National Minimum Wage (NMW) Compliance Checks Are Back On HMRC’s Agenda. Are You Prepared?

By Dale O’Reggio, Technical Lead – NMW Specialist and Vicky Robertson, Principal – Tax Healthcare Specialist at BDO (www.bdo.co.uk)

Last year’s Mencap sleep-in Supreme Court case dominated media headlines with a focus on how the NMW should be applied within the care sector. Although some caution should still be applied when operating sleep-ins, this article will instead focus on other common but less well-publicised pitfalls to help you prepare for increased HMRC NMW compliance activity following the coronavirus pandemic.

With many care sector workers paid at or close to NMW rates, establishing appropriate employment policies is crucial to achieving NMW compliance.

Common care sector pitfalls
• Travel time – Whether that be from care home to care home or client to client, the essential information to keep in mind is that travel for work purposes is deemed to be working time under NMW rules.
• Paying new starters on time – There are strict rules around when NMW payments should be made following work carried out. Payment must be made within the pay period in which work was carried out or the following. Any later than this may cause an NMW breach, depending on the specific circumstances.
• Uniform – If the policy requires workers to wear certain clothing or footwear which incurs the worker costs, HMRC will consider this a cost that reduces NMW pay if not reimbursed by the employer.
• Admin fees – Any admin fees charged for deductions that are allowed under NMW rules such as court orders or DBS checks are likely to reduce NMW pay.
• Unpaid working time – We often see cases of unpaid working, such as workers arriving before or leaving after their allocated shift time or being asked to come in early or stay late for handovers, as well as the rounding down of clock in times, disputes over breaks which weren’t taken deducted from time worked and incorrectly operated time off in lieu (TOIL) policies.
• Deductions from pay – Many employers inadvertently breach NMW rules when making deductions from workers relating to things such as Christmas savings schemes, the purchasing of goods or services (including meals), uniform and recovering training costs when leaving the organisation.

Expensive mistakes

In addition to making good any underpayments, if HMRC finds an employer to have underpaid their workers, they can issue penalties of up to 200% of the underpayment. Reputational damage from being publicly named and shamed can also prove extremely detrimental.
What can you do to protect your organisation?

It is important for employers to understand what constitutes working time for NMW purposes, the relevance of travel time as a core component of this, and the need to ensure there are systems in place to properly record this. The importance of this was prominently highlighted in the recent House of Commons Health and Social Care Committee report, published on 26th July 2022, which issued a recommendation to the Government that HMRC’s enforcement team must be proactive in ensuring care workers receive NMW for all time spent working and traveling.

Assessing the impact of any pay deductions made outside of tax and National Insurance, regardless of any perceived benefit to the worker, in addition to considering any work-related charges your worker may incur is essential.

Effective communication with employees and a strong policy suite with robust controls and processes are also particularly valuable. In our experience, providing employees with an opportunity to seek clarification on areas that might concern them can help prevent potential whistleblowing to HMRC or ACAS.

The above scenarios cover the most typical cases we encounter when supporting employers in the care sector with NMW compliance, but it is not exhaustive and the risks for your business will depend on your specific employee policies and procedures.

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