Pay Any National Minimum Wage (NMW) Arrears Without Penalty

Employers have a legal obligation to pay employees a wage that is at least equal to the National Minimum Wage (NMW). From 1 October 2015, the NMW for employees aged 21 and over is £6.70 an hour.

HMRC are getting tough on employers who do not pay employees the NMW. However, the National Minimum Wage campaign gives employers an opportunity to get their house in order and to pay any arrears to employees without incurring a penalty.

What is the NMW campaign?

The NMW campaign is a voluntary disclosure opportunity, which offers employers the chance to pay any NMW arrears owed to employees without incurring a penalty.

How does the campaign work?

There are four steps to the NMW campaign:

  • Step 1 – check employees are being paid at least the NMW. Guidance and a NMW calculator are available on the GOV.UK website – see gov.uk/national-minimum-wage/employers-and-the-minimum-wage.
  • Step 2 – make a commitment to putting things right by completing a notification form. By completing the notification form the employer is committing to calculate and pay any NMW arrears to employees and also to pay and tax and National Insurance to HMRC that becomes due as a result of paying the arrears. Once the notification form has been submitted HMRC will acknowledge a receipt and issue a unique reference number.
  • Step 3 – complete and submit the disclosure form, quoting the unique reference number, within two months of submission of the notification form to tell HMRC that you have paid your NMW arrears. Arrears should be paid at the NMW rate at the date on which payment was made, not the rate prevailing when the arrears arose. The disclosure form asks for the employer’s details and those of your employees who have been paid less than the NMW. When disclosing, details must be provided of any employees who in the last six years have been paid less than the NMW. Employers with arrears which date back to before 6 April 2009 should contact HMRC.
  • Step 4 – Pay any tax and Class 1 National Insurance that is due on the arrears over to HMRC.

Need to know: HMRC are always more lenient with those who make the effort to sort out their affairs, so it is always better to go to them and own up rather than wait to be found out. HMRC have the power to charge a penalty of up to 100% of the NMW arrears (subject to a maximum penalty of £20,000) and are planning to increase this to 200%. The NMW campaign provides a chance to pay arrears without incurring a penalty.

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