Measures to ensure people receive fair pay announced

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Employers who fail to pay staff at least the minimum wage they are legally entitled to will now have to pay double what they do.

A package of measures has been announced by the government today to ensure ‘hardworking people’ receive the pay they are entitled to.

These measures include:

  • doubling the penalties for non-payment of the National Minimum Wage and the new National Living Wage
  • increasing the enforcement budget
  • setting up a new team in HMRC to take forward criminal prosecutions for those who deliberately do not comply
  • ensuring that anyone found guilty will be considered for disqualification from being a company director for up to 15 years.

“There is no excuse for employers flouting minimum wage rules and these announcements will ensure those who do try and cheat staff out of pay will feel the full force of the law,” said Business Secretary Sajid Javid, who also announced today that the government’s fair pay agenda will also include an investigation into tipping practices after several high profile chains received press attention for not allowing staff to retain their tips.

A new team of compliance officers in HMRC will investigate the most serious cases of employers not paying the National Minimum Wage and National Living Wage when it is introduced in April 2016. This team will have the power to use all available sanctions, including penalties, prosecutions and naming and shaming the most exploitative employers.

The enforcement budget for the National Minimum Wage and Living Wage will also be increased in 2016 to 2017 with future budgets will be agreed as part of the spending review process.

Employers who fail to pay staff at least the minimum wage they are legally entitled to will have to pay double what they do now. The government have stated that this reform is intended to increase compliance and make sure those who break the law face tough consequences.

The calculation of penalties on those who do not comply will rise from 100 percent of arrears to 200 percent, although this will be halved if employers pay within 14 days. The overall maximum penalty of £20,000 per worker remains unchanged.

In 2013, the policy of naming non-compliant employers was intorduced. Since then, according to government figures, 285 employers, who have owed over £788,000 in arrears, have been charged over £325,000 in penalties. HMRC puts forward the most serious cases of non-compliance to the Crown Prosecution Service for prosecution. In 2014 and 2015 to date, HMRC has investigated 2,204 cases, found arrears in 735 cases for 26,318 workers totalling over £3.29 million and charged over £934,000 in penalties.

The current National Minimum Wage rates are:

  • adult rate (21 years old and over) – £6.50 per hour
  • 18 to 20-year olds – £5.13 per hour
  • 16 to 17-year olds – £3.79 per hour
  • apprentice rate – £2.73 per hour

The apprentice rate applies to apprentices aged 16 to 18 years and those aged 19 years and over who are in their first year. All other apprentices are entitled to the National Minimum Wage rate for their age.

According to the announcement by the Department of Business, Innovation and Skills today, a new Director of Labour Market Enforcement and Exploitation will be created to oversee enforcement of the National Minimum Wage, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority (a non-departmental public body of the Home Office). The Director will set priorities for enforcement based on a single view of the intelligence about exploitation and non-compliance.

The government have confirmed that a consultation will be launched in the Autumn on the introduction of a new offence of aggravated breach of labour market legislation. The consultation will also propose giving the Gangmasters Licensing Authority additional investigatory powers and a wider remit to tackle serious labour exploitation more effectively.

The government has also announced today it will improve the guidance and support made available to firms on compliance and will work with payroll providers to be sure payroll software contains checks that staff are being paid what they are entitled to.

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