Back in June 2023, HMRC named and shamed more than 200 employers for breaching National Minimum Wage deductions. Between them they were fined nearly £7m and ordered to reimburse workers. Some of these firms were household names, including WHSmith, Argos and Marks & Spencer. Many of the companies involved blamed misunderstandings of the rules. Now HMRC is sending letters to many employers telling them they ‘are at risk of not paying the NMW correctly’. It also asks them to arrange a ‘support call’ about the National Minimum Wage.

To help make sure you are compliant with the NMW, this post looks at the most common errors employers make – and what the consequences can be.

What is the National Minimum Wage?

It’s worth recapping what the National Minimum Wage is, if only to remind you of its current rates.

In a nutshell, if you’re an employer, you need to pay your employees a minimum amount stipulated in law. If an employee is aged under 23 you need to pay them at least the National Minimum Wage If they’re over that age, you must pay them the National Living Wage (NLW) or more. The rates for the 12 months beginning 1st April 2023 are:

23 and over 21 to 22 18 to 20 Under 18 Apprentice
£10.42 £10.18 £7.49 £5.28 £5.28


Apprentices are entitled to the apprentice rate if they’re aged under 19, or if they’re older and in the first year of their apprenticeship. Apprentices over the age of 19 who have completed their first year of apprenticeship should be paid the minimum wage for their age.

How are employers getting the NMW wrong?

Of the 200 employers who were named and shamed by HMRC, 39% made deductions that meant employee wages dropped below the NMW or NLW. One of these was WHSmith, which said it had misinterpreted rules about uniforms. It had asked staff to wear specific coloured trousers, shirts and shoes and failed to reimburse them. This counted as a deduction.

Deductions employers wrongly made concerned items like these:

  • Food/meals
  • Parking permits and/or travel costs
  • Cost of, or lost, work equipment and/or personal protective equipment
  • Stock or till shortages
  • Training costs
  • Childcare costs
  • Uniforms / worker purchase of clothes to meet dress code.
  • Christmas savings schemes (when administered incorrectly)
  • Salary sacrifice schemes e.g. cycle to work, pension and employer benefit schemes.

Unpaid working time

An additional 39% of employers failed to comply with the NMW or NLW because of unpaid working time. Instances of this included:

  • Additional work before and after a worker’s shift
  • Rounding down time to the nearest hour
  • Unpaid travel time
  • Issues with final pay where employment comes to an end
  • Time for undertaking mandatory training
  • Trial shifts
  • Overtime
  • A salaried hours worker working in excess of their basic hours.

NMW and apprentices

A further 21% of employers didn’t pay the correct rates to apprentices. This can happen when an employer fails to put an apprentice who is aged over 19 and has completed their first year on the relevant NMW for their age. In some cases, people had finished their apprenticeship and their rate of pay didn’t change.

Penalties for non-compliance

If you are an employer, it’s vital that you interpret the rules correctly. Failure to pay the correct minimum or living wage can be as much as 200% of the underpayment. You also have to settle underpayment with employees at the current NMW and NLW rates, not the rates at the time of the underpayment. HMRC can pursue you for up to five years of underpayment, or six years in Scotland.

Help getting payments right

If you have received a letter from HMRC asking you to arrange a support call about NMW, be sure to talk to your accountant first. It’s important to make sure you are compliant or, if you’re not, to take steps to become so. Doing the latter can help you reduce any potential penalties.

One of the best ways to ensure NMW and NLW compliance is to use an outsourced payroll service, such as THP’s. Our accountants can work with you to make sure you are paying the correct wages and advise you on any future changes to the rules.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    About Jon Pryse-Jones

    Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

    An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

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