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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 26 May 2015 to 31 March 2016

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 26 May 2015 to 31 March 2016

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 26 May 2015 to 31 March 2016. 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.
 

Where the underpayments only relate to pay reference periods starting on or after 26 May 2015 all workers can be included in a single notice subject to the minimum and maximum limits shown below

Underpayments and/or arrears for pay reference periods after 1 April 2016

Where an investigation identifies an underpayment for pay reference period starting on or after 1 April 2016 further consideration is required, see NMWM13226.

Minimum penalty for pay reference periods starting on or after 26 May 2015 to 31st March 2016

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 26 May 2015 to 31 March 2016

The maximum penalty per worker is £20,000. Note that this differs for notices which relate to pay reference periods starting on or after 7 March 2014 to 25 May 2015 which are capped on a per notice basis.

No employer should receive a penalty of more than £20,000 for an individual worker.

 

Issuing multiple notices

A notice of underpayment with pay reference periods starting before 26th May 2015 cannot contain penalties 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