The NMW blind spots that technology can’t fix

National Minimum Wage compliance is an increasingly important risk area for employers, and the latest government figures show just how widespread the problem is.

Across two government naming rounds in March and September 2026, more than 1,000 employers were publicly named for failing to pay the National Minimum Wage. Combined, those cases involved:

• Over 86,000 workers underpaid
• More than £11 million in back pay
• Over £19 million in penalties

Many businesses assume that paying above the minimum hourly rate means they’re on safe ground.

Unfortunately, it’s rarely that simple.

In my experience, underpayments often arise from a disconnect between what an organisation believes is happening and what’s actually happening day to day. Payroll calculations might be perfectly accurate, but the information they’re based on doesn’t always tell the full story.

And that can be where the problems begin.

Compliance problems often start outside payroll

When businesses think about NMW compliance, they naturally look towards payroll. After all, that’s where the calculations happen.

But payroll teams rely heavily on information provided by other parts of the business:

• A line manager agrees an informal working pattern.
• An employee regularly arrives early to prepare for their shift.
• Someone works through their lunch break.
• A deduction is introduced without fully considering its impact on minimum wage pay.

These might seem like relatively minor decisions, but each has the potential to affect compliance. And payroll might not even know they’re happening.

It’s something I think more employers need to recognise. HR, finance and operational managers all hold information that payroll needs, and compliance depends on that information reaching the right people.

The biggest risk is the work that nobody records

Working time is a particularly good example. Most employers know exactly how many hours their employees are contracted to work. But how confident are they that those hours reflect what’s happening in practice?

Take someone who regularly starts 20 minutes early to get ready for the day. but where that time counts as working time for NMW purposes, it needs to be considered. Those extra minutes add up, especially if the same habit exists across a team.

A manager might see it as someone being conscientious, or the employee might simply consider it part of the job. Meanwhile, payroll has no reason to suspect anything’s wrong.

The calculations can be correct, but if additional working time isn’t captured, the business could still be underpaying people.

Technology has transformed compliance, but has its limits

I’m, of course, a strong advocate for payroll technology. Modern systems can automate calculations, apply the correct statutory rates and flag potential compliance issues far more efficiently than manual processes. For larger employers especially, the visibility is invaluable.

But we also need to be realistic about what technology can tell us.

A system might flag an employee whose pay appears close to the NMW threshold. It can help identify where further investigation is needed, but understanding what’s caused the issue often requires looking beyond the payroll data.

Has someone worked additional hours? Has a deduction affected their pay? Is the employee’s information up to date?

Those questions still need answering.

We need to stop treating alerts as answers

There’s an important distinction between identifying a potential compliance issue and establishing that a breach has occurred.

An alert is a reason to investigate, not necessarily evidence that something has gone amiss. And equally, the absence of an alert doesn’t guarantee everything is correct, particularly if the underlying information is incomplete.

Someone needs to review what it’s telling them, understand the circumstances and decide what action, if any, is required.

The best payroll teams use technology to direct their attention towards the areas that need it most, while applying their own knowledge and judgement to what they find.

Payroll expertise matters more than ever

As automation and AI become more sophisticated, I believe the role of payroll professionals becomes even more valuable.

In my experience, the four NMW types of work aren’t always well understood, and identifying which applies to a particular worker isn’t necessarily straightforward. Salaried hours work, time work, output work and unmeasured work can each involve different rules for calculating hours.

Before running the calculation, someone needs to understand how a worker is paid and which rules apply. They also need to question payments or deductions that don’t quite fit, and recognise when an operational change could affect compliance.

Technology can apply the rules, but payroll professionals need to understand which rules should be applied.

And if systems can take care of more routine checking, that leaves payroll teams better placed to focus on these more complex decisions.

Compliance needs a wider view

Ultimately, investing in better payroll technology is a positive step, but businesses need to consider what’s happening around it.

Managers need to understand which working arrangements could affect compliance. HR and finance need to share relevant changes, and payroll needs reliable information and a clear way to raise concerns.

I’ve always believed communication is key, and NMW compliance is a good example of why.

Technology can make risks easier to spot, but even the most accurate payroll calculation is only as reliable as the information behind it.

Upcoming payroll webinar: National Minimum Wage compliance

Thursday 12 November | 10 – 11am

Join me and Michelle Keith, COO at Moorepay, in our upcoming webinar for an in-depth look at the NMW risks that are easily missed and what payroll teams can do to spot them sooner.