Receiving a letter from HMRC informing you of a National Minimum Wage (NMW) investigation can be daunting. It can often be a nerve-wracking and concerning experience for any company. Whether intentional or unintentional, NMW violations can lead to significant financial fines. Moreover, they can seriously harm a business’s reputation due to the possibility of public exposure as a non-compliant employer. The consequences of failing to comply with NMW regulations should not be underestimated. Last year alone, M&S, Argos and WH Smith were all names HMRC listed amongst 200 employers who failed to pay the National Minimum Wage.


Whilst many of these employers maintained the breaches were unintentional, fines were still issued by HMRC. Some were potentially as high as 200% of the arrears owed! As such, it is incredibly important to familiarise yourself with the rates and rules surrounding NMW. Only then can you minimise the risks of being caught out.


The rates and the rules…


The National Minimum Wage (NMW) and the National Living Wage (NLW) are the minimum hourly rates that must be paid to workers in the UK. The rates are reviewed annually and are currently set as follows:


23 and over – £10.42 per hour (NLW)

21 to 22 – £10.18 per hours

18 to 20 – £7.49 per hour

Under 18 and Apprentice – £5.28 per hour.


These rates are set to ensure that all workers receive a fair wage for their labour and to prevent exploitation. The new rate system is due to change in April 2024. This will remove the 21-22 band altogether and increase the rates across the board. They will be as follows:


21 and over – £11.44 per hour (NLW)

18 to 20 – £8.60 per hour

Under 18 and Apprentice – £6.40 per hour


NMW Compliance


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 bases its assessment of NMW violations on worker testimony or projections from “best fit” samples when exact records are unavailable. This often puts employers in a difficult position with limited recourse.


The onus of proving compliance weighs heavily on the employer. Non-compliance can result in significant consequences. In the large majority of breaches, it isn’t as simple as a worker being paid the wrong hours rate. In the case of WH Smith, for example, they were found to have breached the legislation as they required their employees to wear specific coloured trousers, skirt and shoes and didn’t reimburse their staff for purchasing them.


What does it mean for businesses?


For businesses, managing the complexities of NMW and NLW compliance is a significant challenge. It requires meticulous record-keeping and a deep understanding of the ever-changing regulations. Small businesses, in particular, may find it difficult to keep up with the administrative burden. Often, they lack the resources to navigate through NMW investigations with ease. This can lead to unintentional breaches and the subsequent anxiety when faced with the potential consequences.


So what are the best steps to take to avoid sleepless nights?


To minimise the risk of NMW breaches, employers should stay informed about the latest legislation and ensure their payroll systems are up to date. Conducting regular audits of pay records and seeking professional advice can also help to identify and rectify any potential issues before they escalate into full-blown investigations.


Employees, on the other hand, should familiarise themselves with their rights regarding the NMW and NLW. It’s crucial for workers to understand their entitlements and to speak up if they suspect that they are being paid less than the minimum wage they are entitled to. By being proactive and informed, employees can play a role in ensuring that they are fairly compensated for their work.


The current debate…


The ongoing discussion around the adequacy of the National Minimum Wage and the National Living Wage is essential. While these regulations are designed to protect workers from exploitation, there is ongoing debate about whether the current rates are sufficient to provide a decent standard of living, especially in areas with a high cost of living. As the economy and living costs continue to change, there are calls for regular and meaningful adjustments to the NMW and NLW to ensure that workers can lead a dignified life without struggling to make ends meet.


In short…


The National Minimum Wage and the National Living Wage have undoubtedly brought positive changes to the labour market by ensuring fair compensation for workers. However, the complexities and potential consequences of non-compliance can cause anxiety for both employers and employees.


It’s crucial for businesses to diligently manage their payroll processes and for employees to stay informed about their rights to mitigate the risks associated with NMW and NLW. Additionally, ongoing dialogue and evaluation of the adequacy of these minimum wage rates are essential to ensure that they continue to serve their intended purpose of enabling workers to lead a decent life.

At Lewis Brownlee, we have a dedicated Payroll team who can take the difficulty out of handling NMW for you. So, if you would like to find out more, please do get in touch. We offer a free, introductory meeting so that you can find out what we do and how we do it. And, as ever, we always look forward to seeing how we can partner in your business success!




If you’d like to speak to one of our experts about, please call 01243 782 423, or email from our contact page and we will be in touch!

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