW will increase to £12.71 per hour, while the 18-20-year-old rate rises to £10.85, the 16-17-year-old rate to £8.00 and the apprentice rate to £8.00. Employers should note that while these rates take effect from 1 April, they only apply from the start of the first full pay reference period following that date. This means that, depending on pay cycles, some employees may not actually see the increase until late April or even May 2026. This period of transition serves as a timely reminder for payroll teams to check NMW calculations carefully, ensuring no underpayments occur. Different worker categories (time, salaried, output and unmeasured) each have distinct calculation rules. One area increasingly catching employers off guard is the ‘Salaried Work Excess Annual Time’ calculation or ‘SWEAT’. HMRC’s new focus: the hidden hours issue For years, NMW compliance has been viewed narrowly. Check the pay rate, count the hours, make sure the maths adds up. But recent enforcement trends tell a more complex story. A growing number of salaried employees are falling into unintentional underpayment territory, not because their salaries are low, but because of hidden, unrecorded hours of extra work. HM Revenue and Customs (HMRC) has now identified the SWEAT calculation as one of the most common sources of NMW underpayments. In fact, the regulator has signalled its intent to focus enforcement energy squarely on this issue. If the acronym SWEAT isn’t already part of your compliance vocabulary, it should be. Hybrid and flexible working have changed how employees view their working day. The old boundaries between ‘on-the-clock’ and ‘off- the-clock’ have blurred. The morning commute gave way to logging in from home, but so too did answering emails on a Sunday or checking messages at 10pm.
These small moments of ‘just one more thing’ have added up to a significant cultural shift. A retail worker completing mandatory online training from home, a manager reviewing rotas after hours, a professional finishing a client presentation on a Saturday. All of it counts as working time under NMW rules. The problem for employers is that this incremental overworking is often invisible. It isn’t logged on timesheets or recorded in workforce systems. Yet, HMRC will absolutely treat it as working time if an investigation arises, and that’s where the SWEAT calculation becomes critical. Understanding the SWEAT calculation At its core, the SWEAT calculation checks whether salaried employees have worked more than their contracted annual hours, and if so, whether those excess hours have been paid to the individual at the NMW or NLW rates or above. Here’s where it gets tricky. Suppose a salaried worker completes their full annual contracted hours by month 11 of their pay year. Any work they do in month 12 now counts as excess hours, and their salary for that period must cover both normal pay and those extra hours at no less than the NMW rate. This requirement applies even to well-paid managers or professionals. For example, someone on a £65,000 salary who consistently works well beyond their contracted hours (especially with salary sacrifice deductions for pensions, for example) could breach NMW thresholds once their real hourly rate is calculated across actual hours worked. HMRC recognises the complexity here. It has recently launched webinars specifically on the SWEAT calculation and advised employers to ensure calculations are accurate and defensible. What HMRC looks for during investigations An NMW investigation is far more thorough than many realise. It doesn’t stop at the payroll data. HMRC investigators build a
picture of actual working patterns through interviews, digital records and activity logs. Laptop log-in times, email timestamps and even calendar histories can all provide evidence of work completed outside formal hours. The digital footprints left by modern working life now make it easier than ever for HMRC to identify unpaid hours. If your organisation has normalised informal, out-of-hours working, these records could tell a compelling story and potentially an expensive one. Why it matters: beyond low pay roles It’s a misconception that NMW compliance only affects low-wage sectors. HMRC’s recent findings show increasing breaches among white-collar roles and mid-to- senior managers. The issue isn’t pay level, it’s hours worked. Where organisations fail to track these accurately, even well- compensated employees may, on paper, fall below the legal threshold. The bottom line The NMW increases taking effect from April 2026 bring renewed urgency for employers to tighten their compliance processes. But with HMRC sharpening its focus on the SWEAT calculation, the real risk lies less in headline pay rates and more in the unseen accumulation of unpaid hours. For pay professionals, the message is clear: compliance begins with visibility. Track actual hours, review them annually and ensure every salaried worker’s pay passes the SWEAT test. Hidden hours may have become part of the modern working culture but they’re now one of the most visible risks to NMW compliance.
Jeni Morris
CIPP Consultant
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