The notice of underpayment: minimum wage arrears and the 200 per cent penalty

Checked 22 July 2026 · How we check our figures

Jump to: The decision · What next · Numbers · Deadlines · Mistakes

What it is

A notice of underpayment is the letter an employer receives when minimum wage arrears are found: it names each underpaid worker, the sums due and a penalty on top, and since 7 April 2026 it runs on ss. 103 to 108 of the Employment Rights Act 2025 rather than the repealed notice provisions of the National Minimum Wage Act. Employers tend to call the whole package a minimum wage fine, but it is two demands with different destinations: arrears to the workers within 28 days, s. 103(2), and a penalty to the government, s. 107. The minimum wage penalty calculator prices both.

Reading the notice

For each worker the notice must state the relevant day, the sum due and how it was calculated, the periods concerned, the statutory provision, and the required sum, s. 106(2)

Where it carries a penalty it must state the amount, the calculation and the pay-by date, s. 108(3)

Minimum wage arrears are restated at the current rate rather than the rate underpaid, s. 17 National Minimum Wage Act 1998, preserved by s. 104(3)

The decision in front of you

Paying the arrears and at least half the penalty within 14 days of the notice means the penalty is treated as paid, s. 108(4)

Paying inside the 28 days without the 14-day sprint sends the arrears to the workers and the full penalty to the government, ss. 103(2) and 107(2)

An appeal to the employment tribunal within 28 days, s. 110, runs on the grounds the section lists, from no sum having been due through to a miscalculated penalty

Silence is the expensive option: after the 28 days, and once appeal rights are exhausted, the sums become enforceable through the county court, ss. 114 and 115, and unpaid minimum wage cases are generally referred to the public naming scheme (gov.uk enforcement statement)

What happens next

Enforcement waits for the appeal: the county court route only opens after the 28 days and once appeal rights are exhausted, s. 114(2)

A wrong notice can be withdrawn or replaced, ss. 111 to 113: on a straight withdrawal any penalty paid comes back with interest at the Judgments Act 1838 rate, s. 111(2), and on replacement the sums already paid count against the new penalty, s. 113(3)

The Fair Work Agency carries the power since 7 April 2026, with HMRC operating the minimum wage side on its behalf, and naming runs with the Department for Business and Trade (gov.uk enforcement statement, May 2026)

Guidance written before April 2026 describes the repealed ss. 19 to 19H regime and should be read with that in mind

The numbers

Penalty: 200 per cent of the shortfall per worker (s. 107(4) Employment Rights Act 2025; legislation.gov.uk, checked 2026-07-22)

Cap: 20,000 pounds per worker (s. 107(5))

Floor: 100 pounds per notice (s. 107(6))

Half the penalty is forgiven where arrears and half are paid within 14 days (s. 108(4))

Reach: six years ending with the day the notice is given (s. 105(2))

The wage rates themselves are movable: see the minimum wage penalty calculator at /fines/minimum-wage-penalty, figures dated there

The March 2026 naming round listed 385 employers, 7.3 million pounds of arrears for around 60,000 workers and 12.6 million pounds of penalties (DBT naming round, March 2026)

The deadlines

28 days from the notice for arrears and penalty, ss. 103(2) and 107(2)

14 days for the half-penalty door, s. 108(4)

28 days to appeal to the employment tribunal, s. 110(2)

The claim period reaches back six years, s. 105(2)

What people get wrong

Reading arrears at the old rate: minimum wage arrears are uplifted to the current rate, s. 17 National Minimum Wage Act 1998 via s. 104(3)

Citing the old law: ss. 19 to 19H of the National Minimum Wage Act were repealed on 7 April 2026, so sources older than that describe a regime that no longer exists

Expecting HMRC alone: the Fair Work Agency now holds the power, with HMRC operating the minimum wage side on its behalf (gov.uk enforcement statement)

Authority

ss. 103 to 115 Employment Rights Act 2025

s. 17 National Minimum Wage Act 1998

SI 2026/323, commencement

gov.uk, Fair Work Agency enforcement statement, May 2026

HMRC factsheet NMW FS3