HMRC recovery powers and penalties for employers who fail to pay NMW


HMRC can bring a claim on behalf of workers to recover NMW arrears. Workers can initiate support from HMRC in recovering arrears by calling the Acas Helpline (which has replaced the Pay and Work Rights Helpline). The complaint is referred to HMRC national minimum wage compliance officers. 


HMRC has the power to enter premises, inspect records, interview employers and pass information on to workers. If the employer is found to be owing money, HMRC can issue an underpayment notice, requiring payment of arrears within 28 days. Most inquiries are settled when the employer receives the notice. Employers have a right to appeal against the notice to an employment tribunal.


When issuing an underpayment notice, an HMRC enforcement officer must also serve a penalty notice. HMRC penalties for NMW non-payment doubled from 1 April 2016, from a fine of 100% to 200% of the total arrears. The penalty halves if arrears are paid within 14 days. The minimum and maximum amounts of the fine are £100 and £20,000 per worker. 


HMRC also operates a “naming and shaming” policy which involves identifying non-payers in an HMRC press release. The latest list, published in February 2016, named 92 employers in various sectors including hairdressing, social care, hospitality and security services, who owed workers over £1,873,000 of NMW arrears. 


Non-payment of the NMW, failure to keep records, or making false records are all criminal offences. Prosecutions are extremely rare, although extra resources have been promised to fund improved enforcement of criminal penalties against deliberate non-payers. 


In future, NMW enforcement by HMRC will be brought under the umbrella of a new regulator — the Director of Market Enforcement. The Immigration Act 2016 creates new offences (see Chapter 3). At the same time, the powers of the Gangmasters Licensing Authority (which operates a licensing system to prevent exploitation of vulnerable workers) are being strengthened and its remit expanded (see Chapter 3).