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HMRC internal manual

National Minimum Wage Manual

National minimum wage rates: interest rate

Relevant legislation

The legislation that applies to this page is as follows:

  • National Minimum Wage Act 1998, sections 22A(3)(c) to (4), 22C, 22E(3) to (4), 22F(4)(b) & 22F(5)
  • Judgements Act 1838, section 17
  • Employment Tribunals (Interests) Order 1990

Interest payable on repayment of penalties

When a penalty has been paid (or partly paid) and then ceases to have effect because a notice of underpayment has been withdrawn and either:

  • not replaced, or
  • replaced without the penalty,

then any amount already paid towards the penalty must be repaid to the employer with interest. The appropriate rate is set by Section 17 of the Judgments Act 1838 and is the rate in force on the date the penalty was originally paid.

Interest is calculated from the date the penalty was paid, up to and including the date of repayment. If more than one payment was originally made towards the penalty, interest should be calculated separately for each amount, from the date it was paid.

When a notice of underpayment is withdrawn and replaced, and the penalty on the replacement notice differs from the penalty on the original notice, then any amount paid in respect of the original penalty is treated as paid in respect of the new penalty. Any amount paid in excess of the new penalty is repaid with interest, calculated as above.

Arrears of NMW pay

Interest is not usually due on arrears of national minimum wage pay owed to workers, but may become due if arrears are claimed through an employment or industrial tribunal.

Arrears enforced via employment and industrial tribunals

Interest is due on employment and industrial tribunal awards relating to national minimum wage if the amounts remain wholly or partly unpaid after 42 days. The 42 days runs from the date on which the tribunal’s judgment is recorded as having been sent to the parties and is known as the “relevant judgment day”. The date from which interest starts to accrue is the day immediately following the expiry of the 42 day period called the “calculation day”. The interest is simple interest accruing from day to day on any part of the money awarded by the tribunal but remaining unpaid. Where the sum awarded is varied upon a review of the judgment by the tribunal or upon appeal to a higher tribunal or court, the interest will accrue in the same way but on the varied award. The tribunal can also award costs.

Arrears enforced via civil courts

In the civil courts the judge’s decision is set out in a written Order, which will set out the debt (which may also include interest from the date of the enforcement notice) and may also award costs to one of the parties. If a defendant fails to pay the debt once ordered to do so by the judge, the appellant can ask the court to try and recover the money on their behalf by enforcing the judgement. However, this process will only cover the amount owed and does not include provision for any additional interest.