Whistleblower reports of NMW underpayment soar

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Some employers are getting caught out by complex NMW rules while others are falling victim to spurious reports

The number of whistleblower reports about underpayment of the National Minimum Wage (NMW) have increased 134% in the last year, according to law firm Pinsent Masons.

HMRC received 6,027 whistleblower reports in the year to 31 March 2018, up from 2,573 in 2016/17.

Underpayment of the NMW could result in employers being fined up to 200% of arrears and, in some cases, criminal prosecution.

The dramatic increase in reports has partly been driven by the introduction of a new online complaint system in 2017, Pinsent Masons suggested, which has made it easier for workers to report employers for potential breaches of NMW laws. The number of online complaints received by HMRC increased tenfold to 4,161 in 2017/18, up from 437 in 2016/17.

The number of investigations opened by HMRC into employers as a result of whistleblower reports has also increased, rising by 43% from 2,775 in 2016/17 to 3,975 in the last year. Through its compliance work, HMRC identified £15.6 million in pay owed to more than 200,000 workers last year.

Pinsent Masons warned that some employers are getting caught out by complex NMW rules. The firm emphasised that smaller businesses with limited HR resources are particularly at risk. Common errors include deducting money from pay for uniforms, paying apprentice rates to full-time workers, and failing to properly account for overtime.

However, Steven Porter, partner at the law firm, said the ease of filing an online complaint means there is greater chance of HMRC receiving ‘red herrings’ or spurious reports. This could lead to employers who are compliant nevertheless facing costly enquiries and substantial reputational damage, he warned.

“There has been a substantial rise in whistleblower reports as workers increasingly look to use new tools to take action," Porter commented. “HMRC’s new online complaint system has made it significantly easier for workers to report employers, and workers are now increasingly doing HMRC’s policing for them. However, the ease of the new system also means employers are more likely to face ill-founded claims."

He added: “The consequences for employers of underpayment can be very serious. Clearly fines can be problematic, but the fact that the employer could be 'named and shamed' could potentially be much more damaging and could even result in a hit to revenues if customers go elsewhere as a result.

“Although it's clear that the rules are becoming more complex than first envisaged, HMRC will not see this as an excuse – having adequate resources in place to navigate the rules is essential.”

Earlier this month it was revealed that almost 240 employers underpaid workers, including care homes, car washes, pubs, and football clubs. Individual businesses included Odeon and UCI cinema group in Manchester, and Sussex and Durham Cricket clubs.

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