HMRC recovers highest amount of underpayments for highest amount of workers in 2017/18

The Department for Business, Enterprise and Industrial Strategy has released an eye-opening report containing details of the government’s enforcement of minimum wage underpayments.

The most notable detail revealed by the report is that the arrears identified by the HMRC in 2017/18 was the highest amount of money recovered for the highest number of workers in any year since the National Minimum Wage (NMW) was introduced, with 200,000 workers identified as being underpaid a total of £15.6 million.

The report confirms that HMRC investigate every complaint received regarding NMW and National Living Wage (NLW) underpayments. There was a 71 per cent increase in the number of complaints received by ACAS and HMRC in 2017/18, compared to the previous year, with 45 per cent of HMRC complaints received through the online complaints form, available to workers 24 hours a day.

As a result of the significant underpayments identified, HMRC issued organisations with penalty fines totalling £14 million; triple the total value of penalties issued in 2016/17. As civil penalty fines help recover wage arrears for workers quicker than criminal sanctions, HMRC only carried out criminal prosecution against one organisation in 2017/18. Additionally, more than 600 companies were ‘named and shamed’ by the government during this period, bringing the total to 1,957 organisations who have been included on these lists between February 2014 to July 2018.

The government is continuing their efforts to raise awareness of minimum wage laws and have undertaken various measures to do so, including send 1.6 million text messages to workers deemed at risk, launching a new website, and sending email nudges to employers. The awareness campaign carried out in April 2018 to coincide with wage increases focused on radio, outdoor posters and digital adverts. It is estimated that this campaign resulted in an additional 670 complaints received by HMRC.

As well as addressing complaints received, HMRC carry out proactive and targeted enforcement in areas they think have the highest risk. In 2017/18, HMRC targeted social care, retail warehousing and ‘gig economy’ employers. They also focused on various employment practices including pay and the use of employment agencies, payment of apprentices, and migrant workers.

Although NMW and NLW are seen as highly complex and uncertain areas, the risks for organisations who incorrectly pay staff are high. Organisations who fail to comply will have to repay any arrears to staff, face a penalty fine of up to 200 per cent of the underpayment capped at £20,000 per worker, and may be ‘named and shamed’ by the government. There is also widespread press and media coverage of these shaming lists, leading to potential reputational costs. HMRC encourage organisations who may be at risk of underpaying staff to contact them for advice and guidance.

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