The snappily named Assured Tenancies and Agricultural Occupancies (Forms) (moratorium Debt) (Consequential Amendment) (England) Regulations came into force on Monday 3 May 2021.
HMRC confirm that its enforcement policy aims to:
- prevent employers gaining a competitive advantage over other businesses by unlawfully depressing workers’ pay;
- encourage employers to voluntarily comply, so that workers are paid the correct wages;
- protect vulnerable workers by penalising employers who fail to pay the national minimum wage on time;
- ensure workers who are paid correctly to receive arrears which take into account the length of time they have been underpaid;
- demonstrate to the business community that non-compliance with national minimum wage legislation is unacceptable.
As part of its power to achieve the above policy aims, where HMRC find any non-compliance with the National Minimum Wage legislation, it will issue a notice of underpayment which must always include a penalty. The penalty, for pay reference periods which start on or after 1 April 2016, is double the total underpayment (i.e. 200%) for all workers shown on the notice of underpayment. The maximum penalty per worker is £20,000.
HMRC assistance with compliance
We are aware that HMRC are currently offering assistance to help employers check whether workers are paid at least the National Minimum Wage, and correct any practices which employers may have which lead to the National Minimum Wage non-compliance (such as sleep-in arrangements, provision of accommodation, non-payment of business related travel time and travel expenses). This assistance is provided with the view to encourage employers to comply with the National Minimum Wage legislation.
We understand that employers who review their practices with the assistance from HMRC, will not be subject to the usual penalties, should HMRC find that there has been a failure to pay the National Minimum Wage. In line with its enforcement policy aims, we expect that where as part of this review employers are found to have underpaid their workers, they would be expected to correct any historic underpayment (up to 6 years).
To date employers subject to formal National Minimum Wage inspections had some protection in relation to penalty notices being issued by HMRC, in that the approach taken, limited the penalty to £20,000 per underpaid worker. However, a recent Tribunal decision has now confirmed that whilst there is a statutory cap of £20,000 per underpaid worker for each penalty notice, there is no limit on the number of penalty notices HMRC can issue in respect of each worker, as long as they are for different periods. This means employers can face multiple fines; making the statutory cap of £20,000 per unpaid worker almost meaningless.
Employers could therefore find themselves not only paying workers the arrears of National Minimum Wage but also paying HMRC a significant and uncapped amount under penalty notices.
On 26 July 2017 the Government announced it has temporarily suspended enforcement activity and is waiving historic financial penalties against employers in respect of sleep-in shift. Please see our previous briefing here.
For more information
For more information on the National Minimum Wage compliance, please get in touch with your usual contact in our Employment Team or speak to Anna Dabek or Matthew Wort. You can find out more about our employment work on our website.
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