Not paying the National Minimum Wage just got more serious!

Following changes made last year making it easier for employers who fail to pay the National Minimum Wage ("NMW") to be ‘named and shamed’, the government confirmed earlier this year that the financial penalty for NMW non-payers will be increased to a maximum of £20,000.

The current legislation means that employers who fail to pay their workers the NMW must pay their employees the unpaid wages plus a fine of up to 50 per cent of the total underpayment for all workers found to have been underpaid. A minimum penalty of £100 and a maximum penalty of £5,000 are currently applied. Under the present rules, employers can reduce that fine by half if they make payment of the unpaid wages to employees within 14 days.

Under the new scheme, the fine percentage will be increased so that employers will now be liable to a fine of 100 per cent of the total underpayment, up to a maximum of £20,000. The new regulations are currently awaiting parliamentary approval but are expected to come into force later in February 2014. It is unclear whether the regulations will still provide for employers to receive a reduction of the fine for early payment.

The government has also indicated that it will go even further and intends to bring in legislation in the near future that will enable the £20,000 maximum penalty to apply to each underpaid worker, as opposed to all underpaid workers as a collective. The financial implications for employers not paying the NMW could therefore be huge.

Last year, 708 employers were issued with fines and forced to pay backdated wages so the importance of ensuring that you are paying your employees in line with the NMW regulations can not be understated. The current NMW rate for workers aged 21 and over is £6.31 per hour and is reviewed in October each year. Employers are urged to ensure that they regularly examine the amount they pay their employees to ensure compliance.

For further information on the NMW requirements or on any other aspect of employment law, please contact James on 01332 225271 or at james.johnson@smithpartnership.co.uk.