Enforcing the minimum wage
The minimum wage can be enforced by HM Revenue and Customs (HMRC) compliance officers or by a worker making a claim in an employment tribunal or court.
You must pay people who do work for you at least the minimum wage if they are a ‘worker’ for minimum wage purposes and a specific exemption does not apply to them (see Determining the status of a worker). If you discover that you have paid workers below the minimum wage, you must pay them any arrears, as explained under Calculating minimum wage arrears.
The minimum wage can be enforced by HM Revenue and Customs (HMRC) compliance officers or by a worker making a claim in an employment tribunal or court.
A worker can also take their direct action independently of HMRC for example to an employment tribunal. If they choose to do this, HMRC will no longer be able to investigate or take any further action on their behalf.
Acas provides free, impartial and confidential advice to employers, workers, employees and their representatives via the Pay and Work Rights helpline. You can ask Acas about the National Minimum Wage by calling 0300 123 1100 Monday to Friday 08am to 6pm. If your query is complex, Acas will transfer you to the National Minimum Wage team at HMRC.
If a worker suspects that they have been paid less than the minimum wage rate that they are entitled to, they can make a complaint by calling the Acas helpline. Alternatively, complaints can also be made online direct to HMRC using the online form (see Complain about pay and work rights) or to Acas (see Helpline Online). Third party complaints can also be made by someone else on behalf of a worker (‘third party information’).
HM Revenue and Customs (HMRC) enforces the minimum wage on behalf of BEIS. HMRC compliance officers may carry out inspections of employers. There is no requirement to provide reasons for an inspection.
Investigations can be opened as a result of a worker complaint (made to either Acas, or directly to HMRC), or as a result of targeted investigations initiated by HMRC (using risk modelling and third party information).
Officers must show an identity document on request. They have various powers to obtain information. They can, for example:
- require you or people working for you to produce and explain records about minimum wage pay (see Minimum wage record keeping)
- require you or people working for you to supply further explanations as necessary to determine whether the legislation has been complied with
- enter, at any reasonable time, your premises in order to interview you or inspect records
- require you to attend for interview, with reasonable written notice, at a place of the officer’s choosing
- remove minimum wage records from your premises for copying - HMRC must return the records to you within a reasonable period
It is a criminal offence to obstruct a compliance officer or refuse or wilfully neglect to give information or produce documents to a compliance officer.
Notice of underpayment
If a compliance officer believes that you have failed to pay at least the minimum wage to a worker, the officer may issue a notice of underpayment (NoU). This may require you to:
- pay arrears of the minimum wage to each worker named on the notice
- pay a penalty
The financial penalty that you are liable to pay can be up to 200% of the value of the minimum wage arrears, up to a maximum penalty £20,000 per worker. The penalty will be reduced by 50% if you fully comply with all the terms of the notice of underpayment within 14 days of service of the notice.
You may appeal against the notice of underpayment within 28 days of service of the notice. An appeal must be made to the employment tribunal (or industrial tribunal in Northern Ireland).
If you do not comply with the notice of underpayment, HMRC can:
- take a case to a tribunal or County Court (or the Sheriff Court in Scotland) on behalf of the worker
- seek a criminal prosecution
Further details about the Notice of Underpayment and penalties can be found in section 3 of the Policy on enforcement of the national minimum and national living wage.
There are 6 criminal offences relating to the minimum wage:
- refusing or wilfully neglecting to pay the minimum wage
- failing to keep or preserve minimum wage records
- causing or allowing a materially false entry to be made in minimum wage records
- producing or furnishing records or information which are known to be materially false
- intentionally delaying or obstructing a compliance officer
- refusing or neglecting to answer questions, give information or produce documents to a compliance officer
Employers who deliberately fail to pay the minimum wage may face a potentially unlimited fine.
HMRC is able to use the search and seize powers in the Police and Criminal Evidence Act 1984 when investigating criminal offences under the National Minimum Wage Act 1998.
Labour market enforcement (LME) undertakings and orders were introduced in 2016. They are sanctions that can be used where an employer commits either;
- an offence under the Gangmasters (Licensing) Act 2004
- an offence under the National Minimum Wage Act 1998
- an offence under the Employment Agencies Act 1973 (except section 9(4)(b))
LME undertakings or orders are intended for more serious or persistent offenders. They may include prohibitions, restrictions or imposed requirements on a business to prevent or reduce the risk of non-compliance.
An undertaking will comprise an agreement setting out what an employer needs to do, by when and how, for example, a request to retain accurate records to show that the minimum wage is being paid. An LME undertaking will be effective for the period of time specified in the undertaking, which cannot be more than 2 years. An undertaking may also be released early once the employer has complied with its terms.
If the employer fails to comply with the terms of the undertaking by the agreed date, or refuses to give an undertaking, HMRC will apply to the courts for an LME order. Any breach of an LME order could ultimately result in a 2-year custodial penalty and/or an unlimited fine.
A worker can bring a claim to an employment tribunal (or an industrial tribunal in Northern Ireland) to recover any money which they believe they are owed as a result of not receiving the minimum wage. Alternatively, a worker can go to a civil court to recover the money due to them.
In civil cases, the burden is on the employer to prove that they have paid the minimum wage to the worker, rather than for the worker to prove that they have not received the minimum wage.
A worker may also bring a claim to an employment tribunal (or industrial tribunal in Northern Ireland) if their employer dismisses them or takes some other detrimental action against them for either:
- trying to ensure that they are paid the minimum wage
- becoming eligible for the national minimum wage or a higher minimum wage rate
If the employer finds out the identity of a worker making a complaint about the minimum wage - for example through another worker - and dismisses the complainant worker, this would be unfair dismissal if the worker can show the reason for their dismissal was the fact that they had complained.
If you failed to pay the minimum wage to a worker, you must pay them the arrears they are entitled to. Arrears are calculated according to a formula using the current minimum wage rate. See Current minimum wage rates for more information.
The ‘current minimum wage rate’ is the current rate for the age band that applied to the worker at the time of the original underpayment. This means that, if the current rates for that age band are higher than the rates that applied at the time of the underpayment, the amount of the arrears due to the worker will be more than the amount of the original underpayment. If current rates are lower than the rates that applied at the time of the underpayment, the worker will be entitled to the amount they were actually underpaid.
For example, a worker who was eligible for the 16 to 17-year-old rate at the time of the underpayment will now be entitled to be repaid arrears using the current 16 to 17-year-old rate if that rate is higher than the arrears calculated using the 16 to 17-year-old rate at the time of the underpayment - even if they are now aged 19. But if the current 16 to 17-year-old rate results in a lower figure the worker is entitled to the actual arrears.
If you need to calculate and pay arrears, you should:
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Work out the amount of the original underpayment in the pay reference period by deducting what the worker has been paid from what they should have been paid.
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Divide the underpayment by the relevant minimum wage rate which applied at the time of the underpayment.
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Multiply this figure by the current minimum wage rate.
If the minimum wage rate increases between the date the arrears are calculated and the date that a worker is repaid those arrears, the worker will be entitled to further arrears based on the higher rates that are in force after the rate increase.
Example calculation
(example uses 2023/2024 rates)
A 45-year-old worker was paid £250 for 35 hours worked in the pay reference period 1 December 2022 to 8 December 2022. The arrears are calculated in April 2023.
The minimum wage rates for the relevant periods are:
- £9.50 for the pay reference period 1 December 2022 to 8 December 2022
- £10.42 for April 2023
1. Work out the minimum amount the worker should have been paid in the pay reference period and identify the size of the underpayment.
- Multiply the correct rate during the period of the underpayment by the hours worked: £9.50 x 35 = £332.50.
- Deduct the amount the worker was paid: £332.50 - £250 = £82.50 underpayment.
2. Divide the underpayment by the minimum wage rate which applied at the time of the underpayment and multiply it by the current rate.
£82.5 ÷ £9.50 x £10.42 = £90.49
The worker is entitled to £90.49 in arrears.
On 1 April 2021, the age bands for the minimum wage rates changed, with workers aged 23 and over entitled to the National Living Wage. Where arrears are being calculated for a pay reference period starting on or after 1 April 2021 for someone who was aged 23 or over at the time, the current minimum wage rate which should be used is the National Living Wage rate for workers aged 23 and over. Where arrears are being calculated for earlier pay reference periods, the minimum wage rate to be used for those aged 23 and 24 years is the National Minimum Wage rate.
If, as a result of a self-review, you have identified and paid arrears for underpayment of minimum wage, then there is an option to inform HMRC and get their assistance in confirming that you have identified arrears correctly.
To request a copy of the form to be used for making a voluntary declaration email [email protected]. Other than in exceptional cases, there is no public naming or financial penalties associated with any paid arrears that are declared to and accepted by HMRC using the voluntary declaration process.
See Help and support for employing people for support from HMRC for employers, including webinars and guidance on ensuring correct payment of the National Minimum and National Living Wage.
You are legally required to keep sufficient records to show you are meeting minimum wage requirements.
The records you keep must be sufficient to show for each worker that minimum wage is being paid for every pay reference period they work. These records can come in a number of forms, many of which are covered in this section. Some specific requirements are set out below, but the key is that you can prove you have paid each worker at least the minimum wage for all time worked.
Your records will be used in the event of a dispute - it is your responsibility to prove you are meeting minimum wage requirements. It is a criminal offence to fail to keep sufficient records.
HMRC’s rights of access to minimum wage records
HMRC minimum wage compliance officers can ask to see your records to check whether you are paying the minimum wage. HMRC can also remove minimum wage records from your premises in order to copy them, but must return them within a reasonable period. When required, you must explain your minimum wage records to compliance officers, answer questions about them and provide any further information necessary to determine if the minimum wage has been paid. HMRC officers have the power to enter any premises used to carry out an employer’s business, or which the employer uses in connection with his business, including the premises of businesses which place and employ agency workers.
Three of the 6 minimum wage criminal offences relate to record-keeping and you may be subject to criminal prosecution for:
- failing to keep or preserve minimum wage records
- causing or allowing a materially false entry to be made in minimum wage records
- producing or furnishing records or information which are known to be materially false
You will also be vulnerable in any civil dispute about whether the minimum wage has been paid, since the burden of proving this rests on you.
Workers’ access to minimum wage records
If a worker has reasonable grounds to believe that they may not have been paid the minimum wage, they have the right to see your records relating to them.
To do so, they must make a written request to you. You must produce the records within 14 days of receiving the request, or within a time period you agree with the worker.
A worker may inspect and examine the records and copy any part of them, and when doing so may be accompanied by someone else. If they wish to be accompanied they must have told you in their written request.
The records must be produced at the place of work, or at a place the worker can reasonably attend or is mutually agreed.
If you refuse to let the worker see the records or fail to produce the records the worker can take a complaint to an employment tribunal. If the employment tribunal upholds the complaint they will award the worker 80 times the hourly rate of the minimum wage.
Keeping and storing minimum wage records
Minimum wage records do not have to be kept in any particular form. They can be kept on paper or on computer, for example. But you must be able to produce the records for an individual pay reference period for an individual worker in a single document on request.
You also have legal duties under the Data Protection Act 2018 around how you keep staff records and what you do with them.
From 1 April 2021, employers are required to keep records for a minimum of 6 years after the end of the pay reference period following the one that the records cover. This applies to all records created after 1 April 2021 and also to all records which an employer was still required to keep immediately prior to 1 April 2021 under the previous requirement that records be kept for a minimum of 3 years.
For example, if a person is paid each calendar month:
- their records for the month of May 2017 would be covered by the old rules – these would therefore have needed to be kept until the end of June 2020
- their records for the month of May 2020 would be covered by the new rules – these will therefore need to be kept until the end of June 2026
- their records for the month of May 2021 will also be covered by the new rules – these will therefore need to be kept until the end of June 2027
It is a criminal offence not to keep records for the required period.
You should be aware that a civil case can be brought before a court for up to 6 years. In such a case, it would still be for you to prove that you had paid the minimum wage. You may therefore wish to consider retaining your records for 6 years also for those earlier periods, even though the requirement under National Minimum Wage legislation to retain records for 6 years took effect from 1 April 2021.
Minimum wage records you should keep
By law, you are required to keep sufficient records to show that you are paying your workers at least the minimum wage for each pay reference period and to be able to produce this in a single document. There is no definition of what counts as ‘sufficient’ records. The situation will vary from employer to employer and from worker to worker. It is left to your own judgment for each worker. It is for you to judge when, for any particular worker, you should keep more detailed or specific records to show you are paying at least the minimum wage. We do recommend though that records are kept in a consistent way, with a clear breakdown on working time and associated pay rates across a pay reference period, to make records accessible to workers.
It may also be appropriate for employers to provide their workers with a clear breakdown of all their working time and associated pay rates across a pay reference period.
If a worker brings a claim for unpaid minimum wage to a tribunal or court, the burden will be on you to prove that the minimum wage has been paid. You will need to have records to enable you to provide this proof. Clear and verifiable records will facilitate this process.
In the case of workers transferring under TUPE (Transfer of Undertakings (Protection of Employment) Regulations), the duties and liabilities in connection with contracts of employment transfer to the new employer. This includes the duty to maintain and preserve records. ‘New’ employers are therefore advised to ensure that all records, including workers’ minimum wage records, are transferred to them as part of any transfer arrangement.
Records of working arrangements
It is good practice to keep records covering not only workers’ hours and pay, but also their working arrangements.
Records relating to the working arrangement will generally reference any documented agreement between the employer and worker detailing specific working hours, pay and conditions, and any additional payments or allowances.
The most common example is a contract of employment.
If the worker is an apprentice, a contract of apprenticeship is usually signed as part of the arrangement between parties. This is important as it sets out the period of apprenticeship, the skills or trade being learned and any training plans.
Additionally, you could retain records of official job offers.
If your workers are undertaking any trials or training, you could retain any agreements covering such periods.
It is good practice in all cases to have documentation signed by all the parties involved.
Records covering time worked
Central to being able to both calculate hourly rates of pay for your workers and demonstrate that the minimum wage has been paid is the accurate recording of time worked.
You have to be able to show how many hours have been worked in each pay period.
This isn’t simply a case of recording the weekly or monthly hours in a worker’s contract or the total amount on their payslip. It’s important to be able to show the actual hours worked.
The records you are advised to keep include records which show:
- total pay paid to workers
- the hours they have actually worked, where appropriate with a breakdown of each category working time, such as contact time, time travelling between appointments, and time waiting for appointments
- overtime, shifts or other circumstances when there are increased rates of pay
- details of any allowances paid to the workers
- any deduction or payment for living accommodation provided by the employer to the workers
- amounts representing tips, service charges, gratuities or cover charges paid to the worker
- any absences - for example - rest breaks, sick leave, holidays
- any travel or training undertaken by the workers during work hours
- bank statements or other commercial documentation
- contracts and agreements between you and your workers
- workers’ dates of birth
- payments and deductions for expenditure incurred by the worker in connection with the employment
- payments for travelling to a temporary workplace (and any associated subsistence and accommodation) which are allowed as deductions from earnings under section 338 of the Income Tax (Earnings and Pensions) Act 2003
- reasons why a worker is exempt from the minimum wage if applicable
The above is not intended to be a definitive or comprehensive list. The details of records to be kept may differ from case to case and also according to the type of work being done.
If you have a ‘daily average’ agreement with a worker, you must also keep a copy of that agreement (for more information, see Unmeasured work).
Any deduction from a worker’s pay should be clearly displayed on the worker’s payslip. For more information see payslips.
If you make a deduction in respect of something like a loan or advance of wages – or in respect of a disciplinary matter – these should be evidenced with a written agreement, or as part of the worker’s written contract.
If you are employing rated-output workers and paying fair piece rates, you must keep a copy of the written notices served on your workers and a copy of the data showing how you arrived at the ‘mean hourly output rate’ for all relevant pieces/tasks (see Output work).
If you are unsure if you are keeping sufficient records, you may wish to contact the Acas helpline on Tel 0300 123 1100.
Workers’ access to minimum wage records
If a worker has reasonable grounds to believe that they have not been paid the minimum wage, they have the right to see your records relating to them.
To do so, they must make a written request to you. You must produce the records within 14 days of receiving the request - or within a time period you agree with the worker.
A worker may inspect and examine the records and copy any part of them, and when doing so may be accompanied by someone else. If they wish to be accompanied they must have told you in their written request.
The records must be produced at the place of work, or at a place the worker can reasonably attend or is mutually agreed.
If you refuse to let the worker see the records or fail to produce the records the worker can take a complaint to an employment tribunal. If the employment tribunal upholds the complaint they will award the worker 80 times the hourly rate of the minimum wage.