Minimum Wage: Why Employers Who Pay Above the Rate Still Get Caught
In March 2026, the government named 389 employers for failing to pay the National Minimum Wage. Between them, they had underpaid around 60,000 workers by more than £7.3 million, and faced approximately £12.6 million in penalties on top of repaying the arrears.
The list ranged from major household names to smaller employers across care, childcare, hospitality, retail and other sectors.
Many minimum wage breaches arise even where the headline hourly rate is correct. Government enforcement guidance repeatedly identifies deductions, unpaid working time and incorrect treatment of apprentices as common causes of underpayment.
This article covers where those errors actually come from.
The rates
From 1 April 2026:
| Category | Rate per hour |
|---|---|
| National Living Wage — 21 and over | £12.71 |
| 18 to 20 | £10.85 |
| Under 18 | £8.00 |
| Apprentice | £8.00 |
The accommodation offset — the maximum an employer can count towards minimum wage pay for accommodation provided — is £11.10 per day, with a weekly maximum of £77.70.
Rates change on 1 April, not 6 April. They do not align with the tax year, and that catches people out every year.
They apply from the pay reference period, not the pay date
This is the technical point that produces the most avoidable errors, and it runs through everything else in this article.
The new rates apply from the first pay reference period beginning on or after 1 April, not from the first pay date after 1 April.
For a monthly payroll running from the 1st, that distinction does not matter. For a payroll running from, say, the 20th of each month, it matters a great deal: the period beginning 20 March runs into April at the old rate, and the new rate applies from the period beginning 20 April.
Get this backwards in either direction and you have either underpaid or overpaid an entire workforce for a month.
The seven ways employers get caught
1. Deductions that pull pay below the floor
This is the largest single cause, and the one employers find hardest to accept.
The headline hourly rate can be perfectly compliant, and the employer can still be in breach, because deductions from pay reduce what counts as minimum wage pay.
Common examples:
- Uniforms. If an employee has to buy a uniform, or has the cost deducted, that reduces their minimum wage pay
- Tools and equipment required for the job
- Dress code requirements. If a contract requires specific clothing — black trousers, safe footwear — and the employee buys it themselves, that can count as a reduction, even where the employer never handled the money
- Training costs deducted from pay
- Salary sacrifice arrangements, including pension salary sacrifice, that take pay below the floor
Note the distinction on pensions. A contractual salary sacrifice arrangement reduces minimum wage pay, because the worker has given up that part of their cash entitlement. An ordinary employee pension deduction does not necessarily have the same effect.
An employee paid at or just above the National Living Wage has almost no buffer. A £30 uniform deduction from a monthly wage can be enough to create a breach.
Enforcement records include employers whose only failure was a dress code policy they did not think of as a deduction.
2. Unpaid working time
Time an employee is required to be at work, and under the employer's control, generally counts as working time — whether or not it is on the rota.
Situations that regularly cause problems:
- Security checks on entry or exit
- Time spent changing into required clothing on the premises, where the circumstances mean the employee is required to do so as part of the job
- Handover time between shifts
- Setting up before opening or clearing down after closing
- Mandatory training outside normal hours
- Travel between assignments during the working day
Five minutes a day, across a workforce, across six years, produces a large number.
3. Age band changes applied on the wrong date
When a worker turns 18 or 21, they become entitled to a higher minimum wage rate.
But the higher rate does not necessarily start on the birthday itself.
The new rate applies from the first pay reference period beginning on or after the worker's birthday.
For example, an employee who turns 21 on 10 May, but whose monthly pay reference period begins on the first of each month, would move to the 21-and-over rate from 1 June.
This is easy to miss because payroll systems often hold the date of birth but do not automatically connect it to the start of the next pay reference period.
Flag upcoming 18th and 21st birthdays, but make sure the effective date follows the pay reference period rule.
4. Apprentice rate applied when it should not be
The apprentice rate applies to:
- apprentices aged under 19; and
- apprentices aged 19 or over who are still in the first year of their apprenticeship.
Once an apprentice aged 19 or over completes the first year of the apprenticeship, they become entitled to the ordinary minimum wage rate for their age.
Again, the change is applied from the first pay reference period beginning on or after the relevant date, rather than simply changing the rate part-way through an existing pay reference period.
An apprentice aged 19 or 20 may therefore move to £10.85, while an apprentice aged 21 or over may move to £12.71.
The rate depends on the worker's age, apprenticeship status and the relevant pay reference period — not simply on the job being labelled an apprenticeship.
5. The rate uplift not applied to every payroll
If you run more than one payroll, or use different systems for different groups of staff, the April uplift has to reach all of them.
A single missed payroll can mean months of underpayment before anyone identifies it — and the look-back period means those months stay on the record.
6. Salaried workers with variable hours
A salaried employee whose hours vary can fall below the minimum wage in a particular pay reference period even though their annual salary looks comfortable.
This is most likely where hours increase seasonally, or where unpaid overtime becomes routine. The calculation is per pay reference period, not annual.
7. Accommodation offset miscalculated
Where an employer provides accommodation, only a limited amount can count towards minimum wage pay — £11.10 a day from April 2026, with a weekly maximum of £77.70.
Charging more than the offset, or applying it incorrectly, reduces minimum wage pay by the excess.
What it costs to get wrong
Minimum wage penalties are calculated by reference to the underpayment, not simply by asking whether the employer intended to underpay.
A Notice of Underpayment can require:
- repayment of the arrears to affected workers; and
- a financial penalty of up to 200% of the arrears, subject to a maximum of £20,000 per worker.
If the employer fully complies with the Notice of Underpayment within 14 days, the financial penalty can be reduced by 50%.
The enforcement look-back can extend for up to six years.
That combination matters.
A five-minute daily working-time error may look insignificant for one employee in one week. Applied systematically across a workforce and allowed to continue for several years, it can become a substantial liability.
Employers may also be publicly named.
The government's March 2026 naming round included 389 employers, around 60,000 workers, more than £7.3 million of arrears and approximately £12.6 million of penalties.
It should not be read as a list of employers currently underpaying workers. Naming frequently takes place well after the original underpayment has been investigated and corrected.
Its real value for employers is showing the types of payroll and working-time failures that enforcement activity uncovers.
The Fair Work Agency
The Fair Work Agency launched on 7 April 2026.
National Minimum Wage enforcement is already within the Fair Work Agency's statutory remit.
There is, however, an important transitional arrangement.
HMRC currently continues to carry out National Minimum Wage enforcement on behalf of the Fair Work Agency. The full transfer of the National Minimum Wage enforcement function and the relevant HMRC staff into the Fair Work Agency is planned for April 2027.
So an employer facing a National Minimum Wage investigation in 2026 may still deal directly with HMRC officers, even though the statutory enforcement responsibility now sits within the Fair Work Agency framework.
This is different from some of the additional employment rights that the Fair Work Agency is due to take on later. Statutory holiday pay enforcement is planned from 2027, while Statutory Sick Pay enforcement will transfer at a later stage.
For employers, the practical message is unchanged: minimum wage enforcement is active now, and the creation of the Fair Work Agency is intended to make employment-rights enforcement increasingly joined up rather than less intensive.
What actually prevents this
The common thread through all seven error types is that none of them is caught by individual vigilance. They are caught by process.
Treat the April uplift as a single controlled event. Apply it across every payroll at the same time, through one process, rather than payroll by payroll as each comes round.
Flag age band birthdays automatically — and apply the pay reference period rule. Anyone turning 18 or 21 in the coming months should appear on a list, with the correct effective date worked out rather than assumed.
Audit your deductions. List everything that comes out of pay, and everything an employee is required to buy. For each one, ask whether it reduces minimum wage pay. Uniforms and dress codes are the usual culprits.
Look at what happens either side of a shift. If staff arrive fifteen minutes early to set up, or wait to be searched at the end, that is working time.
Check apprentices at their first anniversary. Diarise it when they start.
Keep records for six years. The look-back period means older records are still within scope. Retain hours worked, rates applied, deductions made and the basis of any accommodation offset.
Review payslips for transparency. A payslip that shows hours, rate and each deduction separately makes it possible to spot a breach. One that shows a lump sum does not.
A quick self-check
- When did you last apply the minimum wage rate uplift, and did it reach every payroll you run?
- Does anybody on your payroll turn 18 or 21 in the next three months, and do you know which pay reference period the new rate applies from?
- Do any of your employees pay for their own uniform, tools, or clothing required by a dress code?
- Is there any time when staff are on the premises and under your direction that is not on the rota?
- Do you have apprentices who have passed their first anniversary?
- If an employee asked you to demonstrate that they had been paid at least the minimum wage in a particular week two years ago, could you?
A "no" or "not sure" to the last one is the most important. Enforcement is evidence-based, and the burden of showing compliance sits with the employer.
Not confident your payroll would stand up to a review?
Minimum wage compliance is not usually about the headline rate. It is about deductions, unpaid working time, pay reference periods and record-keeping — and those are exactly the areas where an ordinary payroll process is not designed to raise a flag.
If you would like your pay rates, deductions and working-time records reviewed against the current rules, get in touch and tell us how your payroll is run.
Get in Touch →