Higher Penalty for Non-Compliance of the National Minimum Wage

Higher Penalty for Non-Compliance of the National Minimum Wage

Last week it was announced by the Coalition Business Secretary Vince Cable that employers who fail to comply with the National Minimum Wage will be faced with a higher maximum fine. This new legislation is due to come into force next month.

Currently the fine consists of a payment of unpaid wages plus 50% of the value underpaid. However upon implementation of the new rule in February 2014 this will be increased to make the employer pay the full 100% of unpaid wages owed to their employees in addition to the value underpaid. The new limits will also give rise to an increase in the maximum fine charged from £5000 to £20000. This maximum penalty is to be levied on an employer for each underpaid employee. In the most serious of circumstances the UK government is working with the HM Revenue and Customs to service prosecutions.

The National Minimum Wage currently for adults is £6.31 £5.03 for employees aged 18-20 and £3.72 for those aged 16-17 (with lower rates at £2.68 for some apprentices). In the last two years the HM Revenue and Customs fined 708 employers following on from 1693 complaints. The stiffer penalty is aimed to decrease this figure in the future by ‘naming and shaming’ non-compliant employers and acting as an incentive to others to increase their wage rates if they fail to yet meet the minimum requirement.

Vince Cable reiterated that this will deliver a strong warning to employers that the National Minimum Wage cannot be ignored. “We are bringing in tougher financial penalties to crack down on those who do not pay by the rules. The message is clear- if you break the law you will face action.”

Written by

Sarah Pavitt

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