National Minimum Wage checks are increasing – are you prepared?

HMRC is stepping up checks on National Minimum Wage (NMW) compliance, and even small mistakes can lead to hefty fines and reputational risk. For hospitality businesses already operating on tight margins, these checks can be particularly disruptive.

Moore Kingston Smith has recently seen an increase in hospitality clients receiving letters from HM Revenue & Customs (HMRC) asking them to confirm whether they’ve carried out their NMW compliance checks.

If you’ve had one of these letters and aren’t sure what to do next, this guidance will help.

HMRC is actively investigating NMW compliance as part of its wider push to ensure employers meet their legal obligations and employees receive the pay they’re entitled to. Hospitality remains one of the most frequently reviewed sectors due to the heightened risk of non-compliance.

Why hospitality businesses are at greater risk

NMW compliance can be particularly challenging for hospitality businesses. Common pitfalls include:

• Unpaid time for setting up or closing down shifts, such as chefs preparing kitchens before clocking in, or front-of-house teams cashing up after closing

• Deductions for uniforms, including branded shirts, aprons or footwear that take pay below NMW

• Staff meals or accommodation deductions, particularly in hotels, resorts or live-in pub roles, where incorrect accommodation offsets are often applied

• Time spent changing into and out of uniform

• Mandatory training, such as health and safety briefings or menu training, that isn’t always treated as paid working time

• Unpaid working time for salaried employees

Many hospitality businesses also run tronc schemes, where tips and service charges supplement base pay. While tronc arrangements can be beneficial for employees, these payments cannot be counted towards meeting NMW.

With such tight margins, variable shift lengths, overtime during busy service and last-minute rota changes, even small errors in time recording or deductions can quickly result in underpayment. This is why HMRC frequently flags hospitality businesses for investigation.

Paying above NMW doesn’t always mean you’re compliant

It’s a common misconception in hospitality that paying staff more than the NMW guarantees compliance. In reality, NMW rules go beyond the hourly rate.

For example, a bartender or receptionist earning £14 per hour could still fall below the threshold if factors like salary sacrifice deductions or unpaid setup time aren’t accounted for.

HMRC applies detailed rules and complex calculations, meaning even higher-paid staff can be underpaid once deductions, unpaid working time, or other adjustments are considered.

What happens if you’re not compliant

If you act before HMRC formally confirms an investigation, you can usually correct errors without penalties. However, once an investigation begins, the consequences can be serious:

• Repayment of arrears to affected employees

• Penalties of up to 200% of the arrears

• Public listing on HMRC’s “name and shame” register

• Reputational damage and loss of employee trust

HMRC has wide powers to review payroll records, rotas, contracts, and to interview current and former employees. They can look back over six years of records, so it’s vital to be ready to provide complete and accurate data.

How we can help

We provide end-to-end support designed specifically for hospitality businesses, making NMW compliance straightforward and stress-free:

• Review payroll records for the past six years

• Work with your operational managers to understand day-to-day processes

• Check employment contracts to ensure correct worker classifications

• Carry out detailed NMW checks using pay data and operational practices

• Highlight compliance risks and offer clear, practical solutions

• If we don’t run your payroll, we can collaborate with your payroll provider to implement adjustments quickly and efficiently

Our approach gives hospitality employers peace of mind and demonstrates a genuine commitment to their teams. It shows your business is proactive about paying staff fairly, accurately and in line with HMRC expectations.

National Minimum Wage seminar

To help our hospitality clients better understand the complexities of NMW compliance, we will be holding a NMW seminar on Thursday 26 March 2026.

The session will focus on NMW rules for salaried workers, explaining how HMRC carries out NMW compliance checks and why, as a result, even higher-paid employees in hospitality businesses can still be underpaid for NMW purposes.

You can register your interest by clicking here.