HMRC’s budget to ensure businesses are paying employees the national minimum wage (NMW) and national living wage (NLW) is to increase by £5.3m in 2017/18 after it grew significantly in April 2016 to £20m, according to government’s Labour Market Enforcement Strategy report
In 2015/16 the NMW/NLW enforcement team, who has 363 staff members, had 2,667 cases with 40% of cases consisting of arrears of £500 or less, with an average of £90 per worker. Around one in six cases involved arrears of over £5,000, an average of £179 per worker.
It is estimated that there were 362,000 jobs paying less than NMW/NLW in April 2016, which is equivalent to 1.3% of all UK employee jobs or 19% of those paid at or below NMW or NLW rates.
In 2015/16 for NMW the top three sectors for the number of cases where arrears were identified were: accommodation and food services; other service such as hairdressers and beauty; and the wholesale and retail trade. Recent focus on the health and social care sectors has resulted in a boost in the number of cases.
Although policy responsibility rests with the Department for Business, Energy and Industrial Strategy (BEIS), it is HMRC who is responsible for enforcement. In October 2016 HMRC created a team focussed primarily on tackling the most serious cases on non-compliance, including large businesses.
Of those entitled to and paid below NLW, over 40 % were paid between £7.00 and £7.20 and a further 16% were paid between £6.70 and £6.99 per hour, leaving over 40% paid at least 50p an hour below the NLW.
From 1 April 2016, the calculation of NMW underpayment penalties was increased by BEIS from 100% to 200% of arrears. The penalty is reduced by half if the unpaid wages and the penalty are paid within 14 days.
Employers who break NMW or NLW law and owe over £100 in wages are ‘named’ as part of the BEIS scheme. The naming scheme is intended to have both reputational and financial consequences for employers, acting as a deterrent for employers and increasing compliance.
HMRC has five ways to enforce compliance with the NMW/NLW, including: getting the wage arrears paid to the worker; civil penalties of up to 200% of the arrears owed per worker up to £20,000; naming scheme under which BEIS will name all employers who owe their workers over £100; the new regime of labour market enforcement undertakings and orders; and criminal investigation possibly resulting in a prosecution by the Crown Prosecution Service (CPS).
Under payment of the NMW by age, 2015 and 2016
| Young People (Excluding Apprentices) | Number paid below NMW 2015 | Proportion paid below NMW 2015 | Number paid below NMW 2016 | Proportion paid below NMW 2016 |
| Age 16-17 | 1,900 | 0.70% | 1,700 | 0.60% |
| Age 18-20 | 15,000 | 1.60% | 14,000 | 1.50% |
| Age 21-24 | 26,000 | 1.30% | 24,000 | 1.20% |
United Kingdom Labour Market Enforcement Strategy - Introductory Report is available here.
