Guidance

Guidance notes on the notice of underpayment — NMW FS3

Updated 3 May 2024

We are responsible for making sure that employers pay their workers at least the correct rate of National Minimum Wage (NMW) and National Living Wage (NLW). We do this under the National Minimum Wage Act 1998.

This factsheet contains information about NMW arrears and penalties.

Where we refer to the NMW this also covers the NLW.

Why we’ve given you this notice of underpayment (NoU)

We’ve issued a notice to you because you did not pay NMW to your workers. You’ll receive a notice even if you’ve paid some or all of the amounts due from our check.

The start of a check is the date we first contacted you.

How we work out the unpaid amounts

The unpaid amounts of NMW are worked out using the relevant day for each individual worker.

The relevant day is the day where a worker has been identified as being paid below the correct rate of NMW for one or more pay reference periods. Where there’s more than one worker named on the notice, the relevant day may be different for each worker.

Arrears are worked out using current NMW rates. Workers will be due more arrears than they were originally underpaid if current rates are higher than the rates that applied at the time of the underpayment.

For more information on how arrears are worked out, check:

• calculating the minimum wage
• NMW and NLW calculator for employers

Why you’ve been charged a penalty

As you have not paid the correct NMW to your workers a financial penalty is also due. This is charged under section 19A of the Act unless the Secretary of State has specified circumstances in which a notice should not impose a penalty.

Working out the amount of the penalty

The penalty is 200% of the underpayment for each worker with a minimum charge of £100 per notice and a maximum charge of £20,000 per worker.

How to appeal against a notice of underpayment

You have the right to appeal against a notice to an Employment Tribunal within 28 days from the date of service of the notice.

The date of service is the date the notice was received. This will be considered the same day as the date of the notice if delivered by hand or sent by email before 4.30pm on that day.

If the notice is issued after 4.30pm by email, the notice is deemed served the following day.

Where the notice is served by post, the date of service will be taken as 2 working days from the date of issue of the notice, unless proven otherwise.

You can appeal against:

• our decision to serve the notice
• the unpaid amounts to be paid to a worker
• the penalty

You can also appeal where a replacement notice has been issued that relates to a worker not included in the original notice.

Read general information about making a claim to an employment tribunal.

For guidance, read Making a claim to an employment tribunal (T420).

When appealing against a notice use the specific NMW appeal form.

Where to find an appeal form

For employers in:

• England, Wales and Scotland, check the Employment Tribunal page
• Northern Ireland, go to Industrial Tribunals and Fair Employment Tribunal Northern Ireland

You must lodge an appeal at an Employment Tribunal (or in Northern Ireland, an Industrial Tribunal) before the end of 28 days following the date of service of a notice.

If the appeal is successful a tribunal may change:

• the amounts outstanding
• the penalty you have to pay

or decide that no amounts are outstanding or that no penalty is due.

Suspension of the penalty

If you appeal against a notice we’ll suspend collection of the penalty. The penalty will be reinstated if the appeal is withdrawn or dismissed.

More Information

Read more information about:

• enforcement of the NMW
• operating PAYE and National Insurance contributions on the payment of NMW arrears
• paying NMW penalties