National Living Wage and National Minimum Wage Enforcement

As the government has recently published it’s 2023 report into the enforcement of the National Living Wage and National Minimum Wage, together with the announcement prior in the budget of the increases to come into effect from April 2025, it would be beneficial for all employers to undertake a review of matters sooner rather than later to enable you to take steps to safeguard your organisation.

I am not suggesting that employers need to panic due to the changes being announced, rather they should review matters to ensure they are prepared and ensure any potential concerns are highlighted early on.

The report sets out the measures being taken to address and prevent non-compliance with minimum wage requirements, whilst accepting that the increase to the minimum wage rates has had a significant impact upon some employers.

The key statistics from the 2023 report are as follows:

  • HMRC closed almost 3,200 cases with over 900 closed with arrears
  • £13.66 million in arrears was identified for over 108,000 workers
  • HMRC issued 750 penalties totalling £13.72 million
  • Nearly 12 million workers were reached by targeted communications campaigns
  • Targeted enforcement continued to be the primary method of identifying arrears, accounting for 74% of closed cases, up from 71% in 2021 to 2022

The statistics speak for themselves and the cost to employers who are found to be in breach of minimum wage requirements can be significant.

HMRC can be made aware of an employer’s non-compliance as follows:

  • an employee raising a complaint via ACAS of via HMRC’s complaint form; or
  • an investigation by HMRC or data received from PAYE and other sources.

If HMRC become aware of a potential breach of the minimum wage requirements they can take the following action:

  • nudge’ letters
  • telephone contact with employers and workers
  • face-to-face meetings with employers and workers

The more serious the breach, the more action HMRC are likely take against an employer.

If you receive any contact from HMRC regarding minimum wage requirements I would recommend obtaining advice at the earliest opportunity.

A copy of the full report can be obtained here: REPORT

Enforcement action is taken against employers who fail to pay their employees the National Living or Minimum Wage. HMRC is responsible for enforcing the minimum wage, and they do this by considering the following:

  • Promote
  • Prevent
  • Respond

This is based on the idea that some employers fail to comply with minimum wage requirements due to a lack of understanding or information as opposed to deliberate non-compliance. In the circumstances, this strategy is aimed at improving the information available to employers. If an employer fails to respond to compliance measures, they will then be subject to full enforcement action.

This strategy aims to ensure compliance by highlighting the consequences of failing to comply with minimum wage requirements. This is on the basis HMRC are aware some employers deliberately fail to comply with minimum wage requirements.

This is triggered where HMRC identifies non-compliance with minimum wage requirements. Employers in this instance will usually receive a notice of underpayment and be required to pay the arrears to the employee within 28 days. In addition to having to pay the arrears, which could be costly depending on the underpayment and the number of employees affected, HMRC will also pass on the employers’ details to the Department for Business and Trade, who could name the employer, through the naming scheme, causing potential reputational damage.

In very serious instances, HMRC can refer matters for criminal investigation which could lead to criminal prosecutions if there is sufficient evidence. As such, the consequences of non-compliance are extremely serious.

The current minimum wage rates are as follows:

National Living Wage – £11.44 per hour   (typical full-time salary 40 hours per week £23,795.20)

Minimum wage for 18 – 20 year old – £8.60 per hour

Minimum wage for 16 – 17 year old – £6.40 per hour

Apprentice Rate – £6.40 per hour.

The government has announced that in April 2025 the minimum wage will increase as follows:

National Living Wage – £12.21 per hour (typical full-time salary 40 hours per week £25,396.80)

Minimum wage for 18 – 20 year old – £10 per hour

Minimum wage for 16-17 year old – £8.60 (unchanged at present).

Apprentice Rate – £7.55 per hour

As set out at the beginning, the aim is for employers to consider matters now and obtain advice if required.

Our team are able to assist with a range of enquiries and HR support. If you would like to discuss matters, please contact us on 01983 897003.

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.


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