Rogue employers who do not pay their workers the National Minimum Wage (NMW) will face an increased penalty of up to £20,000 as part of government’s crackdown on employers who break the law.
Currently employers that break NMW law must pay the unpaid wages plus a financial penalty calculated as 50% of the total underpayment for all workers found to be underpaid. The maximum penalty an employer can face is £5,000.
Following an announcement by the Prime Minister before Christmas, the government will increase the financial penalty percentage from 50% to 100% of the unpaid wages owed to workers. The maximum penalty will increase from £5,000 to £20,000. Regulations introducing these new limits are subject to Parliamentary approval and are expected to be in force in February 2014.
The government also wants to go further and will bring in legislation at the earliest opportunity so that the maximum £20,000 penalty can apply to each underpaid worker.
Business Secretary Vince Cable said:
Anyone entitled to the National Minimum Wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules. The message is clear – if you break the law, you will face action.
As well as higher penalties, we have made it easier to name and shame employers who fail to pay their workers what they are due. We are working with HM Revenue and Customs to investigate non-compliance and facilitate prosecutions in the most serious of cases. We also make sure that every complaint made to the free and confidential Pay and Work Rights Helpline is looked at.
The National Minimum Wage plays an important role in supporting low-paid workers whilst making sure they can still find work. Enforcing this is a key to fairness in our workforce.
The intention is to penalise those with the highest levels of arrears. Employers who are found to have made underpayments of more than £20,000 to any worker after the new laws come into force will not only pay the new higher level of penalties but will face this penalty for each such worker. Where the underpayment for any individual worker or group of workers exceeds £20,000 the penalty will be restricted to £20,000 in relation to that worker or group.
Notes to editors
- The current penalty is calculated as 50% of the total underpayment for all workers specified in the Notice of Underpayment issued to employers by HMRC if they break National Minimum Wage law. Where this amount would be less than £100, the minimum penalty of £100 is applied. Where this amount would be more than £5,000, the maximum penalty of £5,000 is applied. The penalty is reduced by 50% if the unpaid wages are paid within 14 days.
The percentage figure and the maximum penalty can be increased by Regulations. Primary legislation is needed to introduce a penalty of £20,000 per worker into the NMW Act 1998.
- The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.