The short answer: why care agencies get checked
Care providers get looked at more than almost any other sector, and it isn't personal. The way care work is paid, by the visit, by the shift, with travel between clients and nights on call, makes it genuinely easy to slip below the National Minimum Wage without anyone meaning to. National Minimum Wage, or NMW, is the legal floor on pay per hour. HMRC knows the sector runs close to that floor, so it puts resource there.
This guide is written by LOYALS, a King's Cross firm of accountants and business consultants that runs weekly payroll, council invoicing and minimum wage checks for London home care agencies. We see the same underpayments turn up again and again, and none of them come from bad intent. They come from a rota system that pays contact time only, a uniform deduction nobody re-checked, or a sleep-in rate set years ago and never revisited.
From 1 April 2026 the National Living Wage, the top NMW band for workers aged 21 and over, is £12.71 an hour, with £10.85 for 18 to 20 year olds and £8 for under-18s and apprentices, per the GOV.UK minimum wage rates as at September 2026. Carers are workers, so the minimum wage covers every one of them, as HMRC's eligibility guidance confirms, and every hour a carer works has to average at or above the rate for their age. The word that matters there is average, and it's where care agencies come unstuck.
What triggers an HMRC minimum wage check
There are three main routes in, and knowing them tells you where your own exposure sits.
The first is a worker complaint. A carer who thinks they've been underpaid can report it, free and anonymously, and HMRC is obliged to look. In practice the trigger is often a leaver, someone who has just resigned and adds up their travel time on the way out. One complaint opens the door to a review of every worker, not just the one who complained.
The second is HMRC's own data. HMRC matches the pay you report through PAYE, the Pay As You Earn system that reports wages in real time, against the hours it would expect for the work. Real Time Information, the RTI submissions you file each pay run, feeds that picture. If your reported pay per head looks low for a care provider, you move up the risk list.
The third is sector targeting. HMRC and the government have run repeated campaigns aimed squarely at social care because it is a known underpayment hotspot. You do not need to have done anything to be selected. Being a care employer is enough to make you a plausible candidate, which is exactly why preparation beats reaction here.
What actually happens, step by step
A check is not a dawn raid. It's a paperwork exercise, and it runs to a fairly predictable shape. Knowing the sequence takes a lot of the fear out of it.
It opens with a letter or a call telling you a review has started, followed by a request for records. HMRC will ask for pay records, contracts, rotas and timesheets, usually going back as far as six years. An officer then rebuilds what each worker was actually paid per hour, spreading total pay across all the working time, including travel between visits. If that average dips below the rate for anyone, even by pennies, that's an underpayment. It ends with a Notice of Underpayment, a NoU, setting out the arrears to repay and the penalty due.
The whole thing can take months. During it, HMRC deals with your records, not with a story about how busy the office was. That's why the state of your rota data and your payroll trail matters more than anything you say in a meeting.
Where the underpayment hides in social care
Almost every care agency underpayment comes from one of five places. None of them look like underpayment on the payslip, which is exactly why they survive until an officer spreads the pay across the hours.
Travel time between visits. This is the big one for domiciliary care. Time a carer spends travelling from one client to the next during the working day counts as working time for the minimum wage, per HMRC's guidance on working hours for the minimum wage, updated January 2026. Pay only the 30-minute visits and ignore the 15 minutes between them, and the real hourly rate drops below the floor even though each visit looks well paid. We break the mechanics down in our guide to domiciliary care mileage and travel time under HMRC rules.
Deductions from pay. A charge for a uniform, a tunic, a DBS check the worker pays for, a fob or an app subscription: if it's for the employer's benefit or a requirement of the job and it takes pay below the rate, it's a breach. HMRC lists these among the most common causes of underpayment, in its checklist of common minimum wage errors for employers.
Sleep-in shifts. Since the Supreme Court decided Royal Mencap Society v Tomlinson-Blake in 2021, a worker allowed to sleep on a sleep-in is only owed the minimum wage for time awake and working, not for the hours asleep. The trap is the opposite: treating a genuinely awake, working night as a sleep-in and paying a flat rate for it. If the carer is up and on duty, the whole shift counts.
Training and induction time. Unpaid induction days, unpaid shadow shifts and mandatory training on the worker's own time are all working time. If a carer sits through a paid-for course you require but isn't paid for the hours, that's underpayment.
Rounding down call times. Rounding a 40-minute visit to 30, or clipping the clock at the start and end of a shift, shaves minutes that add up across a rota. Over a year those minutes become real arrears.
The pattern is clear. If you run visiting care, travel time and rounded call times are your danger zone. If you run residential or live-in services, the sleep-in and awake-night question is where the money sits. Either way, deductions catch everyone.
The penalty, the arrears and the naming list
Here's what a Notice of Underpayment actually costs, and why it's out of all proportion to the mistake.
First, you repay every affected worker in full. Second, you pay a penalty of 200 percent of the total arrears, capped at £20,000 per worker, as HMRC sets out in its guidance on enforcing the minimum wage. The penalty halves to 100 percent if you pay the arrears and the reduced penalty within 14 days, which is a real reason to sort it fast once a NoU lands. Third, and this is the part care providers feel hardest, the government publishes rounds of employers who broke the law. In March 2026 more than 385 employers were named across the UK, owing over £7.3 million between them.
For a care agency, the naming is often worse than the money. Councils commission you, families choose you, and a public underpayment record undoes years of reputation building overnight. This is a compliance problem that behaves like a marketing problem the moment it goes public.
Who enforces this now: HMRC and the Fair Work Agency
There's a change worth understanding, because it's being widely misreported. The Fair Work Agency, created by the Employment Rights Act 2025, launched on 7 April 2026 and brings several enforcement areas under one roof. Minimum wage, though, has not moved yet. As at September 2026, HMRC still delivers minimum wage compliance checks, and the full transfer to the Fair Work Agency is scheduled for April 2027, with 2026/27 treated as a transitional year.
So nothing about your obligations has softened. If anything, a single agency with a wider remit and a sharper focus on low-paid sectors points one way for social care, and it isn't gentler. Treat the current year as the window to get clean, not as a pause.
Here's how the three common ways of handling care payroll compare on minimum wage risk:
| What you need | DIY / payroll software | Generic accountant | LOYALS care specialist |
|---|---|---|---|
| Spreads pay across travel time, not just visits | ✗ Pays what you enter | ● If flagged | ✓ Built into every pay run |
| Checks deductions don't breach the rate | ✗ | ● | ✓ Reviewed at onboarding |
| Gets sleep-in and awake-night pay right | ✗ | ✗ Rarely sector-aware | ✓ Care-specific rules applied |
| Keeps a six-year records trail for HMRC | ● If you archive it | ● | ✓ Held and audit-ready |
| Handles the NoU response if a check opens | ✗ | ● Extra fee | ✓ Included support |
| Open Mon to Sat for an urgent letter | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
This is why care agencies that have had one scare tend to move from generic payroll to a specialist who knows where the sector's underpayments hide.
How to prepare before the letter arrives
You don't need to wait for a check to know where you stand. A self-review now finds the same things an officer would, on your terms and without the penalty attached.
- Rebuild one busy week per carer. Take total pay for the week and divide it by every working hour, contact time plus travel between visits plus any awake nights. If the average is below the rate for that carer's age, you have a problem to fix.
- List every deduction. Uniforms, DBS charges, app fees, anything taken from pay. Check none of them pull a carer below the rate in any week.
- Re-read your sleep-in arrangements. Decide honestly whether each night is a genuine sleep-in or awake work, and pay accordingly. Don't rely on a rate you set two years ago.
- Check induction and training. Confirm every mandatory hour is paid, including shadow shifts and unpaid trial days.
- Keep the trail. Rotas, timesheets and pay records for six years, matched to your RTI submissions. If they line up, a check is an inconvenience rather than a crisis.
- Correct quietly if you find a gap. Voluntary correction before HMRC arrives avoids the penalty and the naming. Waiting does the opposite.
LOYALS runs payroll and historic minimum wage reviews for care agencies across London and the UK, so if the maths above turns up anything you're unsure about, a short review will tell you exactly where you stand and what to fix. It's the cheapest insurance a care employer can buy.
Run a care agency and want this handled for you? Our care agency accountants run weekly payroll, council invoicing and minimum wage compliance from £995 a month, so travel time, deductions and sleep-ins are checked on every pay run and your HMRC trail stays clean. You can also see how our payroll and PAYE service keeps RTI and the rate right for every carer.