HMRC warning puts payroll compliance firmly in the spotlight
HMRC has issued a clear message to businesses that rely on seasonal and short-term staff that payroll compliance is not optional, even for temporary contracts.
As demand increases across retail, hospitality, leisure, logistics and other seasonal sectors during the busy Christmas period, HMRC is urging workers to check their payslips to ensure they are being paid correctly.
For employers, this is a timely reminder that errors in payroll, however unintentional, can lead to fines, further HMRC enquiries and public “naming and shaming”.
Temporary and seasonal workers are legally entitled to receive at least the correct National Minimum Wage (NMW) or National Living Wage (NLW) for every hour they work.
Why seasonal workers are under the microscope
Seasonal roles are often fast-paced and short-term, which HMRC says increases the risk of payroll mistakes.
HMRC has highlighted particular concern around sectors, where staff may work irregular hours, cover extra shifts or complete tasks outside of their scheduled working time.
HMRC’s focus is not limited to headline hourly rates, as underpayment can occur even where the stated rate looks correct on paper.
Common problem areas include unpaid working time and deductions that reduce pay below the legal minimum.
Unpaid working time can include starting early or finishing late to open or close premises, cleaning duties or completing mandatory training outside of paid hours.
Extra shifts or additional hours must also be paid correctly, even if they are informal or last-minute to cover an unexpected festive rush.
Meanwhile, if an employer deducts money for items, such as uniforms or equipment and this deduction reduces pay below the minimum wage threshold, this is not permitted.
Even relatively small deductions can tip an employee’s pay below the NMW or NLW leading to non-compliance.
The current NMW hourly rates are:
| 21 and over | 18 to 20 | Under 18 | Apprentice |
| £12.21 | £10 | £7.55 | £7.55 |
These rates apply regardless of whether the contract is permanent, temporary or seasonal.
The consequences of getting payroll wrong
HMRC has been clear about enforcement and employers who fail to comply with the minimum wage rules can face penalties of up to 200 per cent of the underpayment owed to workers as well as the repayment of all outstanding arrears.
In the 2024/25 tax year HMRC identified wage arrears of £5.8 million to more than 25,000 underpaid workers. The tax authority also issued 750 penalties worth £4.2 million to the public purse.
HMRC also regularly publishes the name of business who have not complied causing reputational damage to those affected.
Failing to comply with the NMW rules can also cause management disruption and a loss of trust among staff, which employers want to avoid.
What businesses should be doing now
For employers, this is a strong reminder to review payroll processes before issues arise, including:
- Checking hourly rates against the correct age-related thresholds
- Ensuring all working time is captured and paid, including training and opening or closing duties
- Reviewing deductions to confirm they do not reduce pay below the legal minimum
- Ensuring payslips are accurate, clear and issued on time
- Keeping robust records to evidence compliance
Seasonal hiring often happens quickly, but payroll compliance must not be rushed.
Systems that work well for permanent staff may not automatically catch issues for short-term or variable hours workers.
Keeping your payroll processes compliant
An experienced payroll provider can help businesses put the right controls in place, reduce risk, and give confidence that staff are being paid correctly.
With HMRC taking an increasingly proactive approach, investing in compliant payroll processes is far more cost-effective than dealing with penalties later.
If your business relies on seasonal staff or short-term contracts, now is the time to review your payroll processes and ensure they stand up to scrutiny. Speak to our payroll team for guidance.
