In October 2025, the UK Government named nearly 500 employers for failing to meet statutory minimum wage requirements, with more than £10 million in penalties imposed across the round. Centrica PLC, the parent company of British Gas, was among them, having failed to pay £167,814.69 to 356 workers following historic payroll errors.
Centrica attributed the issue to technical faults between 2015 and 2019, primarily involving salary sacrifice arrangements and training bonds. The case shows how the treatment of employee benefits and training-related deductions can create minimum wage liabilities, even when the underlying errors are not deliberate.
By examining Centrica’s case, employers can identify similar risks in payroll calculations, review their benefit arrangements and strengthen controls before errors accumulate over multiple pay periods.
Centrica’s £167,814 Minimum Wage Underpayment – What Went Wrong?
Centrica PLC, which owns British Gas, was named in the October 2025 government enforcement round for failing to pay £167,814.69 to 356 workers. The underpayments related to historic payroll errors between 2015 and 2019, primarily involving salary sacrifice arrangements and training bonds. The case highlights the need to check how benefits, deductions and training-related arrangements affect minimum wage calculations.
The mention of payroll operations leads directly into the technical origins of these specific errors.
How Salary Sacrifice and Training Bonds Created Payroll Risks
Technical faults in Centrica’s payroll processes between 2015 and 2019 affected the calculation of minimum wage entitlements. According to the company’s statement reported at the time, the underpayments related primarily to salary sacrifice arrangements and training bonds rather than employees’ take-home pay alone.
The government’s October 2025 naming list recorded 356 affected workers and £167,814.69 in arrears. Although the average underpayment was approximately £471 per worker, the actual amounts varied between individuals.
The case illustrates why employers should test how benefits, deductions and training-related arrangements affect pay for minimum wage purposes. Small errors repeated across multiple pay periods can create significant liabilities before they are identified.
For practical guidance, employers can review the official GOV.UK minimum wage calculation guidance.
Arrears Versus Total Payroll Scale
The £167,814.69 in underpayments should also be considered in the context of Centrica’s overall payroll costs. While the amount represents a relatively small share of the company’s total UK payroll, its significance lies in how relatively minor discrepancies can accumulate across a large workforce and multiple pay periods.
For large employers, even isolated payroll errors can create substantial arrears when repeated over time. This highlights why regular payroll checks and minimum wage compliance reviews are important, particularly when calculations involve complex pay components.
|
Metric |
Correct figure |
Context |
|---|---|---|
|
Total arrears |
£167,814.69 |
Historic minimum wage underpayment |
|
Workers affected |
356 |
Confirmed in the government naming list |
|
Average arrears per worker |
Approximately £471 |
Calculated average; individual amounts varied |
|
Period of technical errors |
2015–2019 |
As reported by Centrica |
|
Resolution |
Rectified |
Centrica said the issue was corrected when identified |
Once the payroll issue was identified, the company began the process of correcting the affected payments. The technical problem was addressed, and back pay was provided to the workers affected by the underpayments to resolve the outstanding amounts.
The case also highlights the importance of keeping up with minimum wage requirements across the UK and EU. For international employers, regular payroll reviews, effective internal controls, and accurate record-keeping can help identify discrepancies early and reduce the risk of wider compliance issues.
Common Triggers for Centrica Minimum Wage Underpayment in Large Firms
While Centrica’s case involved technical glitches, the broader triggers for such failures often stem from complex benefit structures and contract terms.
Salary Sacrifice and Minimum Wage Calculations
Salary sacrifice arrangements allow employees to give up part of their contractual cash pay in exchange for a non-cash benefit. However, the reduction in cash earnings can cause a minimum wage breach if the employee’s pay falls below the applicable statutory threshold.
Employers must ensure that salary sacrifice arrangements do not reduce a worker’s pay below the National Minimum Wage or National Living Wage. Payroll checks should account for the amount sacrificed, the worker’s eligible pay and hours worked in each pay reference period.
This is particularly important when employers offer pension contributions, childcare benefits, season tickets or other salary sacrifice schemes across a large workforce. Automated controls should flag cases where a proposed deduction could take pay below the legal minimum.
For further detail, see the official GOV.UK guidance on salary sacrifice.
Training Bonds and Recoverable Training Costs
Training bonds and repayment agreements need careful review when they involve deductions from employees’ pay or require workers to reimburse training costs. Depending on the arrangement, a deduction or payment connected with employment can reduce the pay counted towards the minimum wage.
Employers should distinguish between the contractual terms of a training agreement and its treatment under minimum wage legislation. A clause that appears valid under an employment contract does not automatically mean that a related deduction is permissible for minimum wage purposes.
Payroll and HR teams should review training repayment clauses, the timing of deductions and the effect on pay in each relevant pay reference period. Where the treatment is uncertain, seek specialist advice before applying the deduction.
Practical checks include:
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Reviewing salary sacrifice and training repayment agreements
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Testing deductions against minimum wage calculations
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Confirming that payroll systems capture eligible working hours accurately
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Rechecking affected pay periods whenever contracts or benefit arrangements change
Legacy Practices and Inherited Payroll Errors
Historical pay structures clash with modern enforcement. Legacy systems often lack the granularity needed for today’s audits. Old contract clauses might be non-compliant now, creating unforeseen liabilities for established firms.
Centrica’s case shows why historic payroll configurations and benefit arrangements need periodic review. Employers should retain records of salary sacrifice elections, training agreements, deductions and the calculations used to verify minimum wage compliance. Regular checks can identify legacy issues before they affect more pay periods or workers.
Teams should use an HR compliance checklist to review systems as updating old practices is an essential step to ensure long-term payroll integrity.
HMRC Naming Scheme and the October 2025 Enforcement Round
These common triggers eventually lead to the public spotlight through HMRC’s rigorous enforcement and naming protocols.
Mechanisms of the Public Naming List
HMRC plays a central role by issuing Notices of Underpayment to non-compliant firms. Household names are not exempt from this scrutiny. The process is designed to be highly visible and punitive.
The criteria for being listed alongside 500 other employers involve meeting a specific minimum arrears threshold. This naming round happens twice a year. It serves as a public warning to other large corporations.
Maintaining compliance requires constant vigilance. We recommend conducting regular compensation benchmarking in Europe to ensure your pay structures remain competitive and fully legal since this proactive approach prevents costly errors.
Fair Work Agency – Current Enforcement Responsibilities
The Fair Work Agency launched on 7 April 2026, bringing together several labour market enforcement functions. However, the transfer of National Minimum Wage enforcement is taking place in stages.
During the 2026–2027 transition year, HMRC continues to deliver minimum wage enforcement under contract to the Fair Work Agency. The transfer of this function is planned for April 2027. Employers should therefore continue to maintain accurate payroll records and respond appropriately to HMRC minimum wage investigations during the transition.
The Fair Work Agency’s enforcement framework includes notices of underpayment, civil penalties and public naming of employers that breach minimum wage requirements. The applicable penalty can reach 200% of the underpayment, subject to the relevant statutory rules.
For Centrica, the central lesson remains the same: salary sacrifice arrangements, training bonds and other deductions should be reviewed against minimum wage requirements, regardless of which body delivers the enforcement function.
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Civil penalties for minimum wage underpayments, subject to statutory rules
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Public naming of employers that breach minimum wage requirements
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HMRC continuing minimum wage enforcement under contract during the transition
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Planned transfer of minimum wage enforcement to the Fair Work Agency in April 2027
Protecting Reputation Against Centrica Minimum Wage Underpayment Risks
Beyond the financial fines, the true cost for firms like Centrica often manifests in the court of public opinion.
Managing Media Fallout and Public Perception
Media coverage regarding Centrica and brands like Holland and Barrett remains intense. National news outlets often focus on the “underpaid” headline. This creates a narrative of corporate negligence. Communications teams must react quickly to provide context.
Evaluate the impact of being labeled non-compliant. The “naming and shaming” strategy hits brand equity. It can affect recruitment and employee morale. Reputation is harder to fix than payroll.
Maintaining trust requires transparency. We believe that HR compliance training is a vital step for leadership teams. It helps avoid the public fallout seen in recent enforcement rounds.
Best Practices for Payroll Compliance Reviews
We recommend regular internal audits to catch errors early. Don’t wait for an HMRC intervention. Use external experts to spot legacy system flaws. Proactive checking is the only way to stay off the public naming list.
It is important to note the need for clear communication between payroll and HR. Silos lead to mistakes in salary sacrifice and training pay. Integrated data ensures that every deduction is legally sound.
- Quarterly internal audits
- Cross-departmental data sharing
- External compliance reviews
- Automated alert systems for low-pay thresholds
Final Words
Centrica’s £167,814.69 minimum wage underpayment affecting 356 workers demonstrates how historic payroll errors involving salary sacrifice and training bonds can create significant liabilities. Employers should regularly test benefit arrangements, review training repayment clauses and verify minimum wage calculations across relevant pay periods. With the Fair Work Agency now established and HMRC continuing minimum wage enforcement until April 2027, robust payroll controls remain essential to prevent repeat errors and protect employee trust.
