UK: National Minimum Wage – Getting It Right

Last Updated: 15 May 2018
Article by Gareth Hills

We've seen that employers are increasingly focusing on the risk around whether or not they comply with the National Minimum (NMW) / National Living Wage (NLW) legislation. This is being prompted by media coverage and increasing HMRC activity.

HMRC, which is responsible for NMW compliance, has significantly stepped up its compliance activity following an increase in their enforcement budget from £13m in 2015/16 to £25.3m in 2017/18.

Alongside this, employees are becoming more aware of their rights under the NMW legislation, reflected by a significant increase in the number of NMW underpayment reports received by HMRC. We are aware of at least one case where a report has led HMRC to launch an NMW compliance review at the employer in question, even though it turned out that the actual complaint was found to have no basis.

In this current climate, as an employer you really need to be clear on what your NMW obligations are and ensure that you are comfortable you are meeting those obligations, so you don't put yourself at risk and so your employees are not disadvantaged.

The implications of HMRC identifying non-compliance can be significant. In addition to the financial cost of repaying historical underpayments to your employees, the administrative burden of identifying and calculating liabilities dating back six years, and the associated penalties which HMRC can, and do charge - up to 200% of the underpayment limited to £20,000 per employee - as well as being "named and shamed" for an NMW underpayment could have an adverse impact on your organisation's reputation.

The Department for Business, Energy & Industrial Strategy (BEIS) periodically publishes a list of organisations with the most significant NMW underpayments - the most recent list was published on 9 March.  We've seen that some media outlets have been quick to note some big name employers which have appeared on this "name and shame" list.

Getting it right

It's often the case that many employers who fail to meet their NMW obligations do so not because of any malicious intent to underpay their employees, but through misapplication of the complex rules which govern NMW. For example, the legislation is very prescriptive in terms of what can and cannot be included in an employee's pay that counts towards NMW purposes and what deductions can be taken from employees without impacting their NMW. The legislation often produces some interesting outcomes which can take employers and employees by surprise.

In our experience, HMRC adopts a very strict interpretation of the legislation and so an important first step towards ensuring your organisation is compliant is to make sure that you understand the rules and are completely clear on its practical application to your workforce.

The next step is to ensure your internal controls and processes allow your organisation to effectively meet its obligations. Any remedial action required should be taken as soon as possible.

Undertaking this proactive self-review will give your organisation a much greater level of assurance should HMRC look into your NMW compliance, or should your employees challenge their pay. We believe the recent increase in NMW/NLW rates provides an ideal opportunity to start this self-review.

HMRC's compliance activity

HMRC's compliance activity is being carried out across the UK: 260 employers were named on the BEIS list published in December 2017, and 179 further employers were on the list they published in March 2018.

There appears to be greater incidence of identified NMW underpayment in certain sectors as compared to others. For example, half of the employers on the most recent list operated in the hospitality, hairdressing, retail or social care sectors, and around 62% of workers who were underpaid were employed in the hospitality sector.

The South West and Wales are not immune from this with 62 local businesses appearing across the two most recent "name and shame" lists, of which just over two-thirds were South West employers.

In our experience, HMRC are also prioritising certain sectors over others in their compliance activity, particularly those with larger populations of lower-paid employees. We've already highlighted some pitfalls with NMW compliance for social care organisations. You can read more in our article here.

However, we are also aware of other employers outside of these supposed at risk industry sectors that have received visits from HMRC.  Accordingly, HMRC's activity is not exclusively focused on certain sectors and any employer can potentially find itself on the receiving end of a review.  That's why it's worthwhile reviewing your own organisation's processes.

How we can help

If you have current concerns about your organisation's NMW compliance, or you would like the opportunity to discuss this area further, be assured we have specialists that can help. We assist organisations in a variety of ways.  For example, this could include either:

  • Proactive steps, i.e. reviewing NMW compliance processes, undertaking remedial activity etc.; or
  • Reactive steps, i.e. providing you with support in preparing for an upcoming HMRC review, or where HMRC have already started that review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions