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5 Critical Ways HMRC Says Christmas Workers Are Being Underpaid (And How To Claim Your £5.8M Arrears)

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The festive season often brings a surge in temporary and seasonal employment, but it also triggers a major financial alert from HM Revenue and Customs (HMRC). As of December 2025, HMRC is urging every individual working a Christmas job—from retail assistants and warehouse staff to delivery drivers—to meticulously check their pay, warning that tens of thousands of workers are being underpaid due to critical errors and employer non-compliance. This isn't just about minor deductions; the issue involves millions of pounds in wage arrears.

The latest enforcement figures from HMRC reveal a stark picture of the problem: in the 2024–2025 tax year alone, the authority identified a staggering £5.8 million in wage arrears owed to 25,200 underpaid UK workers. This massive figure underscores a persistent failure by some employers to meet their legal obligations, particularly regarding the National Minimum Wage (NMW) and National Living Wage (NLW). The risk is heightened during the busy holiday period, making a payslip check an essential task for every seasonal employee.

The £5.8 Million Problem: HMRC's Latest Figures and Enforcement Action

The core of the underpayment crisis facing seasonal staff is twofold: breaches of minimum wage legislation and common payroll errors, particularly with Pay As You Earn (PAYE) tax deductions. The sheer scale of the issue—25,200 workers underpaid a total of £5.8 million—has prompted HMRC to step up its scrutiny on payroll compliance across the retail, hospitality, and logistics sectors, which rely heavily on temporary staff during the Christmas peak.

To combat this, HMRC has taken significant enforcement action. In the same 2024–2025 period, the tax authority issued approximately 750 penalties to non-compliant employers, totaling £4.2 million. This demonstrates a firm commitment to penalize businesses that fail to pay their staff correctly, with fines potentially reaching up to 200% of the underpayment amount.

Entities involved in the enforcement and compliance efforts include HMRC's National Minimum Wage (NMW) team, the Advisory, Conciliation and Arbitration Service (Acas), and various payroll compliance bodies. The focus is not just on hourly rate but on ensuring every minute of working time is compensated at the correct legal rate.

5 Critical Ways Seasonal Workers Are Being Underpaid

HMRC has identified several recurring methods through which employers inadvertently—or deliberately—breach National Minimum Wage and National Living Wage rules, especially with temporary and seasonal staff. Understanding these common pitfalls is the first step for a worker to protect their earnings.

1. Unpaid Working Time (The 'Hidden Hours' Trap)

One of the most frequent causes of underpayment is the failure to pay for all hours worked. This often includes time that an employer does not officially log as 'working hours' but which is legally considered part of the job.

  • Unpaid Training: Mandatory training sessions or inductions, which are often required before starting a Christmas job, must be paid at the minimum wage rate.
  • Security Searches: Time spent undergoing mandatory security checks or searches at the start or end of a shift is working time and must be paid.
  • Opening/Closing Duties: Workers who arrive early to set up or stay late to clean and close, but are only paid for their scheduled shift, are being underpaid.

2. Illegal Deductions from Pay

Many seasonal positions, particularly in retail and hospitality, require a uniform or specific equipment. Deductions from a worker's pay for these items can often push their effective hourly rate below the NMW/NLW threshold, which is illegal.

  • Uniform Costs: Deductions for uniform, even if the worker keeps the item, must not bring the employee's pay below the minimum wage.
  • Savings Clubs or Schemes: Any deductions for employer-run schemes, unless genuinely voluntary and for the worker's sole benefit, can constitute an NMW breach.
  • Till Shortages/Damages: Employers cannot legally deduct money for till shortages or accidental damages if it causes the worker's pay to fall below the minimum wage.

3. Incorrect Tax Codes (The PAYE Pitfall)

While NMW breaches relate to the gross pay, incorrect tax codes affect the net pay and are a major source of underpayment for seasonal staff. When an employee takes on a second job for the Christmas period, or if the job is their first employment in the tax year, the employer may use an emergency tax code (like 0T or BR).

Using an emergency tax code often results in the worker paying too much tax (over-deduction of PAYE), meaning they are effectively underpaid in their monthly salary. While this overpayment can be reclaimed later, it causes a significant, immediate financial strain during the holiday season.

4. Misclassification of Apprentices and Young Workers

The National Minimum Wage has different rates depending on the worker's age and whether they are an apprentice. Employers must ensure they are applying the correct minimum wage rate for the worker’s age bracket (e.g., under 18, 18-20, 21-22, or 23 and over for the NLW). Misclassifying an older worker as a younger one, or failing to apply the correct apprentice rate, is a common error.

5. Failure to Pay for Travel Time

While commuting to a regular workplace is not usually paid, travel time between different work sites or mandatory travel as part of the job (e.g., a delivery driver traveling between drop-off points or a retail worker moving between branches) must be counted as working time and paid correctly. Failure to do so reduces the effective hourly rate and constitutes an NMW breach.

How to Check Your Payslip and What to Do Next

HMRC's urgent advice to all seasonal staff in December 2025 is to "Check your pay." This proactive step is crucial to ensure you are not one of the 25,200 underpaid workers identified by the authority.

Checking for Minimum Wage Compliance

The first step is to calculate your true hourly rate. Divide your gross pay (before tax and National Insurance) by the total number of hours you worked, including all training, opening, and closing duties. This figure must be at least the current National Minimum Wage or National Living Wage rate applicable to your age.

  • Check Your Hours: Compare the hours on your payslip with your own records (timesheets, clock-in/out records, or a personal log).
  • Review Deductions: Scrutinize all deductions. If any deduction (e.g., for a uniform or transport) brings your hourly rate below the NMW/NLW, you may have a claim.

Checking for Tax Code Errors (PAYE)

The second critical check is your tax code, which can be found on your payslip. For most people with one job, the tax code for the 2025/2026 tax year will be a number followed by 'L' (e.g., 1257L). If you have a seasonal job as a second source of income, you might see codes like 'BR' (Basic Rate), 'D0' (Higher Rate), or '0T' (Zero Tax-Free Allowance).

  • Code BR: This means all your pay from that job is taxed at the basic rate (20%), which is common for a second job.
  • Code 0T: This means you are paying tax on all your income with no tax-free personal allowance.
  • What to Do: If you believe your tax code is incorrect, especially if you have an emergency code and this is your only job, you should contact HMRC directly. They can issue a new, correct tax code to your employer, and any overpaid tax will be refunded via your next payslip or at the end of the tax year.

Taking Action to Reclaim Wage Arrears

If you suspect you have been underpaid, either due to an NMW breach or an incorrect tax code, you have a clear path to resolution:

  1. Speak to Your Employer: Raise the issue with your employer or payroll department first. Many errors are genuine mistakes and can be quickly rectified.
  2. Contact Acas: If the employer does not resolve the minimum wage issue, you can contact Acas (the Advisory, Conciliation and Arbitration Service) for free, impartial advice.
  3. Report to HMRC: You can confidentially report an employer you suspect is breaking minimum wage law to HMRC's National Minimum Wage team. HMRC will then investigate the employer and ensure all wage arrears are paid back to the affected workers, alongside the potential for significant penalties for the employer.

Given the £5.8 million in arrears identified in the last tax year, seasonal workers must be vigilant. Checking your payslip is your best defense against being financially short-changed during the expensive Christmas period.

5 Critical Ways HMRC Says Christmas Workers Are Being Underpaid (And How to Claim Your £5.8M Arrears)
hmrc christmas workers underpaid
hmrc christmas workers underpaid

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