National Minimum Wage (NMW): HMRC to contact London employers

Typically, GCA projects involve employers receiving a ‘nudge’ letter which asks them to review their NMW compliance against a checklist of common risk areas, such as:

• Deductions from pay for items or expenses connected with the job;
• Paying workers for all the time they work, which includes travel and training (including training that might be undertaken at home);
• Correctly uprating employees when they qualify for higher age-related rates; and
• Deductions or payments for accommodation.

In some areas HMRC have written to workers in the area raising awareness of the GCA and typical NMW risks.

Following the nudge letter, HMRC usually offer an ‘employer support’ call or meeting to provide help to employers as they conduct their compliance review.

HMRC expect any errors identified to be corrected by making payments to the affected employees. As noted above, GCA projects are initially outside HMRC’s usual enforcement proceedings, so errors should therefore not be subject to the usual penalty and naming regime. However, failure to engage with the project could result in a full HMRC investigation.

Employers should also be aware that HMRC’s communication to workers in the area is likely to generate an increase in worker complaints to HMRC regarding NMW failures which will mean HMRC will open a review. When a review is opened, penalties (up to 200 percent) will be applied to any underpayments and the employer is likely to be ‘named’.

We encourage employers that receive a nudge letter to take action and review their records to ensure they can demonstrate to HMRC that their NMW compliance systems and processes are robust and effective.

As a starting point, the systems and processes to manage the key compliance risks listed in HMRC’s letter should be reviewed. However, it’s important to bear in mind that the list is not exhaustive. It’s therefore important to carry out a broader review, focusing on any areas that present particular compliance risks for your industry (e.g. sleep-in arrangements for the care sector, working time of salaried workers etc).

If HMRC carried out a formal NMW review in recent years, it will also be important to be able to demonstrate that any recommendations arising from the review were implemented and have been tested.

Please contact the authors or your usual KPMG contact to discuss how the new GCA initiative could impact your business, or how our team of employment tax, employment law, and payroll experts can support you with all aspects of NMW risk assessments, compliance and remediation.

For further information please contact:

• Josiah Greenall
• Gareth Dennett