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HMRC internal manual

National Minimum Wage Manual

Issuing notices of underpayment: calculating the penalty on a notice for pay reference periods starting on or after 7 March 2014 to 25 May 2015

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 starting on or after 7 March 2014 to 25 May 2015

The penalty is the total underpayment (i.e. 100%) for all workers shown on the notice of underpayment but only for pay reference periods which start on or after 7 March 2014 to 25 May 2015. 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 respective underpayment or arrears to workers after the start of the investigation.

 

Employers who are found to have made underpayments of more than £20,000 to an individual worker or group of workers after 7 March 2014 will face paying up to the maximum £20,000 for each worker or group of workers. This means that if the total underpayment, is equal to or more than £20,000 then,

  • the employer will be issued with individual notices for each worker with an underpayment that is equal to or more than £20,000, and

  • those workers with underpayments of less than £20,000 will be grouped together into groups of no more than £20,000. This will result in the maximum penalty being be imposed whilst issuing the fewest notices.

 

The policy intention is to impose larger penalties on those employers with the highest levels of underpayment.

Minimum penalty for pay reference periods starting on or after 7 March 2014 to 25 May 2015

The minimum penalty per notice is £100.

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

The penalty will always be based on the underpayment shown on the notice. The underpayment is uplifted to identify the arrears due to the worker.

Where the underpayment is nil, the minimum penalty will apply (see NMWM13160 for more information)

Maximum penalty for pay reference periods starting on or after 7 March 2014 to 25 May 2015

The maximum penalty per notice is £20,000, (multiple notices can be issued)

Therefore, if the total underpayment for all the workers named on the notice is £20,000 or more, the penalty is always £20,000.

 

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