22 | TECHNICAL
Jeni Morris, IPPE Consultant, discusses why, when it comes to the national minimum wage (NMW), understanding regulations, managing risks and building resilience into organisations is imperative Understanding the real risk of non-compliance with NMW rules
L et’s talk about the NMW. It’s one of those employment law obligations that every UK business knows they need to get right, yet compliance failures keep happening with alarming regularity. So, what’s going on? Understanding the regulations, managing the risks and building real resilience into your organisation aren’t just nice-to-haves, they’re absolutely essential. Getting to grips with the regulations On the surface, NMW looks simple enough. While the headline rates are straightforward, the devil lies in the detail. The NMW framework is far more complex than it first appears. Here’s where it gets tricky. The regulations need to tell you four crucial things: l who counts as a worker l which payments actually count towards NMW l what deductions you can legitimately make l how to calculate working time properly. Each of these opens up a whole world of complexity. We see businesses trip up on salary
sacrifice schemes all the time. They miscalculate salaried excess hours
April 2026, and it will have responsibility for enforcing various employment rights, including NMW. NMW enforcement is becoming sophisticated, and HM Revenue and Customs is no longer relying on complaints from workers, and is now using data analytics to identify non-compliant employers proactively. Meanwhile, workers are more clued up about their rights than ever before, and Tribunal claims for unlawful deductions of wages often piggyback onto NMW breaches. Building real resilience So how can you protect your organisation? Resilient businesses don’t just react to NMW requirements, they bake compliance into everything they do. Start with your systems. Your payroll software needs to capture every element of the NMW calculation accurately, with automated alerts when pay is heading towards dangerous territory. However, technology alone won’t save you. Documentation provides essential protection. Clear records of working time, pay calculations and the rationale behind pay decisions create an audit trail which demonstrates good faith compliance efforts, even if technical breaches occur. Finally, resilient organisations foster a culture where pay compliance is viewed not as a burden, but as a fundamental aspect of treating workers fairly. This cultural shift transforms NMW compliance from a box-ticking exercise into a strategic priority which protects both workers and the business. In an environment of increasing scrutiny and severe sanctions, understanding NMW regulations, honestly assessing organisational risk and systematically building compliance resilience aren’t optional, they’re business imperatives.
calculations hours for workers. They forget to account for time spent on seemingly minor activities like security checks or changing into uniform. And then there are the really nuanced areas: sleep-in shifts, travel time and training hours. Each comes with its own set of rules, which need careful interpretation. Plus, with regular updates to rates and regulations, this isn’t something you can sort out once and forget about. Understanding the real risks Let’s be blunt about what happens when you get NMW wrong. The financial penalties are eye-watering – 200% of the underpayment, capped at £20,000 per worker. But it doesn’t end there. The Department for Business and Trade publicly names employers who fail to pay NMW. The reputational damage can be devastating. Employee morale tanks, customers reconsider and stakeholders start asking difficult questions. There’s more, though. NMW errors are rarely isolated incidents. They’re usually symptoms of broader problems with your payroll and human resources systems. If you’re getting NMW wrong, what else might be incorrect? Tax compliance, automatic enrolment for pensions, statutory payments? It’s a domino effect waiting to happen. The risk is particularly high in certain sectors. Complex pay structures and variable working patterns create a perfect storm for compliance challenges. The 2026 landscape is changing. A new Fair Work Agency is being established in
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