New minimum wage penalties

Companies who do not pay their workers the National Minimum Wage (NMW) will face an increased penalty of up to £20,000 as part of the government’s crackdown on what it describes as ‘rogue employers’ say Harris & Co accountants Northampton.

Under current rules, 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.

The government now plans to introduce new regulations which will double the financial penalty percentage from 50% to 100% of the unpaid wages owed to workers, while the maximum penalty will increase to £20,000. The new regime is expected to come into force in February 2014, is likely to be strengthened further with additional legislation so that the maximum £20,000 penalty can apply to each underpaid worker.

The Department for Business, Innovation and Skills said 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.

Business Secretary Vince Cable said:

‘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 HMRC 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.’