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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 1 April 2016

Relevant legislation

·        National Minimum Wage Act 1998, section 19A

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

The penalty is double the total underpayment (i.e. 200%) for all workers shown on the notice of underpayment but only for pay reference periods which start on or after 1 April 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 relate only to pay reference periods starting on or after 26 May 2015 all workers can be included in a single notice.

Minimum penalty for pay reference periods starting on or after 1 April 2016

The minimum penalty per notice is £100.

Therefore, if the total underpayment for all the workers named on the notice is £50 or less the penalty is always £100.

Penalties will be due where the employer has paid the original underpayment for a pay reference period but has not taken into account a subsequent increase in national minimum wage rates.

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 starting on or after 1 April 2016

The maximum penalty per worker is £20,000.

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 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