Be aware, some businesses have recently hit the headlines for all the wrong reasons! HMRC have publicly named 518 employers who have failed to meet their legal responsibilities and pay National Living or National Minimum wage correctly to their staff (a total amount of £7.4 million) – something which has affected almost 60,000 workers.
Although these underpayments may not always be intentional, employers risk significant financial penalties of up to 200% of the amount they underpaid. Businesses must pay the correct minimum wage, regardless of what’s stated in a contract, otherwise they are committing a criminal offence.
Common mistakes leading to underpayment of wages include:
- Making inappropriate wage deductions (e.g. cost of uniforms, work equipment)
- Failing to make payments for overtime, time on training, time spent travelling for work
- Including an element of pay that does not count towards a worker’s minimum wage e.g. tips from customers
- Not increasing an individual’s rate of pay due to a recent birthday e.g. turning 18 or 21.
- Failing to apply the annual rate increases each year on 1 April (see below)
Rates for 2025/26
From 1 April 2025, the National Living and National Minimum Wage hourly rates are as follows:
- National Living Wage (21 and over) – £12.21
- 18 to 20 – £10.00
- Under 18 – £7.55
- Apprentice – £7.55
Failing to pay your staff correctly is breaking the law, if you are in any doubt as to what you should be paying your staff, advice is available:
https://checkyourpay.campaign.gov.uk/are-you-an-employer/
Likewise, if workers suspect that they are being underpaid, they can contact ACAS or HMRC for further guidance and make a complaint. Enforcement officers will look into the pay of all staff at the location of business not just the complainant. Furthermore, employers will not only be fined but any arrear payments will be calculated using the current rate of National Minimum or Living Wages i.e. not the rates applied at the time of underpayment. It is also worth noting that you don’t need to be working for an employer to report them to HMRC. HMRC investigations can go back 6 years.
A word to the wise, as employers make sure you pay attention when it comes to queries from workers about wages. Payroll processing can be complex and mistakes may inadvertently happen from time to time but they need to be caught and rectified early on before the matter unnecessarily escalates. No one wants to be investigated by HMRC/before an employment tribunal, let alone the negative publicity and reputational damage associated with failing to pay your staff what they are legally entitled to.
