Employers who fail to pay the national minimum wage (NMW) will be publicly named and shamed under revamped plans to make it easier to clamp down on rogue businesses, Employment Relations Minister Jo Swinson announced today.
The new rules are part of government efforts to toughen up enforcement of the NMW and increase compliance. By naming employers it is hoped that bad publicity will be an additional deterrent to employers who would otherwise be tempted not to pay the NMW. This is on top of financial penalties which employers already face if they fail to pay NMW.
The revised NMW naming scheme, which will come into effect in October 2013, will strip back restrictions, making it simpler for government to name more employers who break the law.
Under the original scheme, employers had to meet one of seven criteria before they could be named. The minimum amount of national minimum wage owed to workers had to be at least £2000 and the average per worker at least £500 before an employer could be referred to the Department for Business, Innovation & Skills (BIS) from HM Revenue & Customs (HMRC) for naming. The revised scheme will remove these restrictions so that any employer who breaks minimum wage law can be named.
In 2012 to 2013 HMRC identified 736 employers who had failed to pay the national minimum wage leading to the recovery of £3.9 million in unpaid wages for over 26,500 workers.
Employment Relations Minister Jo Swinson said:
Paying less than the minimum wage is illegal. If employers break this law they need to know that we will take tough action.
This is why I’m making changes so it is easier to name and shame employers who break the law. This gives a clear warning to rogue employers who ignore the rules, that they will face reputational consequences as well as a fine if they don’t pay the minimum wage.
If workers feel they aren’t getting the minimum wage that they are legally entitled to then they should contact the free and confidential Pay and Work Rights Helpline on 0800 917 2368. Calls will be referred to HMRC to actively investigate any suspected non-payment of national minimum wage.
Chair of the Low Pay Commission David Norgrove said:
The Low Pay Commission has been disappointed that only one person has been named under the scheme up until now, and has encouraged the Government to reconsider the rules. These changes are welcome, and to name more employers who do not pay the minimum wage should encourage greater compliance and help the low paid.
Notes to editors
The BIS scheme to name employers who break minimum wage law came into effect on 1 January 2011. The scheme is one of a range of tools at the government’s disposal to tackle this issue. Employers who pay workers less than the minimum wage have to pay back arrears of wages at current minimum wage rates and face financial penalties of up to £5,000. In the most serious cases employers can be prosecuted.
- Under the previous scheme there were 7 criteria for naming, and an employer had to meet one of these to be named plus the financial criteria:
- there is evidence that the employer knowingly or deliberately failed to comply with their NMW obligations
- there is evidence that the employer has previously received advice from HMRC about the steps they need to take to ensure future compliance with national minimum wage and has not taken those steps
- there is evidence that the employer has failed to take adequate steps to keep or preserve NMW records
- there is evidence that the employer has delayed or obstructed a NMW compliance officer in the performance of their duties
- there is evidence that the employer has refused or neglected to answer questions put to them by a NMW compliance officer
- there is evidence that the employer has refused or neglected to provide information or produce documents to a NMW compliance officer
- there is evidence that the employer refused or neglected to pay arrears of the NMW to workers, following HMRC intervention, which has resulted in HMRC taking action against the employer to ensure payment of arrears to workers
Under the previous naming scheme, HMRC only referred cases to BIS where the total arrears owed to workers are at least £2,000 and the average arrears per worker are at least £500.
Employers found to meet the criteria for naming are notified by BIS and invited to make representations against being named with a notice period of 28 days.
The revised scheme will name employers that have been issued with a Notice of Underpayment (NoU) by HMRC. This notice sets out the owed wages to be paid by the employer together with the penalty for not complying with minimum wage law.
Currently employers have 28 days to appeal against the NoU and this will continue. If the employer does not appeal or unsuccessfully appeals against this NoU, BIS will consider them for naming. The employer then has 14 days to make representations to BIS outlining whether they meet any of the following criteria: naming by BIS carries a risk of personal harm to an individual or their family or there are national security risks associated with naming, or there other factors which suggests that it would not be in the public interest to name the employer or company. BIS will normally expect to inform the employer of any representations made within 14 days of receipt of any representation made by the employer. If BIS do not receive any representations or the representations received are unsuccessful, the employer will be named via a BIS press release under this scheme.
The government will continue to publicise the decisions of employment tribunals in cases where an employer has unsuccessfully appealed against a NoU. HMRC will also continue to publicise county court judgments and other orders made against employers who HMRC have had to take to court to recover arrears of wages for workers.
Penalties for NMW are calculated as 50% of the total underpayment for all the workers specified in the NoU. Where the amount would be less than £100, the minimum penalty of £100 should be applied. Where this amount would be more than £5,000, the maximum penalty of £5,000 should be applied.
- 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 four 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.