The Department for Business and Trade (DBT) have published the enforcement results of National Minimum Wage (NMW) and the National Living Wage (NLW) during the 2022 to 2023 financial year
The significant increases to the NMW and NLW in recent years mean a growing proportion of workers are earning within a narrow range of the NMW/NLW rates. Due to the rising population at risk, enforcement of the NMW and NLW continues to be as important as ever. HMRC continued to enforce minimum wage legislation, considering all complaints and supporting employers with compliance.
The Low Pay Commission (LPC) regularly makes recommendations to the government on NMW/NLW enforcement. In their 2023 enforcement report, the LPC focused on the persistence of underpayment for individuals from year to year and set out recommendations regarding:
- one-sided flexibility
- the frequency of the minimum wage Naming Scheme
- expansion of data collection on underpayment
Summary of 2022 to 2023 enforcement results
Enforcement activity in 2022 to 2023 saw an increasing number of cases closed and a significant level of arrears identified:
- HMRC closed almost 3,200 cases with over 900 closed with arrears
- £13.66 million in arrears was identified for over 108,000 workers
- HMRC issued 750 penalties totalling £13.72 million
- nearly 12 million workers reached by targeted communications campaigns
- targeted enforcement continued to be the primary method of identifying arrears, accounting for 74% of closed cases, up from 71% in 2021 to 2022
Enforcement of the minimum wage
The government is committed to taking robust enforcement action against employers who fail to pay their staff correctly.
HMRC enforces the minimum wage using a variety of methods to encourage compliance and enforce the minimum wage legislation, based around a ‘Promote, Prevent and Respond’ strategy.
‘Promote’ is based on the idea that some instances of failure to comply with minimum wage legislation are due to insufficient information or understanding, rather than deliberate non-compliance by an employer.
‘Prevent’ as some employers will deliberately underpay, balancing the potential benefits of underpaying workers against the risk of being caught.
‘Respond’ is triggered when HMRC identifies non-compliance, either as a result of a worker complaint, or of their targeted enforcement work.
Enforcement in 2022 to 2023
Of cases investigated 1/3rd were found to be in breach of National Minimum Wage requirements.
HMRC opened over 3,250 cases and closed almost 3,200. More than 900 closed cases resulted in workers being paid arrears – , ‘the strike rate’, was 33%
They identified £13.66 million in arrears owed to over 108,000 workers and issued 750 penalties totalling £13.72 million to non-compliant employers.
Targeted and complaint-led enforcement
Non-compliance with the minimum wage is identified through two routes:
- a complaint via the Acas helpline
- or via HMRC’s online complaint form.
HMRC considers every complaint made by a worker, the majority received via HMRC’s complaint form (3,127), as opposed to the Acas helpline (340) or ‘other’ sources (22).
HMRC identify cases of non-compliance by proactively targeting sectors or employers where they believe non-compliance is prevalent. This is referred to as ‘targeted enforcement’.
Targeted enforcement returned over £11.0m in arrears to nearly 92,000 workers. 81% of arrears and 84% of workers identified were found through targeted enforcement.
Name and shame
The National Minimum Wage Naming Scheme remains a key deterrent to employers breaking minimum wage law.
Criminal prosecutions
21 employers have been prosecuted for underpaying the minimum wage with an additional case accepting a caution
Paying the minimum rate
Paying at or close to the minimum wage rate can increase the risk of underpayment because employers are more likely to accidentally underpay when making deductions from wages or not accounting for all working time.
Estimates of minimum wage non-compliance by minimum wage rate, April 2023:
Minimum wage underpayment over time, 2016 to 2023
Want to see the full report?
To see the full report, click on the following image for a direct link.
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