The publication of the names of nearly 500 employers found to have breached employment law has once again placed the spotlight on National Minimum Wage compliance.
These businesses, listed in the Government’s latest publication of the National Minimum Wage Naming Scheme, failed to meet their legal obligations to around 42,000 workers and have been fined a total of more than £10 million.
While some cases involve deliberate underpayment, many are caught out by technicalities or have inadvertently breached the rules through well-intended actions.
Top reasons for National Minimum Wage breaches
The most common reasons for underpayment of National Minimum Wage, or NMW, are:
- 28% failing to pay the correct rate to apprentices
- 27% failing to pay the uprated minimum wage
- 15% failing to pay workers correctly for their working time
Other errors include misapplying the accommodation offset where rent is charged to employees for the use of employer-provided accommodation, misclassifying work types, incorrectly identifying worker status and making deductions for items such as uniforms, tools, meals, travel, and salary sacrifice schemes that reduced pay below NMW.
Technical errors can be costly
HMRC’s enforcement activity increasingly uncovers technical breaches, even when employees are paid well above the minimum wage.
These can stem from misinterpretation or misapplication the rules such as failing to adjust pay after a worker’s birthday, incorrectly classifying salaried workers or overlooking unpaid working time spent training or travelling.
The consequences are significant, with penalties of up to 200% of the underpaid wages, and the reputational damage of being publicly named.
The time and resources required to respond to an HMRC audit can also be substantial, particularly if the business lacks robust systems and documentation.
Proactive compliance
Businesses should take proactive steps to manage compliance, including regularly reviewing HR and payroll policies to ensure they reflect current legislation, conducting periodic checks of wage calculations, and implementing reliable systems for recording working time.
Employers must also ensure pay increases are applied promptly following birthdays or rate changes, and that any deductions do not reduce pay below the minimum threshold.
With the Government’s upcoming Employment Rights Bill and the establishment of the Fair Work Agency in April 2026, enforcement is set to become even more rigorous.
By identifying and correcting any compliance gaps before HMRC initiates a formal audit, employers can avoid penalties and protect their reputation, where the errors are corrected in line with HMRC requirements.
