National Minimum Wage whistleblowing grows 134% in a year

However, Pinsent Masons, the law firm behind Out-Law.com, has warned that employers that comply with NMW laws face having to deal with "costly enquiries" and "very substantial reputational risk" as a result of the potential for "spurious reports" to be filed through HMRC's online complaint system.

In 2017, HMRC launched the new online complaint system for reporting potential breaches of NMW laws. It helped spur a near-tenfold increase in the number of online complaints received in the year to 31st March 2018 – 4,161, up from 437 in 2016/17.

In total, HMRC received 6,027 whistleblower reports in 2017/18, up from 2,573 in 2016/17. The number of investigations opened by HMRC into employers as a result of whistleblower reports also increased 43% from 2,775 in 2016/17 to 3,975 in 2017/18, according to Pinsent Masons. In total, HMRC identified £15.6 million in pay that employers owed to more than 200,000 workers last year. 

Employers can be fined up to 200% of arrears for underpayment of the NMW and, in some cases, can face criminal prosecution. Several FTSE100 companies, a S&P500 company, a premiership rugby club and two football clubs playing in the English Championship are among the employers that have received fines.

Steven Porter, tax investigations expert at Pinsent Masons, said: "There has been a substantial rise in whistleblower reports as workers increasingly look to use new tools to take action. 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."

"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 is 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. With the National Minimum Wage having been raised again in April, employers need to be extra careful to ensure no breaches are taking place," he said.

Porter also questioned the government's policy of 'naming and shaming' employers for National Minimum Wage errors after research HMRC commissioned (70-page / 1.94MB PDF) into the separate regime for publishing details of deliberate tax defaulters found the policy is "not seen as an effective deterrent against defaulting on tax obligations".

Porter said the research calls into question whether naming employers who breach NMW rules"remains an appropriate deterrent and tool when seeking to influence employer behaviour".

"The majority of NMW errors arise innocently, without intent on the part of the employer to underpay, and this research throws into doubt the need to needlessly shame innocent employers," he said.