Payroll insight
expect to see a sizeable increase in the number of proactive (non-complaint- based) investigations of large companies. HMRC is utilising new tools – including behavioural economics principles and randomised controlled trials – to drive compliance and identify possible employers in breach. Its risk-based triaging system seems to be an attempt to plan the most efficient method of handling cases and intervention approaches. HMRC has developed and is now testing a risk model which uses data from a range of sources, including pay as you earn and tax credits information to identify workers at most risk of NMW underpayment. In short: HMRC appears to be utilising risk-reward assessments to decide on how to proceed against companies potentially in breach. Lower-level arrears cases in small companies may receive less extensive investigations than large companies. And they may be offered discretionary solutions – such as self-correction. Also called ‘self-review’, self-correction means that once a single complaint has been investigated and arrears identified, a company is invited to go through all
its other payroll records and do the investigative work on behalf of HMRC. This transfers the resource burden to the company, but has the upside that the company will only have to pay fines with respect to the single breach and not to any other breaches it self-identifies. It also escapes large-scale naming-and-shaming on the wider breach. ...caught out under the numerous different areas in which they may be inadvertently breaching NMW rules This raises issues of fairness and equal treatment under the law. HMRC has not yet published its internal guidelines of how it proceeds with investigations, and how it decides what sort of measures are to be enforced. Most worryingly, the powers and level of discretion afforded to investigators are
not transparent, and may well be the focus of legal challenges in the future. NMW audit All companies with staff in the NMW zone should consider conducting a NMW audit which allows them to identify areas of concern and to undertake more detailed work prior to HMRC even arriving at their premises. Any self-identified arrears will, of course, need to be repaid to the staff affected, but do not attract 200% penalties from HMRC or – just as importantly – involve the reputational damage involved in naming-and-shaming. Businesses often tell us that they are compliant but end up being caught out under the numerous different areas in which they may be inadvertently breaching NMW rules. n HMRC's growing use of self-review (or self-correction) is revealed by Jeni Morris in her article 'Self-review of NMW' which was published in the online version of the September 2017 issue of the magazine and can be found here: http://bit.ly/2ykZ0Ae (see page 29).
Multiple NMW penalty
HMRC used NMW law feature in recent notorious case I n a case involving underpayment of the national minimum wage (NMW) to 2,000 workers supplied to Sports Direct, the employment tribunal has ruled that HM Revenue & Customs (HMRC) was entitled to issue multiple penalty notices thereby allowing multiple penalty fines. The range of NMW enforcement measures includes notices of The recruitment company Best Connection Group (BCG), which supplied Sports Direct with workers, was required to pay arrears of pay totalling £469,273.83 and faced penalty fines in respect of notices of underpayment amounting to £263,628.69.
there is no provision in NMW legislation that prevents more than one penalty notice being issued. To avoid the statutory £20,000 ‘per worker’ cap, HMRC issued separate notices for the same worker covering different periods but with each subject to the cap. The underpayments of wages had occurred because: ● where a worker was a minute late clocking in, the automated system defaulted to the next fifteen-minute period so payment was not made for the first fifteen minutes at work ● when clocking off workers were subject to security searches resulting in them remaining on site for, on average, a further eleven minutes which was not paid. n
Although BCG promptly paid the fines to obtain the statutory 50% reduction in penalties, it appealed against the numerous underpayment notices HMRC had issued. BCG argued that HMRC’s issuing of multiple penalty notices was a “deliberate ploy” to evade the statutory cap on the amount of the penalty. One notice could have been issued; issuing multiple notices was an abuse of power. The tribunal’s judgment points out that
underpayment and penalties. HMRC can issue a notice of underpayment along with a penalty for the employer’s failure. The penalty is currently 200% of the total of the underpayment subject to a maximum penalty, which is now £20,000 per underpaid worker but which, at the time relevant to this case, was £20,000 per notice.
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Issue 35 | November 2017
| Professional in Payroll, Pensions and Reward |
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