If your business is under investigation for failing to pay the National Minimum Wage (NMW), Lupton Fawcett is here to ensure you and your business face the minimum amount of damage possible.
Our specialist NMW team regularly assists employers who are facing HMRC investigations, and is also on hand to review your existing practices and procedures in order to ensure legal compliance - minimising the risk of your organisation being fined/prosecuted and publicly 'named and shamed'.
With offices in Leeds, Sheffield and York, we have a team of experts ready to talk to you. To speak to a member of our NMW team, call 0333 323 5292 or simply fill out our online contact form and we will get back to you shortly.
About NMW Investigations
In recent years, the Government has put a great deal of effort and money into enforcing the NMW.
If a complaint is made, this will trigger an HMRC investigation into the employer’s business. HMRC compliance officers can carry out inspections at any time, and will require employers to produce records and other information. The compliance officer will often interview the employer, either in a meeting or by telephone, and may interview payroll staff and other workers. In more serious cases, HMRC can carry out dawn raids, giving an employer very little time to formulate a response.
Too often we advise businesses which have dealt with an alleged breach of the NMW Regulations and an HMRC investigation without the benefit of early specialist legal advice, only to discover that something has been said or done which later prejudices our ability to put forward a good defence to the alleged breach.
It is essential that any organisations facing HMRC investigations take advice at the earliest possible opportunity in order to avail themselves of the best possible defence. With this in mind, our NMW rapid response team can be contacted 24/7 on 07971 520407 without any obligation. Employers often have in place insurance to cover the legal and other professional costs of HMRC investigations.
Frequently Asked Questions
Why is the National Minimum Wage important?
Implementation and enforcement of the National Minimum Wage is a central feature of the Government's employment policies. The message is clear: minimum pay rates will continue to increase above inflation in the coming years and those employers who fail to pay them will be penalised.
What are the basic NMW rates?
Workers who are working in the UK and who are over compulsory school age are entitled to be paid the NMW. The current hourly rates are as follows:
- National Living Wage - £7.50 per hour, payable to workers aged 25 and over.
- National Minimum Wage - £7.05 per hour, payable to workers aged 21 and over.
- Development Rate - £5.60 per hour, payable to workers aged between 18 and 20 inclusive.
- Young Workers Rate - £4.05 per hour, payable to workers aged under 18 but over the compulsory school age.
- Apprenticeship Rate - £3.50 per hour, payable to apprentices aged 19 and under, or aged 19 and over but in their first year of apprenticeship.
Note that there is no minimum wage for children under the compulsory school age.
How does the National Living Wage differ from the NMW?
Introduced in April 2016, the National Living Wage (NLW) is an hourly rate calculated by the Living Wage Foundation as being the wage that workers need to earn in order to cover the basic costs of living. This means that all workers aged 25 or above are legally entitled to the NLW, which is set at £7.50 per hour, and those under 25 are entitled to other rates, dependant upon age amongst other factors.
Can I call an employee an “apprentice” and pay the lower rate NMW?
No. Firstly, the apprenticeship rate of £3.50 per hour is only payable to apprentices who are under 19, or who are 19 are or over and in their first year as an apprentice. Secondly, an employer must ensure that its contract with the apprentice falls into one of two categories:
- A common law “contract of apprenticeship”, which is a fairly old-fashioned arrangement that places training (rather than working for the employer) as the primary purpose of the contract; or
- An “apprenticeship agreement”, which is a creature of statute and must be in a prescribed form, incorporating (amongst other things) details of the apprenticeship framework under which the employee is being trained.
An employer who pays the apprenticeship rate to an employee whose contract has not been properly drafted to comply with these requirements could fall foul of the NMW legislation. The employer could then be required to pay the full NMW rate, rather than the apprenticeship rate, to the employee. If the underpayment is enforced via the HMRC compliance officers, then the employer could be required to pay an additional penalty of 100% of the original underpayment, as well as being “named and shamed” by the Department of Business Innovation and Skills.
Do I need to pay a wage for work experience or internships?
Children of compulsory school age are not entitled to be paid the NMW, so no difficulties arise when school children take part in work experience schemes.
However, the rules are different for young people who are over compulsory school age. There is a specific NMW exemption for work experience placements of up to one year undertaken by students as part of a UK-based Further or Higher Education course.
If a person is over the compulsory school age and entitled to the NMW, the lines between ‘worker’ and ‘intern’ must be clearly identified by the employer. An intern must be there on a non-contractual basis and must not have restrictions placed on them, as they are working on a voluntary basis.
Organisations can minimise the risk of an intern being found to be a worker by:
- Avoiding making payments to interns, other than of actual expenses reimbursed against receipts
- Removing or minimising perks that could be seen as ‘payment’
- Ensuring that the intern is not bound by any obligations to the organisation, for example, by giving the intern the ability to refuse tasks or to choose when to work
- Avoiding contractual language and instead use more flexible language such as “usual working hours” or “suggested tasks”
- Treating interns fairly by having in place clear procedures for dealing with any problems that may arise
The issue of unpaid internships is a political hot potato at the moment, as they are said to favour the socially advantaged, whilst disadvantaging those who cannot afford to work without being paid. Best HR practice is to engage interns on a proper worker’s contract and to pay them the NMW appropriate to their age band.
How is the NMW enforced?
In recent years, the Government has put a great deal of effort and money into enforcing the NMW. If you or your business has failed to pay the NMW, the following action may be taken:
- Taken To Court - Workers can enforce their rights by bringing a claim for unlawful deduction from wages in an Employment Tribunal, or for breach of contract in an Employment Tribunal or the County Court. However, both types of claim require the payment of a court fee.
- HMRC Investigation - A worker or any third party including a trade union representative can complain to HMRC, which will trigger an investigation into the employer’s business.
What are the penalties of failing to pay the NMW?
A notice of underpayment will be issued if the compliance officer concludes that the NMW has not been paid. This comprises a requirement for the employer to repay the arrears of the NMW to the individual worker, as well as to pay a financial penalty to HMRC of 200% of the arrears, so the employer will effectively have to pay three times the amount of the underpayment. The employer does have a right of appeal to an Employment Tribunal.
Once a notice of underpayment has been issued - unless it is successfully appealed - the employer will be “named” by the Department of Business Innovation and Skills (DBIS). While the employer can make written representations against being named, there are very few situations in which DBIS will agree not to name an employer. Often, the reputational damage to an organisation of being named is actually of more concern than the requirement to pay arrears and penalties.
While penalties of up to £20,000 per underpaid worker can be imposed, many NMW arrears penalties amount to less than £1,000 per worker.
In addition to enforcement by way of civil penalties and the “naming and shaming” regime, employers can be prosecuted by the CPS for refusing or wilfully neglecting to pay NMW, failing to keep NMW records, making false entries, delaying or obstructing an investigation or refusing to answer questions. Fines were previously capped at £5,000 for each individual offence, but now a criminal court can impose an unlimited fine upon conviction.
How Lupton Fawcett Can Help?
Lupton Fawcett fields a specialist NMW team comprised of leading employment and regulatory lawyers who are nationally recognised for their expertise. The team has wide experience in advising employers facing HMRC investigations into alleged NMW breaches.
In circumstances where the investigation has started, we can actively manage the HMRC investigation and your response, to ensure the best possible outcome for your business. In particular, we can obtain disclosure of the HMRC case, assist you in your disclosure of documentation, as well as represent you during HMRC investigation interviews.
We can also assist you in appealing a Notice of Underpayment and/or making representations against naming. Even better, we can carry out a health check for you now to ensure that you are paying the correct NMW rate, and that your supporting contractual documentation is in the correct format.
Contact Us For Help
We fully understand the importance of protecting your business and of protecting your reputation. To gain our expert advice, simply contact us by using the details below.
In our experience the earlier you take professional advice once you have become aware that your business may have a problem with NMW, the greater is the likelihood that the ultimate outcome will be one which does not have severe financial and reputational consequences for your business.
Get in Touch
With Lupton Fawcett on your side, you're taking control. Contact us today.