On 10 March we hosted a roundtable in partnership with Shoosmiths, to offer expert legal advice and guidance to our members on HMRC’s National Minimum Wage enforcement regime.
Here are a few of the key take-aways and top tips.
Focus on the retail sector
The retail sector, which employs approximately a quarter of the UK's minimum wage population, is a regular target for HMRC audits.
The investigations themselves can be lengthy, costly and time-consuming – with evidence that practices are being interpreted differently by different compliance officer enforcement agencies.
This is making it difficult for retailers to prepare for and ensure compliance when an audit is carried out.
Why is compliance so important?
If retailers are found to have underpaid workers – the amounts that need to be repaid, including any penalties, can be significant. In the most extreme cases, non-compliance can lead to criminal prosecution, or court action by workers.
Reputational damage – the previously suspended naming and shaming of non-compliant employers is being re-introduced. Those who received a notice of underpayment since suspension of the scheme should therefore expect to be named in the near future.
Failure to comply can also result in costly Tribunal claims.
What can you expect if you get audited?
Retailers, like all employers, don’t have a right to receive advance notification of HMRC audits so you should make sure you’re prepared to be audited at any given time.
Most audits involve HMRC initially meeting with HR and payroll followed by store visits when they will wish to meet and speak with staff. They may also send out questionnaires to staff so that they can assess whether you are complying with your NMW obligations.
Make sure you cooperate at all times whilst also understanding how to challenge any findings should it be necessary.
Key watch outs
The complexities of NMW regulations mean even well-intentioned, or innocuous practices are causing retailers to fall foul of the law. Some of the common problem areas for retailers include:
- Clocking offences
- Security checks
- Salary sacrifice arrangements
- Team meetings/training sessions
- Induction
- Equipment
- Pay averaging
- Uniforms
Indeed, guidance issued in February of this year regarding salary sacrifice arrangements states that pay which falls below the NMW due to salary being sacrificed by the worker for some other benefit, goods or service would be a breach of the NMW regulations and require arrears to be paid to the worker but HMRC would waive the financial penalty and not name and shame the employer.
The importance of record-keeping
Retailers must keep sufficient records to evidence that their workers have received the NMW. All information about an individual worker’s pay received in a particular reference period should be contained in a single document.
- You must keep sufficient records to establish that your workers have received the NMW – records should be kept in a single document for each pay reference period
- Records may include more detailed information such as the various elements that make up their total pay, any deductions for accommodation or absences, or details of time spent on business travel
- Records should be kept for a minimum of 3 years from the end of the pay reference period, and potentially up to 6 years.
The key point being that it will be presumed that the worker has not been paid the NMW UNLESS you can prove to the contrary.
Further advice and guidance
Shoosmiths are currently helping a number of retailers through the HMRC audit process.
If you would like legal support, information or advice, please get in touch with the team who will be happy to help.
HELEN BURGESS helen.burgess@shoosmiths.co.uk
STUART LAWRENSON stuart.lawrenson@shoosmiths.co.uk