We have seen HMRC focus its attention on a range of sectors to enforce compliance with national minimum wage (NMW) regulations.
The recruitment sector has also come under the spotlight, with the recent case of Staffline, the recruitment and training group, who had a historical breach of NMW. The negative publicity caused the company’s share value to plummet. Amongst other reasons, the company cited the complexity of assessing historic data and transactions, which is endemic to the recruitment industry.
Complying with NMW is fraught with pitfalls and is about much more than just understanding the headline rates. There are a number of factors which affect whether you are paying NMW and it is easy for genuine errors to be made.
What are the common issues for recruitment businesses with NMW compliance?
- not capturing all working time (for example, to change into protective clothing or undergo security checks);
- inaccurate and incomplete record keeping (for example, working time and rest breaks)(is this correct, please amend as appropriate);
- complex transactions;
- payroll systems not accounting for age and NMW rate changes; and
- not accounting for worker expenditure (for example the cost of uniforms or equipment required to do the work).
What are the sanctions?
If HMRC starts an investigation and finds an employer is not paying NMW, automatic financial penalties are imposed and the employer will be named and shamed if the underpayment exceeds £100. Genuine error is not an excuse for non-compliance. The sanctions can include:
- repaying underpayments going back six years (five in Scotland);
- paying a financial penalty of up to 200 per cent of underpayment (max £20,000 per worker);
- facing reputational damage through public name and shaming; and
- facing criminal prosecution.
How can RSM help?
Complying with NMW requires specialist knowledge, knowing how to spot mistakes and what HMRC look for during an inspection. RSM’s team of employment lawyers and employment tax specialists have regular dealings with HMRC and can conduct a NMW audit to identify and help you correct any issues, saving your business from financial penalties and reputational damage.
Our audit services might include:
- auditing your payroll;
- reviewing your working practices;
- checking your record keeping procedures are legally compliant;
- providing a report setting out the issues and a recommended course of action; and
- guiding you through a process of correcting mistakes.
If you are subject to a NMW inspection by HMRC, we can support you through the process to mitigate settlements, reduce penalties and limit reputational damage.