COMPLIANCE
Location, location, location – a new enforcement approach
Jeni Morris, head of the national minimum wage (NMW) team at EY discusses HM Revenue and Customs’ (HMRC’s) new approach to NMW enforcement
I t’s looking like a big year ahead in the NMW world – and a potentially difficult one for employers across the UK. Firstly, April 2023 will see the largest rate rise in recent memory, with the national living wage rate for over 23’s jumping from £9.50 per hour to £10.42. If that wasn’t a big enough challenge for employers, it looks like HMRC will be ramping up its NMW enforcement work over the course of the year. In addition to its usual worker complaint and sector-led work, HMRC’s NMW department is introducing a new geographical approach to its work. How will the new enforcement approach work? HMRC’s NMW inspectors will be visiting regions across the country with focussed activity, firstly issuing ‘nudge’ letters to employers to let them know they’re active in the area. Interestingly, they’ll also be writing to workers and ex- workers, pointing out common reasons for underpayment and prompting them to lodge an NMW complaint directly via the HMRC online complaints form. HMRC investigates 100% of complaints it receives – the result being a full-scale investigation of the employer in question. After the initial ‘nudge’, HMRC may offer the employers a ‘health check’. On the surface, this is a no-strings-attached look at
as where and how we work pretty much constantly evolves. What should employers be aware of? It’s highly likely this current approach will help shape HMRC’s future enforcement work, and there’s every chance this will involve future investigations of businesses that HMRC know have had issues previously. If the ‘nudge’ letters, the health checks and the worker letters aren’t enough – finally, HMRC will be opening up hundreds of new investigations into employers in each area. HMRC’s enforcement plans are usually sector-specific and tend to target a specific business size and profile. What’s interesting with this new geographic approach is that it will encompass all employers, from large multi-national to small and medium-sized enterprises. Rate rises, increased enforcement and a reported 100,000 more people being underpaid in the past year will all be challenging enough for businesses in the coming year. Add to that this new approach from HMRC and it very quickly paints a potentially worrying picture for employers. It’s more important than ever to make sure you’re getting things right. Engaging support from a specialist NMW professional may prevent your business from significant reputational and financial implications. n
your payroll and NMW compliance without the immediate threat of penalties and public naming. But as we know with NMW, things are never that simple. If HMRC finds NMW issues as part of this health check, it will give you the opportunity to review any errors, put things right yourself and then ask you for confirmation this has been done. Throughout this exercise, HMRC will have gained valuable insights on your payroll and any NMW vulnerabilities. “It’s highly likely this current approach will help shape HM Revenue and Customs’ future enforcement work” HMRC may instruct you to repay workers. Sometimes this can result in multi-million-pound bills based on technical breaches, an area where NMW specialists like our dedicated EY team would, and have previously, successfully argued against. Remember, many HMRC decisions are simply its interpretation of the legislation: it’s not always black and white. That’s true of many NMW issues. It’s never as straightforward as just paying a rate. New risks are constantly emerging,
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| Professional in Payroll, Pensions and Reward |
Issue 88 | March 2023
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