First published on Friday, October 17, 2025
Last updated on Wednesday, November 5, 2025
A ‘name and shame list’ published by the Department for Business and Trade revealed some big names, and some six-digit discrepancies. But there are smaller names and smaller amounts from all over the UK on the list. As well as making up payments to the affected workers, employers are subject to financial penalties of up to 200% of their underpayment.
The living wage dilemma
With the national living wage expected to rise, and extend to 18-21 year olds, in the upcoming Budget, there is an added challenge for employers. And businesses are warning about the impact it could have on the job market. The hospitality sector has reportedly lost an estimated 100,000 jobs following last year's wage increase combined with higher employer national insurance contributions.
It’s easy to fall foul of NMW and NLW regulations if you don’t make the correct deductions for uniforms, travel time, or overtime. Here are some common ways payroll mistakes can cause a minimum wage breach, and how employers can avoid them:
Uniforms and tools
If your employee pays for their uniform or the tools they need to do their job, HMRC will class that cost as a deduction that reduces their pay. This doesn’t just relate to branded clothing, tunics or work boots, but anything you have a policy about: business suits, shoes, a specific colour of clothing or footwear, for instance.
How to avoid mistakes: Provide tools and uniform free of charge, avoid unnecessary dress requirements, increase wages or set an allowance to meet initial cost and upkeep/replacement.
Even better: Set out policies on dress code and include clauses in employment contracts. BrightBase, our legally-compliant document library, has templates for all of these.
Trial shifts and prep time
Employees must be paid for all the time they work, including overtime, pre or post-shift prep, travelling between locations, arriving early to open up, and when they are on call.
How to avoid mistakes: Consider a clocking in and out app, so your employees can log their time accurately and while they are on the go or in different locations.
Even better: Clocking in and out app Blip reminds your teams to log their working time and rest breaks, so you can see overtime and total hours. You can even export payroll-ready reports to guarantee accuracy.
Rounding errors
Whether they are to do with time or money, rounding errors can cause underpayments, which can snowball over time.
How to avoid mistakes: Make sure your employees log their break time as well as their time in and out. For monetary errors involving decimal places, using accurate payroll software will keep things accurate and consistent.
Even better: Get HR and Payroll systems that work seamlessly together. Using software you can trust will take away doubt and save you hours and even days of admin time.
Keep track of birthdays
No, not so you can enjoy some birthday cake. As well as annual pay rises in April, you need to think about pay rises for younger employees. The rates of minimum wage change if your employee turns 21, as well as for apprentices after their first year of apprenticeship or when they turn 19.
How to avoid mistakes: Find payroll software that automatically calculates rates of pay and updates them on relevant birthdays.
Even better: BrightHR Managed Payroll puts your payroll in the hands of our CIPP-qualified experts. They’ll manage the entire payroll process for you, including talking to HMRC on your behalf and providing accurate and compliant reports.
Topping up with tips
You can’t use tips to top up staff wages to NMW or NLW. The Government’s code of best practice on tips says that you should have a policy on sharing tips that names a responsible person, guidance on sharing tips that are paid directly to one member of staff, deductions, and what happens during holidays and sickness. The Employment Rights Bill will tighten tips laws in October 2026, when employers will have to consult with workers when developing or revising tipping policies.
How to avoid mistakes: Read the code of best practice and consider implementing a policy now.
Even better: Get up to speed with the Employment Rights Bill before October 2026, and download our free guide to the timeline for implementation here.
Failure to keep up with changes in the law
And here’s the biggest compliance risk of all. There are so many regulations that can take your employees under the minimum wage if you don’t keep up.
The Employment Rights Bill will bring more changes over the next couple of years. It’s been described as ‘delivering the biggest upgrade to rights at work for a generation’. You can keep up with changes in our webinar series.
Risks and fines
Aside from fines of over £10 million, companies risk damage to reputation and morale, whether their actions were deliberate or not.
Failure to keep up with minimum wage requirements can cost you dearly in grievances, legal and tribunal fees, repayments, plus fines reaching up to 200% of those repayments.
With rising wage floors and warnings of job losses, getting minimum wage calculations right isn't just about avoiding the name and shame list. It's about ensuring your business can sustain employment while meeting legal obligations.
So how can businesses keep up with minimum wage requirements?
Find HR software that will integrate with your payroll software. So you don’t have to update two different systems, or worse, copy figures across from a spreadsheet or piece of paper.
Your HR provider should keep you up to date and prepared for changes in legislation so you can stay off the name and shame list.
How can BrightHR help?
Integrated HR and payroll software ensures your deductions are accurate, and saves you the hassle of working it out or risking penalties.
And if you’re a Managed Payroll client, we’ll take the entire process off your hands, saving you the cost of a full-time payroll expert. We’ll file everything with HMRC on your behalf, distribute your payslips and send you a full report.
