Government’s latest round of ‘name and shame’ reminds employers of the importance of National Minimum Wage compliance

Last week the Government published the names of almost 500 employers who failed to pay the national minimum wage (NMW). High profile inclusions in the most recent list included the service station business EG Group, Adecco, Go Outdoors and Centrica (formerly British Gas). The list shows the number of employees affected as well as the total underpayment found by HMRC. The underpayments must be repaid and can also be accompanied by a fine for 200% of their value.

The reputational impact of ‘naming and shaming’, and the financial impact of a finding of non-compliance, should not be underestimated. Against this backdrop, here is a ‘back to basics’ guide to NMW.

The current rates

The rates for National Minimum Wage change each year with effect from 1^st April. The rates applicable since 1^st April 2025 are:

Who is entitled to national minimum wage?

The rules relating to NMW apply (with a few specific exceptions) to workers in the UK. This includes individuals working under a contract of employment or a contract to personally provide services, as long as they’re not self-employed or offering services to their own clients.

Agency workers are entitled to the NMW, with responsibility for compliance resting on whoever pays them.

What counts (and doesn’t count) towards NMW?

The following components count towards NMW:

1. Basic Salary: The gross salary before deductions.
2. Performance Incentives: Bonuses, commission, and incentive payments based on performance count, though premiums for overtime or shift work do not.
3. Piecework: Payment per item produced.
4. Accommodation Offset: Employers can count a set accommodation value toward NMW – currently £10.66 per day – but excessive charges are not permitted.

Several elements do not count towards NMW/NLW, and including them may cause employers to mistakenly believe they are compliant:

1. Benefits in Kind: Non-cash benefits (e.g. meals, vouchers, employer pensions) don’t count, except for the accommodation offset.
2. Loans and wage advances: Any repayments on loans or wage advances by the worker are excluded.
3. Redundancy and tribunal payments: Lump sums, retirement benefits, and compensation from settlements don’t count.
4. Premiums for overtime/shift work: Only the basic rate for these hours counts; any excess is excluded.
5. Tips and Gratuities
6. Salary premiums: Additional pay for working specific hours or at certain locations doesn’t count, although the base salary does.
7. Salary sacrifice: When workers sacrifice part of their salary for benefits (e.g. childcare vouchers), this does not count toward NMW.

Certain deductions from a worker’s wage, such as mandatory uniform purchases, reduce NMW pay. Generally, deductions related to expenses that benefit the employer, operate to reduce NMW pay. Other deductions, like union subscriptions, employee pension contributions, tax, and National Insurance, do not reduce NMW pay.

How is NMW calculated?

HMRC are interested in whether a worker has received NMW in a relevant ‘pay reference period’. In auditing compliance, employers need to check if their payments meet NMW in each of these periods.

The pay reference period is typically one month but matches the frequency of a worker’s pay if shorter – such as daily for daily pay or weekly for weekly pay. Employers paying less often than monthly (e.g. quarterly) must still meet NMW requirements each month.

Most common reason for underpayments

Employers can learn a lot from the most common reasons for underpaying found by HMRC. The Education Bulletin which accompanies the latest ‘naming’ publication highlights the following as the most common reasons for underpayment:

1. Failure to pay the correct rate to apprentices. A common issue was a misunderstanding as to how the apprentice rate operates. It does not apply to all apprentices. It only applies to those aged under 19 (or those aged 19 or over in the first year of their apprenticeship). Thereafter, they revert to the worker level applicable to their age.
2. Failure to uprate pay following the annual uplift or after an employee reaches a new age threshold (for example, failing to uprate to National Living Wage when a worker hits 21).
3. Failure to pay for working time which should have been paid at national minimum wage rate. Examples include additional work carried out before and after a worker’s shift, rounding clock-in time to the nearest hour, half hour or 5 minutes, unpaid travel time, time taken to complete mandatory training and time worked during a sleep-in shift.

Key takeaways

• Naming and shaming has teeth. The financial penalties for underpayment are steep, but the reputational hit from public disclosure can be even more damaging.
• Small mistakes cause big problems. Most breaches arise from administrative errors – failing to update pay rates, misapplying the apprentice rate, or overlooking paid working time.
• NMW compliance isn’t just about pay rates. Deductions for uniforms, unpaid training, or travel time can all push workers below the legal threshold.
• Build regular audits into HR and payroll cycles. Check rates, deductions and pay reference periods each April, and whenever employees change age brackets or roles.
• Training matters. Ensure managers and payroll teams understand the rules around working time, salary sacrifice and accommodation offsets.