Ensuring employers comply with National Minimum Wage regulations
Since the government began enforcing the National Minimum Wage in April 1999, HM Revenue & Customs has identified £68 million in arrears for over 313,000 workers, according to today’s report from the National Audit Office. The number of workers identified as being owed arrears in 2015-16 was 58,000 compared to 26,000 in 2014-15.
HMRC has significantly reduced the average time taken to investigate complaints about employers’ non-compliance with the National Minimum Wage, but some complainants (469 or 17% of the caseload) still have to wait over 240 days to get their cases resolved. The NAO’s analysis of HMRC’s caseload (as at December 2015), shows that 72% of open cases are less than 120 days old compared to 42% in December 2013. The time taken to investigate complaints varies considerably and depends on a number of factors such as the complexity of cases and the co-operation of the employer.
Today’s report finds that non-compliance with the National Minimum Wage in the social care sector remains a concern. The Low Pay Commission continues to assess this sector as high risk and has previously reported that up to 10.6% of care workers may not be paid the National Minimum Wage. The Department for Business, Innovation and Skills (BIS) re-classified the social care sector as a high priority sector for 2015-16.
There is no accurate overall measure of non-compliance with the National Minimum Wage regulations and, as a result, it has been difficult to assess the effectiveness of HMRC enforcement activities over time. The government has increased the resources available for compliance and enforcement with the National Minimum Wage.
The NAO finds that the number of referrals passed to HMRC from the helpline has reduced significantly in the year ending December 2015 from 2,327 in 2015 to 1,340 in 2015. In April 2015, BIS changed the operator of the helpline and is now assessing how this change, and other factors, have affected the number of calls.
Both BIS and HMRC have strengthened the sanctions which they are able to apply to non-compliant employers. Since October 2014, BIS has regularly named and shamed non-compliant employers. Between October 2013 and February 2016, it has published the details of 490 employers who failed to pay their workers the National Minimum Wage. Between 2009-10 and 2015-16, HMRC has imposed penalties of nearly £5.6 million on non-compliant employers, and has prosecuted nine employers who fit the criteria set by BIS.
“With the implementation of the National Living Wage, it is even more important that the government ensures its compliance programme reflects the changing risks within the labour market, and maintains its progress in ensuring all employers pay the minimum wage. The government also needs to reduce the time it takes to investigate complaints and resolve cases.”
Amyas Morse, head of the National Audit Office
Notes for Editors
Estimated number of jobs which pay less than the National Minimum Wage held by employees aged 16 and over in April 2015
[Source: Office for National Statistics, Statistical bulletin: Low Pay: April 2015, 18 Nov 2015]
2016-17 budget for HMRC compliance and enforcement activities
The amount HMRC has identified in underpayments of the minimum wage, covering some 313,000 workers, since enforcement began in April 1999
Cases closed by HMRC between 1 April 2015 and 31 March 2016 taking longer than 240 days (17% of caseload)
Proportion of cases arising from worker complaints closed within 179 days between 1 April 2015 and 31 March 2016
Million in penalties levied on employers between 2009-10 and 2015-16
Employers named and shamed so far
Full-time equivalent HMRC staff working on compliance and enforcement as of March 2016
One available estimate of the proportion of workers in the care sector being underpaid the National Minimum Wage
Current HMRC investigations into complaints of non-compliance with the National Minimum Wage in the social care sector as of March 2016
- The Government's National Living Wage was introduced on 1 April 2016 for all working people aged 25 and over, and is set at £7.20 per hour. The adult National Minimum Wage is currently £6.70 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply. It is intended to protect as many low-paid workers as possible without reducing jobs or damaging the economy. The Department for Business, Innovation & Skills (BIS) is responsible for policy and strategy and HM Revenue & Customs (HMRC) carries out compliance and enforcement activity on BIS's behalf. Investigations arise from two key sources: direct contact from people making a complaint; or targeted enforcement campaigns launched by the government based on its own risk assessment.
- Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
- The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 810 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.15 billion in 2014.