It may come as a surprise to you that nearly 500 employers in the UK have been fined a total of £10.2 million for failing to comply with the National Minimum Wage (NMW) regulations, according to the latest government report following investigations by HM Revenue and Customs (HMRC). This is the continuation of the government crackdown on employers, and we don’t want you to be caught.
These findings indicate that approximately 42,000 workers have received back pay totalling £6 million as the government intensifies its efforts to tackle employers who underpay their staff.
The list of offenders includes a wide range of businesses, from local boutiques to well-known national brands across sectors such as retail, hospitality, childcare, and manufacturing. This serves as a reminder that even well-established and reputable employers may occasionally overlook compliance requirements.
We know managing payroll correctly is more complex than it may seem. Legislation can change, and a lack of understanding can lead to significant issues. As the saying goes, “You don’t know what you don’t know” until HMRC comes knocking at your door to inform you otherwise.
The Importance of Getting It Right
What is clear is that failing to pay staff correctly doesn’t just affect employees; it can have serious consequences for businesses too.
Employers found to be underpaying their workers are legally required to repay all outstanding wages and can face financial penalties of up to 200% of the arrears (capped at £20,000 per worker). This would be a serious blow to any business!
In addition, your names are published by the government in an official “naming and shaming” list, which can cause significant reputational damage.
In the most serious cases, where an employer is found to have deliberately failed to pay the minimum wage, they may face unlimited fines and potential criminal prosecution.
In today’s competitive employment market, maintaining fair pay practices isn’t just about complying with the law; it’s about building trust, protecting your brand, and ensuring your workforce feels valued and motivated. Therefore, it is best to take care in the first place.
Common Causes of Underpayment
In our previous blog post on this subject, we explored things to watch out when calculating minimum wage.
As the government cracks down on employers, it’s important to keep the relevant issues in mind.
While some underpayments are intentional, many are not. In fact, HMRC has found that a significant number of violations result from simple errors or misunderstandings about what qualifies as minimum wage pay.
Here are some of the most common reasons for non-compliance:
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Deductions and Charges
You could make deductions for things like uniforms, equipment, or accommodation, without realising that these costs can bring an employee’s hourly pay below the legal minimum. Even small, routine deductions can tip wages below compliance levels.
So be careful when you are making deductions.
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Unpaid Working Time
It could be that you may fail to pay for all hours worked. This is not by design but by mistake.
For instance, time spent in training sessions, waiting for tasks to start, or finishing duties after a shift officially ends. All these activities count as working time and must be paid accordingly.
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Incorrectly Calculated Apprenticeship Rates
Did you know that apprentices are entitled to the apprentice minimum wage rate only if they meet specific criteria (for example, being under 19 or in the first year of their apprenticeship).
Once an apprentice moves beyond these conditions, their pay must increase to the age-appropriate rate. Failing to make this adjustment is a common source of error.
Please make sure your payroll or HR software flags these things up.
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Outdated Pay Rates
Minimum wage rates are reviewed and updated every April. Failing to apply the new rates promptly is a key reason why businesses end up on the government’s list.
If we manage your payroll, we will notify you before each April regarding the updated rates. If you are processing the payroll yourself, it is crucial to ensure you always apply the new rates.
The current rates, effective since April 2025, are:
- National Living Wage (21 and over): £12.21 per hour
- Ages 18–20: £10.00 per hour
- Under 18 and apprentices: £7.55 per hour
Our advice is to ensure your payroll systems are regularly reviewed and updated to reflect these changes.
If you would like a one-time payroll audit to ensure you are on the right track, please reach out to your usual manager at Myers Clark. If you are our client, even if we are not processing your payroll, we can review your systems and processes and provide guidance. Our goal is to give you peace of mind. We are serious about you and your ambitions.
The Wider Impact of Compliance
Getting minimum wage payments right is about more than avoiding penalties because it’s about supporting a positive workplace culture and strengthening business performance.
When employees know they’re being treated fairly, it fosters higher levels of trust, engagement, and loyalty. This, in turn can reduce staff turnover, improve morale, and enhance productivity.
On the other hand, the reputational fallout from being publicly named for underpaying staff can be severe. It may affect customer confidence, deter potential recruits, and even impact relationships with suppliers or investors who prioritise ethical practices.
In short, compliance is good business sense. Beyond legal obligations, fair pay is a cornerstone of a strong employer brand and sustainable growth.
How Can You Protect Yourself?
To stay compliant and avoid falling into common traps, employers should:
- Regularly audit payroll systems to ensure all pay meets or exceeds current minimum wage rates.
- Review employment contracts and policies to confirm that any deductions or charges do not reduce pay below the minimum.
- Keep accurate records of hours worked, including training time, travel between assignments, and any additional duties.
- Stay up to date with government announcements about wage rate changes each April.
- Seek expert payroll or HR advice if unsure about any aspect of compliance. We can help.
A proactive approach to payroll management not only ensures legal compliance but also helps maintain a fair, transparent, and motivated workplace.
Need Help with Payroll or Minimum Wage Compliance?
Navigating payroll regulations can be complex, and even well-intentioned employers can make mistakes. If you’re unsure whether your current practices meet the latest National Minimum Wage requirements, it’s wise to seek professional advice.
Our team can help you review your payroll processes, identify potential risks, and ensure you’re fully compliant with all current legislation.
We’d be happy to help you protect your business, your staff, and your reputation. If you need help, email inquiries@myersclark.co.uk and give a brief explanation of your concerns. One of our team will be in touch promptly.
If you want to read more on this topic you can also visit the official government page:
👉 here.