SMEs warned to be ‘proactive’ with wage compliance amid HMRC crackdown
Small and medium-sized enterprises (SMEs) have been warned to take “proactive” steps to ensure compliance with the National Minimum Wage (NMW) as the tax authority dials in its focus to 11 UK regions.
According to accountancy and business advisory firm Azets UK, the HMRC plans to target SMEs in 11 UK regions as part of its “crackdown” on perceived non-compliance with the NMW.
These UK regions include Belfast, Birmingham, Bradford, Cardiff, Cornwall, Cumbria, east Anglia, Glasgow, Liverpool, the north east, and Watford.
“With HMRC continually ramping up enforcement and the Government granting the Low Pay Commission further powers to align NMW rates with real living costs, now more than ever there is a greater probability of business facing scrutiny,” Kyle Newton, head of national minimum wage at Azets UK, said.
“Employers should take proactive steps to ensure compliance before a letter lands on their desk,” Newton added.
It is common for SMEs to misunderstand compliance with NMW, Newton said, due to the complications of its structure.
“Maintaining compliance with national minimum wage is commonly misunderstood, with the calculation made up of several components across five core pillars – it is not just an hourly rate of pay,” Newton said.
“As an employer, unless you understand these pillars and have policies in place to govern and control each, you are at risk of non-compliance.”
If found guilty upon health check, enterprises will be instructed to pay NMW arrears in addition to an increase in National Insurance Contributions (NICs), and risk financial penalties of up to 200 per cent if there is a refusal upon check.
Regions are targeted upon specific data that suggests a “larger volume of workers potentially being paid below the required NMW rate”, the accountancy firm said, in addition to regional worker complaints.
As the HMRC is targeting workers paid over £30,000 per annum, Azets UK said its estimate is that more than 50 per cent of the SMEs in the targeted regions “could be caught up in the enforcement activity”, even for those who are compliant.
An HMRC spokesman said:“This is part of our routine National Minimum Wage outreach activity across the UK, offering targeted support, helping businesses to identify risks and ensuring their workers are paid what they are due under minimum wage rules.
“We will always take action against employers who fail to meet their legal obligations and it’s really important that people who think they may be being underpaid report it.”