COMPLIANCE
Jeni Morris ACIPP, head of the national minimum wage (NMW) team and Gary
O pening a letter from HMRC to find notification of a NMW investigation can be a daunting and worrying time for any business. NMW breaches, whether deliberate or accidental, can come with hefty financial penalties, along with serious reputational damage through the potential public ‘naming and shaming’ for non-compliant employers. Often these breaches are based around technicalities in the legislation and aren’t simply a case of the wrong hourly rate being paid to a worker. HMRC’s investigations can be long, drawn out and protracted affairs. They often take years to conclude and can draw input from current and former workers. HMRC often forms its opinion on NMW breaches based on worker testimony or extrapolations of ‘best fit’ samples when it doesn’t have access to exact records and details. "Remember, the key point here is that it’s up to you to prove you’re paying every worker at least the national minimum wage for all hours in every pay period" Its compliance checks operate on a ‘reverse burden of proof’ basis, where it is up to employers to prove they are paying NMW correctly, more than it is for HMRC to prove they aren’t. One way to ensure you’re in the best position possible to navigate your business through an HMRC NMW review and these potential issues is to be prepared with robust records and documentation. How does this look in practice? It’s an employer’s responsibility to be able to show it is paying all workers at least the NMW / national living wage. It’s worth noting that an HMRC Henderson NMW specialist, EY, explain how best to prepare for an HM Revenue and Customs NMW audit
investigation can go back for up to six years and can include leavers as well as current workers. You, as an employer, would be expected to retain records relevant to NMW for that length of time. To be able to do this, you need to be able to show the hours worked and the amount paid in every pay period. These records should be kept for all workers, not just those paid an hourly rate. Following legislative changes that came into play in 2020, HMRC has heightened its focus on salaried workers. Lack of robust record keeping is a common reason for NMW issues relating to those paid a salary. Record keeping might look different based on a business’s size and setup and indeed, HMRC doesn’t specify exact formats. However, general good practice will include evidence of: l contracts of employment (including apprenticeship agreements) l staff handbooks and policies (for the previous six years) l pay records, including payslips (with a full breakdown of pay, hours and deductions) l pay elements and deductions reports l time and attendance records or evidence of actual hours worked l salary sacrifice agreements l loan agreements (including those with a third party). However, if businesses cannot provide evidence such as actual hours worked, HMRC won’t just use worker interviews to establish the working time but it may also ask the business for additional data, including: l time logs from computer systems showing employee log in and out times l office entry card details l CCTV footage l learning and development data from mandatory training courses. Remember, the key point here is that it’s up to you to prove you’re paying every worker at least the NMW for all hours in every pay period. Putting these administrative measures in place now could save plenty of time, effort and cost if HMRC’s NMW enforcement team comes calling. n
National minimum wage – on the record
| Professional in Payroll, Pensions and Reward | November 2023 | Issue 95 18
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