PAYROLL INSIGHT
Jeni Morris, NMW specialist in EY’s People Advisory Services team, reveals that HMRC is going to use huge new resources it has been given for NMW compliance to target large companies NMW compliance
H M Revenue & Customs (HMRC) is tasked by the Department of Business, Energy & Industrial Strategy (BEIS) with enforcing national minimum wage (NMW) and national living wage legislation. Its role is to help employers understand their obligations, and to promote compliance with the law. It has a ‘promote, prevent and respond’ strategy. But as the NMW teams become more established and expand, it seems clear that the major focus is increasingly on compliance, deterrence and enforcement. Increase in HMRC resources The NMW team at HMRC is one government department that has seen a sharp increase in its resources in recent years: from £13.5 million in 2015/2016, to £20 million 2016/2017, and £25.3 million in 2017/2018. Most of this significant increase over the last two years has been to recruit new investigators to “fund new teams to proactively review complex employers, some with complex supply chains, considered most at risk of non-compliance [with NMW]” and “allow for greater targeted enforcement”. There are now four hundred staff in the unit, and HMRC is experiencing a “sustained ramping up of [its] targeting and investigative capability”. It is – to quote the
new BEIS report National minimum wage and national living wage: government evidence to the Low Pay Commission compliance and enforcement (http://bit. ly/2uHFjRj) – ‘transitioning’ both in terms of scale and type of enforcement activity. HMRC enforcement activity is no longer just complaint-driven: the new resources are being invested to proactively target large companies. ...no longer just complaint-driven: the new resources are being invested to proactively target large companies Targeting large companies NMW legislation is so complex that many companies may find themselves inadvertently falling afoul of the law. Mere ignorance is no excuse, and accidental non-compliance is treated just as severely as deliberate underpayment. Companies found to be in breach not only have to pay arrears to the staff involved, but can also be fined up to 200% of the arrears
due and named-and-shamed by HMRC. And the larger the company, the higher the arrears and fines. Not surprisingly, HMRC is concentrating its resources on larger and high-profile companies, and on certain sectors. This offers the possibility of higher recovery of arrears, and scaling of efforts and information. The potential result in terms of resources and time invested with respect to the investigator’s ‘strike’ rate is proportionately much higher in companies with thousands or tens of thousands of employees than for smaller companies. The upside incentives in larger companies are significantly greater. Of HMRC’s ongoing large investigations, 38 are in targeted sectors: in 2016/17 these were cleaning, hair and beauty, hospitality, retail and social care. Another thirty large investigations were launched in June 2017, with more planned. While HMRC follows up all complaint- based investigations within targeted time limits, most of the recent increase in identified underpayments seems to be from proactive targeted investigations. New HMRC strategy The only brake on a further increase in these recovery figures seems to be a lack of available staff at HMRC. As more investigators are fully trained, we can
| Professional in Payroll, Pensions and Reward | November 2017 | Issue 35 44
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