HMRC is cracking down on small and medium-sized businesses (SMEs) in 11 UK regions for potential non-compliance with the National Minimum Wage (NMW). Companies found guilty of underpaying will have to reimburse workers for NMW arrears, and face increased National Insurance Contributions (NICs).

Enforcement will focus on 11 specific regions: Belfast, Birmingham, Bradford, Cardiff, Cornwall, Cumbria, East Anglia, Glasgow, Liverpool, the North East, and Watford.

Businesses that refuse HMRC’s initial offer of a health check meeting risk financial penalties of up to 200% and public naming and shaming.

Many SMEs might unintentionally breach regulations due to the complexity of NMW rules and common misunderstandings about calculating NMW beyond just an hourly rate.

HMRC has allocated over £27m to address NMW non-compliance, focusing on regional enforcement. Areas were chosen based on data indicating a higher number of workers potentially earning below the required NMW and intelligence from worker complaints.

Over 50% of SMEs in the targeted regions could be affected, and are likely to face a significant administrative burden in dealing with the meeting, even if they are found to have done nothing wrong. Many businesses have already received letters from HMRC as part of a three-stage process.

How do I know if I’m targeted?

This is likely to be a three step process from HMRC’s perspective, as follows:

Step 1. A business will receive what’s known as a ‘nudge letter’ listing common areas of NMW non-compliance.

Step 2. HMRC will offer a free health check.

Step 3. Ignoring the health check letter is likely to result in HMRC opening a formal enquiry.

What should I do if I receive a letter?

The first thing to do is to send a copy to us! We can advise you from there; the one thing you mustn’t do is ignore HMRC’s letter!