COMPLIANCE
Gary Davies, HM Revenue and Customs (HMRC) senior executive officer, promoting national minimum wage (NMW) compliance, shares how HMRC plans to support employers in ensuring compliance with NMW rules
The NMW: HMRC’s geographic compliance approach
W orkers must be paid the calculation based on legal entitlement. In 2022/23, HMRC identified wage arrears of £13.7 million for more than 108,000 workers. When HMRC discovers NMW underpayments, not only do companies need to pay back the wage arrears, but they may be charged a 200% penalty and could be publicly named by the Department for Business and Trade, which has responsibility for NMW and national living wage (NLW) policy. NMW for all their time spent working. NMW is more than just a pay rate; it’s a How HMRC supports employers HMRC’s NMW compliance outreach activity offers support and guidance to employers to help them get things right and identify risks. As part of this work, HMRC is undertaking a long-term campaign called the ‘geographical compliance approach’, which involves HMRC contacting employers based on geographical location, providing support across a whole range of businesses in a specific area. This sits alongside proactive sectoral work and the consideration of all worker complaints received. The aim is to raise awareness and increase knowledge of the NMW legislation, reducing the risk of non-compliance. Since 2021, HMRC has focussed on ten separate UK locations, including Birmingham, Cardiff and Glasgow, with many more areas planned. Firstly, in each location, HMRC contacts accountants and other company representatives, offering NMW awareness sessions to provide updates on any knowledge gaps, enabling this key group to support their clients. HMRC also engages with influential stakeholders in each area, such as Chambers of Commerce and local authorities, to help promote NMW compliance and amplify key NMW messages. Following these sessions, HMRC sends letters to employers in each location: l advising on common NMW issues
l asking businesses to conduct a thorough review of all the workers they employ l signposting to GOV.UK for further information and support. If an employer finds an issue, they’re asked to repay the arrears and correct their procedures going forward. HMRC also offers some employers a support call with a NMW advisor, who will talk them through the key considerations for their business and provide the opportunity to discuss any potential issues. If wage errors do exist, the employer will be asked to repay any money owed and ensure they do things properly from then on. Those businesses will not be penalised or publicly named if they agree to address the failings as outlined.
How you, the payroll professionals, can help
If members of the CIPP or their client(s) receive a NMW letter from HMRC, please help employers to review their workforce and payroll records and check that workers are being paid at least the minimum wage. Our outreach work has highlighted that some employers have difficulty in compiling the right information to perform a review. Many employers don’t realise that certain pay elements cannot be included in NMW calculations – for example, extra pay for working unsocial hours on a shift – or that some actually reduce minimum wage pay. Payroll professionals can help by providing their clients with a breakdown of all pay elements for all workers, for all pay reference periods. This will help employers to calculate the NMW correctly. Mistakes are easy to make, and companies may not always be aware if something has gone wrong. Paying the correct rate is important, but it’s not always that simple and there are lots of ways workers who are paid at or even above the NMW or NLW can be underpaid. If CIPP members’ clients receive a letter inviting them to take part in a free support call with one of our experts, please encourage them to take HMRC up on the offer. Feedback from businesses that
| Professional in Payroll, Pensions and Reward | February 2024 | Issue 97 24
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