The government has pushed back on complaints from retailers that it is unfairly targeting them for technical breaches of national minimum wage (NMW) regulations.
In a letter to the British Retail Consortium (BRC), HMRC said the regulations around the issue were very clear, The Times reported.
The letter is in response to a call earlier this year from the BRC to pause “unreasonable” enforcement actions on “technical breaches” where employers have inadvertently fallen foul of the current system – which it claims is outdated and does not reflect the flexibility offered by the retail sector today.
HMRC confirmed to People Management that it had sent the letter and added it did not specifically target salary sacrifice schemes or any other form of deduction – but said it did have a legal duty to recover wage arrears on behalf of employees when it found evidence of breaches.
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HMRC has recently stepped up its enforcement regime and has successfully fined hundreds of employers, accusing many of deliberate underpayment of wages. However, many organisations have been caught out after deducting the cost of uniforms or processing tips, inadvertently taking employees below the minimum wage leading to claims the regulations are unclear or inconsistent.
Of particular contention are rules around salary sacrifice schemes, which have caught out a number of large employers. Late last year, it emerged that Iceland could face a bill of £21m in underpaid wages because it broke NMW rules through a voluntary salary sacrifice scheme designed to help employees put money aside, which may have pushed their take-home pay to below the minimum wage.
Other employers have already been hit with fines, including Debenhams which was fined £63,000 in 2017 following what it said was a “payroll miscalculation”.
HMRC told People Management: “All businesses, irrespective of size or business sector, are responsible for paying the correct minimum wage to their staff. HMRC won’t hesitate to take action to ensure that workers receive what they are legally entitled to.”
Responding to HMRC’s letter, Helen Dickinson, chief executive of the BRC, said the industry had “provided a wealth of evidence” that the current enforcement approach undermined flexibility in the workplace.
“HMRC should be focusing its time and effort on catching those who abuse the law, rather than responsible employers who are trying to do the best for their employees but are being held back by poorly thought out legislation,” she said.
“Why, for example, is it that retailers who pay workers every week can average pay over the course of a year to provide income stability for individuals, but those who pay every four weeks cannot?”
Dickinson added it was not just regulations and guidance that needed updating, but HMRC needed to change its approach to enforcement and “reset” its relationship with employers.