Yorkshire Employers Urged to Review Payroll for National Minimum Wage Compliance

Employers in Yorkshire are being urged to take a closer look at their payroll practices as scrutiny over National Minimum Wage (NMW) compliance increases. This warning comes from Azets, a business advisory firm with offices in Leeds, Bradford, and York. The firm highlights that many businesses may be unintentionally breaking complex NMW regulations, which can lead to severe consequences.

Growing Scrutiny

With the recent increase in NMW rates in April 2026, employers are facing greater pressure to ensure compliance. The statutory hourly rates have risen to:

• £12.71 for workers aged 21 and over

• £10.85 for 18 to 20-year-olds

• £8 for 16 to 17-year-olds and apprentices under 19 or in their first year of apprenticeship

Richard Whitelock, an employment tax expert at Azets, explains that it's often the intricate details of the legislation that trip employers up:

“Most employers are trying to comply with the regulations, but the rules are extremely detailed and technical.”

Common Pitfalls

Many businesses may have their payroll systems set up correctly in theory, but they still need to pay attention to the finer details of the regulations. For instance, if employers do not accurately calculate working hours or properly account for deductions from payslips, they could inadvertently underpay their staff.

Richard noted:

“We have seen examples where call centre workers were effectively underpaid because employers failed to count the time employees spent on site preparing for call lines to open.”

Even a small amount of time, like ten minutes a day, can lead to significant underpayment issues when looked at over several years.

Understanding Deductions

Another area where employers may slip up is in deductions from payslips. For example, voluntary arrangements, such as saving schemes for Christmas, can reduce net pay in a way that pushes workers below the minimum wage threshold for HMRC (Her Majesty's Revenue and Customs) calculations. Richard explained:

“There are also complicated rules around deductions from payslips.”

Employers need to be aware that if found in breach of NMW legislation, they could be required to repay arrears going back six years, calculated at the current higher NMW rates. This could lead to penalties of up to 200% of the arrears owed, along with public naming and shaming.

The Role of the Fair Work Agency

The Fair Work Agency (FWA), which was established in April 2026, is responsible for enforcing NMW compliance. The agency has the power to investigate complaints, enter business premises, interview staff, and inspect records, including payroll systems. They can issue notices of underpayment, requiring employers to pay owed sums within 28 days.

Richard cautioned that holiday pay calculations are another common area of confusion, especially in sectors where hours can vary widely. The FWA will have the authority to enforce holiday entitlement and pay on behalf of workers, making compliance even more critical.

Taking Action

Employers are advised to review their payroll processes and ensure that they can demonstrate how pay is calculated, including working time calculations and any deductions made.

Richard emphasised:

“Record keeping is absolutely critical. Failure to keep adequate records can now be a criminal offence.”

When HMRC or the FWA challenge a business’s processes, it is vital to clearly show what has been done, why it was done, and how it was concluded that workers were receiving their correct entitlements. By sorting these issues now, businesses can avoid hefty penalties and reputational damage as enforcement of employment rights becomes more rigorous.

The message from Azets is clear: with the enforcement of NMW regulations becoming stricter, it is essential for employers across Yorkshire to ensure that their payroll systems are compliant and robust. Taking proactive steps now can prevent problems in the future, protecting both the business and its employees.