National Minimum Wage (NMW): HMRC target West Midlands employers

HMRC’s GCA projects usually start with employers receiving a letter asking them to review and feedback on their NMW compliance against a checklist of common risk areas. These can include:

• Deductions from pay for job related items or expenses;
• Paying workers for all their time worked (including travel and training);
• Correctly uprating employees when they qualify for higher age-related rates;
• Operation of salary sacrifice reductions to pay; and
• Pay rates for apprentices.

HMRC will ask employers to confirm that they have undertaken a review, and either declare that no issues were identified, or disclose and correct any errors identified (providing details of the issue, including the total underpayment and confirmation that all affected workers have been paid).

In addition to approaching employers, HMRC may write to workers to highlight typical NMW risks. This increases the likelihood of workers making complaints to HMRC’s helpline which can trigger HMRC opening a formal NMW review. Where a review is opened, penalties of up to 200 percent will be applied to any underpayments and the employer’s name is likely to be published on HMRC’s naming list.

Unlike previous GCA projects, HMRC may not be offering calls or meetings to support employers in the West Midlands to complete their compliance review. Employers will therefore need to understand their NMW compliance obligations and will need to review payroll, absence and time and attendance records to ensure they do not breach the NMW regulations. In addition to the risks outlined in HMRC’s letter, it will be important to review all aspects of compliance as the list of risks in HMRC’s letter is not exhaustive.

When carrying out your review, please be aware of sector specific risks, e.g. sleep-in arrangements for the care sector or workers typically regarded as outside of scope of NMW risk such as salaried workers for whom working time records are not typically retained.

Where you have recently had an HMRC review, it will be important to revisit the closure letter to ensure any recommendations for process improvement have been addressed as the HMRC officer is likely to pay particular attention to these.

Finally, the new Fair Work Agency will take over responsibility for enforcing the NMW in April 2026. The remit of the Agency will extend to holiday pay and sick pay so, for the first time, we will see enforcement activity in these areas once the Agency is fully operational. Whilst reviewing NMW, we recommend that you consider how you are meeting your holiday pay and sick pay obligations so that you can get ahead of future enforcement action in these areas.

Please contact Caroline Laffey, Donna Sharp, Clare Tomlinson, Josiah Greenall, or your usual KPMG contact to discuss how the new GCA initiative and Fair Work Agency could impact your business, or how our team of employment tax, employment law and payroll experts can support you.

For further information please contact:

• Caroline Laffey
• Clare Tomlinson