HMRC has strengthened its enforcement of compliance with the National Minimum Wage (NMW), resulting in £13.7 million in fines being imposed on employers during the 2022/23 tax year.
This enforcement push follows the Government’s increased focus on NMW breaches, supported by a doubling of HMRC’s enforcement budget to £27.8 million compared to 2015/16.
A recent report from the Department of Business and Trade (DBT) highlights the impact of this enforcement, revealing that more than 108,000 workers received NMW arrears following investigations into non-compliance. HMRC closed nearly 3,200 cases, 900 of which revealed unpaid wages. The report underscores HMRC’s increasing use of the Geographic Compliance Approach (GCA), a targeted, three-tiered enforcement approach designed to bring employers in specific areas into compliance with NMW regulations.
Under the GCA, employers are encouraged to address NMW arrears voluntarily, but if problems persist, HMRC can impose penalties of up to 200% of the arrears owed. During 2024, three more regions – Liverpool, East Midlands, and others to be announced – will be added to the GCA, after locations such as Belfast, Cornwall and Watford are added.
Kyle Newton, head of national minimum wage at Azets, commented on the report: “The sheer scale of HMRC enforcement highlights how widespread NMW non-compliance is. Businesses should review their payroll records and ensure they comply with the rules before they face penalties.” Unexpected and damaging to its reputation.
The government remains clear on its position, with DBT stating that “enforcement of the minimum wage is essential, and we are committed to taking tough action against employers who break the law in all sectors.”
The penalties and arrears imposed by HMRC last year reflect growing awareness among workers about their rights, driven in part by campaigns such as Check Your Pay and direct communication from HMRC to millions of workers.
Businesses across the UK are being urged to take proactive steps to ensure compliance with the NMW, especially in light of expected increases in the minimum wage rate, which is expected to exceed £12 per hour in April 2025. Employers who fail to address pay discrepancies Or working time practices may face further penalties, including a public designation by HMRC.
As HMRC’s enforcement activity continues to grow, businesses should review their payroll controls and seek professional advice to mitigate financial and legal risks.