A retailer with four shops is investigated by HMRC after an ex-employee complains. The pay rate was above the minimum in every contract. The problem is elsewhere. Staff were required to buy black trousers from a specified supplier and the cost was deducted from wages. They were expected on the shop floor ten minutes before opening for a briefing, unpaid. Anyone moving between branches did it in their own time.
The arrears come to a five-figure sum across six years of records, there is a penalty on top, and the company appears in the next public naming list under a heading it will not enjoy.
The rate is the easy part
The National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015 set rates by age. From 1 April 2025 the National Living Wage, which applies to workers aged 21 and over, was £12.21 an hour, with lower rates for 18 to 20 year olds, for 16 and 17 year olds and for apprentices in their first year or under 19. Rates are reviewed each April on the recommendation of the Low Pay Commission and have risen every year, so use the current table rather than one you remember.
Two structural points matter more than the numbers. The rate applies to workers, not only employees, so casual staff, agency workers and many people you think of as freelancers are covered. And it applies per pay reference period, which is the period you pay for, up to a month. You cannot average a good month against a bad one.
Underpayment arrears are calculated at the rate in force now, not the rate that applied when the underpayment happened, so an old error costs more to put right than it saved.
Deductions for the employer's benefit reduce minimum wage pay
This is the single largest category of accidental underpayment.
Where a worker is required to buy something for the job, or has a deduction taken for the employer's own use and benefit, the cost reduces their pay for minimum wage purposes. Uniform is the classic. A dress code requiring smart black clothing the worker already owns is generally fine. Requiring a branded item, or an item from a nominated supplier, and charging for it, is not, whether it comes out of the payslip or out of the worker's own pocket.
The same logic catches tools and equipment the worker must provide, training courses required for the role, and safety equipment. Personal protective equipment must be provided free of charge by the employer under health and safety law in any case.
Salary sacrifice arrangements reduce minimum wage pay too, which means a worker near the minimum cannot sacrifice salary for childcare vouchers, a cycle to work scheme or additional pension without risk. Payroll software rarely flags this.
There are limited things that do not reduce minimum wage pay, including tax and National Insurance, pension contributions deducted in the ordinary way, and repayment of a genuine loan or advance. Accommodation has its own regime, with an accommodation offset that limits how much can count towards the wage.
Time you do not think of as work is usually work
The second big category is unpaid working time.
Time spent on the premises at the employer's requirement, waiting to start, is generally working time. The briefing before opening. The handover between shifts in a care home. Security searches at the end of a shift. Setting up before a restaurant's first booking. Closing down and cashing up after the doors are locked. Time spent in required training. Opening and closing a site.
Travel between assignments during the working day counts, though ordinary home to work travel does not. For a domiciliary care worker moving between clients, or a cleaner covering three offices, the travel between them is working time and must be paid, and this has produced some of the largest enforcement actions in the sector.
Sleep-in shifts are the exception people cite and usually misremember. In Royal Mencap Society v Tomlinson-Blake the Supreme Court held in 2021 that workers on sleep-in shifts are entitled to the minimum wage only for time they are awake for the purpose of working, not for time they are permitted to sleep. That is a narrow ruling about a specific arrangement, and it does not extend to waiting time where the worker is required to be awake and available.
Salaried hours workers have their own trap. A salaried hours worker has basic hours set over a calculation year, and their pay is checked against those hours. Where they regularly work beyond the basic hours without additional payment, the effective rate falls below the minimum. Premium pay for overtime or unsocial hours is stripped out of the minimum wage calculation, so a shift premium does not rescue an underlying rate that is too low.
HMRC enforces it, and the list is published
HMRC enforces the minimum wage on behalf of the Department for Business and Trade. It acts on worker complaints and on its own targeted campaigns by sector.
Where underpayment is found, HMRC issues a notice of underpayment requiring the arrears to be paid, calculated at current rates, and imposes a penalty of 200% of the arrears, capped per worker, and reduced if paid promptly. Records must be kept for six years, and the burden of showing that the minimum wage has been paid falls on the employer, so an absence of records is treated against you.
Then there is the naming scheme. The government periodically publishes lists of employers found to have underpaid, with the amounts and the number of workers. The reputational cost usually exceeds the financial one, and the published breach reasons make instructive reading: deductions for uniform, unpaid working time, apprentice rates applied to people who were not apprentices, and failure to increase pay at a birthday.
A self-review costs an afternoon. Take your lowest-paid worker, take one pay period, and work out their actual hours including everything before and after the shift, then divide their actual take-home before tax and after any deductions for the employer's benefit by that number. Do the same for anyone who turned 18 or 21 in the last year, anyone in their second year of an apprenticeship, and anyone on a salary who regularly works extra. If the answer is uncomfortably close to the rate, it is already below it in some weeks.
Where this shows up in the game
Business Baron enforces the minimum wage the way it is actually enforced: not as a block on setting a low rate, but as a liability that surfaces later. Deductions, unpaid handover time and birthdays that should have triggered a rise all accumulate quietly until a complaint or a targeted campaign brings HMRC to you, and arrears are calculated at today's rates across six years. Being named is a hit to public trust that takes months to rebuild. The rates move with the year you are playing in.