National Minimum Wage: Employer compliance

12 May 2016

A report from the National Audit Office (NAO) shows that HMRC has significantly reduced the average time taken to investigate complaints about employers’ non-compliance with the National Minimum Wage; however some complainants still have to wait over 240 days to get their cases resolved.

Since the government began enforcing the National Minimum Wage in April 1999, HMRC has identified £68 million in arrears for over 313,000 workers, according to the NAO’s report Ensuring employers comply with National Minimum Wage regulations. The number of workers identified as being owed arrears in 2015-16 was 58,000 compared to 26,000 in 2014-15.

The NAO’s analysis of HMRC’s caseload (as at December 2015), shows that 72% of open cases are less than 120 days old compared to 42% in December 2013. The time taken to investigate complaints varies considerably and depends on a number of factors such as the complexity of cases and the co-operation of the employer.

Amyas Morse, head of the NAO said:

“With the implementation of the National Living Wage, it is even more important that the government ensures its compliance programme reflects the changing risks within the labour market, and maintains its progress in ensuring all employers pay the minimum wage. The government also needs to reduce the time it takes to investigate complaints and resolve cases.”

The report finds that non-compliance with the National Minimum Wage in the social care sector remains a concern. The Low Pay Commission continues to assess this sector as high risk and has previously reported that up to 10.6% of care workers may not be paid the National Minimum Wage. The Department for Business, Innovation and Skills (BIS) re-classified the social care sector as a high priority sector for 2015-16.

There is no accurate overall measure of non-compliance with the National Minimum Wage regulations and, as a result, it has been difficult to assess the effectiveness of HMRC enforcement activities over time. The government has increased the resources available for compliance and enforcement with the National Minimum Wage.

The NAO finds that the number of referrals passed to HMRC from the helpline has reduced significantly in the year ending December 2015 from 2,327 in 2015 to 1,340 in 2015. In April 2015, BIS changed the operator of the helpline and is now assessing how this change, and other factors, have affected the number of calls.

Both BIS and HMRC have strengthened the sanctions which they are able to apply to non-compliant employers. Since October 2014, BIS has regularly named and shamed non-compliant employers. Between October 2013 and February 2016, it has published the details of 490 employers who failed to pay their workers the National Minimum Wage. Between 2009-10 and 2015-16, HMRC has imposed penalties of nearly £5.6 million on non-compliant employers, and has prosecuted nine employers who fit the criteria set by BIS.