Most employers know they must pay at least the National Minimum Wage or National Living Wage.
However, compliance involves much more than simply checking the hourly rate.
Every year, businesses are required to repay underpaid wages and many also face financial penalties for getting the rules wrong.
Know the correct pay rates
The government reviews National Minimum Wage rates every year.
Employers should make sure payroll systems are updated whenever new rates take effect, usually from April each year.
Working time matters
National Minimum Wage is based on the hours a worker is treated as working.
Depending on the circumstances, this may include:
- Mandatory training.
- Time spent opening or closing the workplace.
- Certain travel during the working day.
- Waiting time where the worker is required to be available.
Incorrectly recording working hours is one of the most common causes of underpayments.
Deductions can reduce pay
Some deductions reduce pay for National Minimum Wage purposes.
Examples include:
- Uniform costs paid by the worker.
- Tools or equipment required for the job.
- Salary sacrifice arrangements in certain circumstances.
Even where deductions are agreed, they can still result in a National Minimum Wage breach.
Keep accurate records
Employers should keep clear records showing:
- Hours worked.
- Pay received.
- Deductions made.
- Worker ages.
- Changes to pay rates.
These records are essential if HMRC carries out a National Minimum Wage inspection.
Check workers as well as employees
National Minimum Wage rules apply to workers as well as employees.
Businesses using casual staff, agency workers or other non-standard working arrangements should make sure everyone who qualifies is receiving the correct pay.
What happens if you get it wrong?
HMRC can require employers to:
- Repay underpaid wages.
- Pay financial penalties.
- Correct payroll records.
In some cases, employers who seriously breach the rules may also be publicly named.
Where can I find official guidance?
Use these official pages for the current rules:
Need advice?
National Minimum Wage compliance is far more detailed than many employers realise.
If you are unsure whether your payroll is fully compliant, we can help you review the risk areas.