Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

National Minimum Wage Manual

Issuing notices of underpayment: calculating the penalty on a notice for pay reference periods 6 April 2009 to 6 March 2014

Relevant legislation

The legislation that applies to this page is as follows:

  • National Minimum Wage Act 1998, section 19A

Underpayments and/or arrears for pay reference periods from 6 April 2009 to 6 March 2014

The penalty is half the total underpayment (i.e. 50%) for all workers shown on the notice of underpayment, but only for pay reference periods which start during the period 6 April 2009 to 6 March 2014. The penalty is subject to the minimum and maximum limits shown below.

The penalty should be imposed even if the employer pays some or all of the underpayments or arrears to workers after the start of the investigation.

Minimum penalty for pay reference periods from 6 April 2009 to 6 March 2014

The minimum penalty per employer is £100.

Therefore, if the total underpayment for all the workers named on the notice is £200 or less the penalty is always £100.

The penalty will always be based on the underpayment shown on the notice. Where the underpayment is nil, the minimum penalty will apply. (see NMWM13160 for more information)

Maximum penalty for pay reference periods from 6 April 2009 to 6 March 2014

The maximum penalty is £5,000.

Therefore, if the total underpayment for all the workers named on the notice is £10,000 or more, the penalty is always £5,000.

In some circumstances when the maximum penalty will be due, the NMW Officer can decide to limit the number of workers named on the notice of underpayment (NMWM13110).

 

Issuing multiple notices

A Notice of Underpayment with pay reference periods starting before 26 May 2015 cannot contain penalties calculated using different percentage rates

This means that where an investigation identifies underpayments in respect of pay reference periods which span 7 March 2014, more than one notice will need to be issued to cover periods before and after 7 March 2014. (see links below)

 

There may be occasions where it will be necessary to issue more than one notice of underpayment to the employer, for pay reference periods:

Starting on or after 6 April 2009 to 6 March 2014 see NMWM13220

Starting on or after 7 March 2014 to 25 May 2015 see NMWM13222

Starting on or after 26 May 2015 to 31 March 2016 see NMWM13224

Starting on or after 1 April 2016 see NMWM13226