Paying the correct amount

Business owners who fail to pay their employees the National Minimum Wage (NMW) are coming under increased scrutiny from HM Revenue & Customs (HMRC), with a number of directors being struck off recently for not doing so.

Earlier this year, the Department for Business Energy and Industrial Strategy (BEIS) ‘named and shamed’ 361 businesses that had underpaid their employees a total of £995,683. Following the investigations, the employers were required to repay all the arrears and pay fines totally around £800,000.

Workers of school leaving age must be paid the NMW, which is £4.05 for those under 18, £5.60 for those aged 18 to 20, £7.05 for those aged 21 to 24 and £7.50 for workers aged 25 or older, although this is called the National Living Wage.

As HMRC points out on its website, it is a criminal offence for employers to not pay someone the NMW or National Living Wage or to fake payment records to make out that they have complied.

Employers who discover that they have paid a worker below the correct minimum wage must pay any arrears immediately. If they do not, HMRC officers have the right to check their payment records, which must be kept for three years, or investigate the employer if a worker complains to them.

If HMRC investigates and finds that an employer has not been paid the correct rates, they must pay the arrears immediately. They will also be fined and might be named and shamed by the Government.

As HMRC states, it will hold the individuals responsible for failing to pay the correct wage to account and, although unlikely, could prosecute them under criminal law. However, the more likely sanction is disqualification as a director for up to 15 years, which has serious implications for the individual.