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5 Critical Ways HMRC Says Christmas Workers Are Being Underpaid In 2024/2025 (And How To Check Your Payslip NOW)

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The festive season brings a surge of temporary employment, but for thousands of UK workers, it also brings a hidden financial risk. HM Revenue and Customs (HMRC) has issued a critical warning for the 2024/2025 tax year, urging all seasonal staff—from retail associates to logistics workers—to meticulously check their payslips, as non-compliance by employers remains a significant issue. The problem of underpayment is dual-edged, involving both failure to meet minimum wage laws and common errors in the Pay As You Earn (PAYE) tax system, which can leave temporary staff either short-changed or facing an unexpected tax bill months later.

As of late 2024, the tax authority has identified a staggering scale of underpayment across the UK workforce. This article breaks down the two primary ways Christmas and temporary workers are being underpaid, highlights the specific figures released by HMRC for the 2024-2025 period, and provides an essential step-by-step guide to protect your earnings.

The Shocking Scale of Underpayment: HMRC's 2024/2025 Compliance Figures

The most immediate and severe form of underpayment is the failure of employers to meet the legal minimum pay requirements. HMRC’s compliance efforts in the 2024-2025 tax year have put a spotlight on the widespread issue of wage arrears, particularly impacting vulnerable, short-term, and temporary staff who fill critical roles in sectors like retail, hospitality, and logistics during the peak Christmas trading period.

The figures are stark and serve as a clear warning to both employers and employees:

  • Total Wage Arrears Identified (2024-2025): £5.8 million
  • Number of Underpaid UK Workers: 25,200 individuals
  • Penalties Issued to Non-Compliant Employers: Approximately 750 penalties, totaling £4.2 million

These figures relate to non-compliance with the National Minimum Wage (NMW) and National Living Wage (NLW). The HMRC has issued a specific 'Check Your Pay' campaign, urging seasonal workers to ensure they are receiving at least the legal minimum hourly rate for their age.

5 Critical Ways Seasonal Workers Are Underpaid (NMW/NLW Non-Compliance)

The £5.8 million in arrears was not due to simple hourly rate mistakes. Employers use subtle, and often illegal, methods to push wages below the legal threshold. These practices are what HMRC is actively policing:

  1. Deductions for Uniform or Equipment: Illegally deducting costs for necessary work items like uniform, safety gear, or training from the worker's pay, which pushes their effective hourly rate below the NMW/NLW.
  2. Unpaid Working Time: Failing to pay staff for time spent on mandatory activities, such as security searches, shift handovers, or required training sessions before or after their official working hours.
  3. Travel Time Misclassification: Not paying for travel time between different work sites, especially common for agency or delivery staff.
  4. Underpayment of Apprentices: Failing to pay the correct rate for apprenticeships, particularly if the worker is over 19 and has completed the first year of their program.
  5. Incorrect Age-Related Rate: Applying the wrong age bracket for the NMW/NLW, especially for younger workers or those who have recently turned 21 or 23 (moving to the NLW).

The Hidden Tax Trap: Emergency Tax Codes and PAYE Errors

Beyond the minimum wage issue, the second major financial risk for Christmas workers is paying the wrong amount of tax. This is almost always due to errors within the PAYE (Pay As You Earn) system, which is notoriously complex for short-term and temporary employment.

The primary culprit is the Emergency Tax Code.

When a new employee starts a job without providing a P45 from a previous employer, or if HMRC has not yet processed their full income details, the employer is legally required to use a temporary Emergency Tax Code.

This code, which typically ends in 'W1' (Week 1) or 'M1' (Month 1) or simply 'X', instructs the payroll system to tax the worker as if they only receive the Personal Allowance for that specific pay period (week or month), without considering their annual entitlement.

The Two Tax Outcomes of an Emergency Tax Code

For seasonal staff, the Emergency Tax Code can lead to two opposite, yet equally problematic, results:

1. Overpayment of Tax (Most Common for Short-Term Workers)

If a student or temporary worker only works for the Christmas period and is put on an Emergency Tax Code, they will likely have too much tax deducted. This happens because the code does not account for the full annual Personal Allowance (£12,570 for the 2024/2025 tax year). They are taxed on almost all their earnings, resulting in an immediate financial loss during their employment.

2. Underpayment of Tax (Common for Second Jobs)

Conversely, if the Christmas job is a second source of income, and the employer uses the standard tax code (1257L) instead of a cumulative code or a code indicating a second job, the worker may not pay enough tax. They could receive a large lump sum of pay now, only to find out later—via an HMRC letter—that they have an unexpected tax bill to pay back. This is a classic example of future tax underpayment being created by current payroll error.

Your Essential Action Plan: How to Check and Claim Your Money Back

Protecting yourself from both wage arrears and tax code errors requires proactive checks and understanding the HMRC resolution process. Do not wait for your employer or HMRC to fix the issue automatically.

Step 1: Check Your Payslip for Wage Compliance

Every time you get paid, verify these three details on your payslip:

  • Gross Pay vs. Hours Worked: Divide your gross pay by the number of hours you worked. This calculated hourly rate must be equal to or higher than the current National Living Wage (NLW) or National Minimum Wage (NMW) for your age.
  • Deductions: Check for any unexplained or non-statutory deductions. Deductions for things like 'accidental breakages' or 'uniform dry cleaning' are often illegal if they push your pay below the minimum wage.
  • Holiday Pay Entitlement: Ensure you are accruing holiday pay (or receiving it correctly upon termination) as seasonal workers are legally entitled to it under UK law.

If you suspect NMW/NLW non-compliance: You should first raise the issue with your employer. If they do not resolve it, the next step is to contact HMRC directly through their NMW helpline. All investigations are confidential.

Step 2: Check Your Tax Code for PAYE Errors

Your tax code is the most important number on your payslip. The standard, correct tax code for most people is 1257L. If your code is different, especially if it ends in W1, M1, or X, you are on an Emergency Tax Code.

  • Find Your Tax Code: It is usually listed under the 'Tax' section of your payslip.
  • Use the HMRC App: The easiest way to check is via your Personal Tax Account on the GOV.UK website or the HMRC app. Here, you can see your current tax code and the income HMRC has on record for you for the current tax year (2024-2025).
  • Contact HMRC: If your tax code is incorrect, contact HMRC immediately. They can issue a corrected P6 notice to your employer to change your code, ensuring future payslips deduct the correct amount of tax.

Step 3: Claiming Back Overpaid Tax (The P800 Process)

If you have overpaid tax due to an Emergency Tax Code, you will not lose the money. HMRC will reconcile your tax affairs after the end of the tax year (April 5th).

The primary mechanism for this is the P800 Tax Calculation.

  • The P800 Notice: HMRC automatically sends out a P800 notice if they determine you have paid too much or too little tax. This is usually issued between June and October following the end of the tax year.
  • Receiving a Refund: If the P800 shows you are due a tax refund (an overpayment), you can usually claim it directly online via your Personal Tax Account or receive a cheque.
  • Paying an Underpayment: If the P800 shows you owe tax (an underpayment), HMRC will tell you how to pay it back, often by adjusting your tax code for the following year.

In summary, while the Christmas season offers vital employment opportunities, temporary workers must remain vigilant. The HMRC's 2024/2025 figures confirm that both wage compliance and PAYE errors are rampant. By actively checking your payslip for NMW/NLW adherence and verifying your tax code, you can ensure you receive every penny you are legally owed.

5 Critical Ways HMRC Says Christmas Workers Are Being Underpaid in 2024/2025 (And How to Check Your Payslip NOW)
hmrc christmas workers underpaid
hmrc christmas workers underpaid

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