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HMRC Warning: 7 Critical Steps Seasonal Workers Must Take To Avoid Being One Of 25,200 Underpaid Staff

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The festive season brings a surge in temporary employment, but it also triggers an annual warning from HM Revenue and Customs (HMRC) about a persistent and costly problem: underpayment of seasonal workers. As of the current date in December 2025, the latest figures from the 2024-25 tax year reveal a staggering issue, with over 25,200 UK workers identified as being owed wage arrears. This isn't just a historic issue; it's a live risk for anyone taking on a short-term contract this Christmas, with the total underpayment identified reaching £5.8 million.

The tax authority is actively urging temporary staff, students, and those on short-term contracts to "check their pay" meticulously. Common payroll mistakes, inappropriate deductions, and the application of incorrect tax codes—especially the dreaded emergency tax code—are the primary culprits causing thousands of seasonal staff to find themselves short-changed. Understanding the mechanisms of underpayment and knowing your rights is the first line of defence against becoming another statistic in HMRC's ongoing compliance efforts.

The £5.8 Million Problem: Why Seasonal Workers Are Most at Risk

The sheer volume of non-compliance uncovered by HMRC in the 2024-25 tax year is alarming, with £5.8 million in wage arrears identified and approximately 750 penalties issued to non-compliant employers. This massive figure underscores the vulnerability of the temporary workforce. The fast-paced nature of seasonal hiring often leads to hurried payroll setup, which increases the likelihood of errors that disproportionately affect Christmas workers.

The risk extends beyond simple minimum wage violations. While ensuring you receive the correct National Minimum Wage (NMW) or National Living Wage (NLW) is crucial, many underpayment cases stem from complex payroll and tax administration issues. Temporary staff, particularly those with a main job or students with no prior employment this tax year, are frequently assigned emergency tax codes, which result in too much tax being deducted from their pay.

Other common causes of wage arrears identified by HMRC include:

  • Unpaid Working Time: This involves not being paid for all hours worked, such as time spent opening up, closing down, or mandatory training sessions.
  • Inappropriate Deductions: Illegal deductions from wages for uniforms, cash shortages, or poor performance.
  • Incorrect Tax Codes: Misapplication of a tax code, often an emergency code (like 0T, S0T, or L codes without a number), which fails to apply the Personal Allowance correctly.
  • Multiple Jobs: Having two jobs simultaneously, where the second employer might not be aware of your primary employment, leading to an incorrect allocation of your tax-free Personal Allowance.

7 Critical Steps to Ensure You Don't Get Underpaid This Christmas

HMRC's primary advice is simple but vital: "Check Your Pay." For seasonal staff, a proactive approach is the only way to safeguard your earnings. Follow these seven steps immediately upon starting your new role:

1. Scrutinise Your First Payslip for Tax Code Errors

Your payslip is the most important document. Immediately check the tax code listed. If you are only working this temporary job, your code should typically be 1257L (or S1257L for Scotland). If you see a code like '0T' (zero tax-free allowance), 'W1,' 'M1,' or 'X' (emergency codes), you are likely paying too much tax. Contact your employer's payroll department immediately to correct this.

2. Verify Your National Minimum/Living Wage Rate

Ensure your hourly rate is at least the current National Minimum Wage (NMW) or National Living Wage (NLW) for your age bracket. Do not assume your employer is compliant. If you are 23 or over, you should be receiving the NLW. If you are younger, check the NMW rate applicable to your age.

3. Track All Working Hours Manually

Keep a personal, detailed log of every hour you work, including start times, finish times, and any breaks taken. This record is your evidence if your payslip shows fewer hours than you actually worked. Underpayment often occurs through a failure to pay for time spent on mandatory activities outside of shift hours.

4. Check for Unauthorised Deductions

Review the 'Deductions' section of your payslip. Deductions should only be for statutory items (tax, National Insurance) or agreed-upon items (pension, union fees). Any deduction for uniform costs, till shortages, or 'disciplinary fines' may be illegal and should be challenged.

5. Use the HMRC Personal Tax Account

If you suspect a tax issue, the most direct route is to check your official records. Log into your Personal Tax Account on the GOV.UK website. This account shows your current tax code and Personal Allowance allocation, allowing you to quickly spot discrepancies between HMRC's records and your payslip.

6. Know the Process for Challenging Underpayment

If you find an error, the first step is always to raise the issue with your employer's payroll or HR department in writing. If they do not respond, refuse to act, or the issue is specifically a tax code problem they cannot resolve, you must contact HMRC directly. They have the power to investigate, recover unpaid wages, and ensure the correct tax code is applied.

7. Understand the P800 Tax Calculation

If HMRC determines you have overpaid or underpaid tax (a common scenario for seasonal workers with emergency tax codes), they will issue a P800 form. This form details the tax calculation and explains how any overpaid tax (a refund) will be returned to you, or how an underpayment will be collected. This is the official mechanism for resolving tax code errors after the tax year ends.

Resolving Tax Code Errors and Claiming Back Overpaid Tax

The most frequent cause of underpayment for seasonal staff is actually *over-deduction* of tax due to an incorrect tax code. This happens because the PAYE system defaults to an emergency tax code when it doesn't have a P45 from a previous job or complete starter information.

If you were on an emergency tax code for a short-term Christmas job, you will likely have overpaid tax. The good news is that you can get this money back. HMRC typically reviews the PAYE records after the end of the tax year (April 5th) and automatically sends a P800 form for a refund. However, you don't have to wait. If you have all your payslips and believe you have overpaid, you can contact HMRC earlier to expedite the process, especially if you have stopped working.

For those who genuinely underpaid tax—perhaps because they had a second job and the Personal Allowance was incorrectly split—HMRC will also use the P800 to notify you. The underpaid tax is typically collected by adjusting your tax code in the subsequent year, spreading the payment out, or by a lump sum payment. The key is to respond promptly to any communication from HMRC to avoid further complications with your tax affairs.

The warning from HMRC is clear: the onus is on the worker to check their payslip. By being vigilant about your tax code, tracking your hours, and understanding the difference between NMW/NLW and tax deductions, you can ensure that your hard-earned Christmas wages don't contribute to the £5.8 million in wage arrears identified by the tax authority. This proactive approach is the best way to secure your full and correct payment.

HMRC Warning: 7 Critical Steps Seasonal Workers Must Take to Avoid Being One of 25,200 Underpaid Staff
hmrc christmas workers underpaid
hmrc christmas workers underpaid

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