National minimum wage – paying the (increased) penalty

Employers who are not paying their workers the National Minimum Wage (NMW) – currently £6.31 per hour for workers over 21 - currently face a penalty of 50% of the total underpayment of the NMW (the minimum being £100 and the maximum being £5,000). Between 2012 and 2013, HMRC identified 736 employers who had failed to pay their workers the NMW. This led to the recovery of £3.9 million in unpaid wages for over 26,500 workers.

Following an announcement by David Cameron before Christmas, the government will increase this to 100% of the total underpayment which will raise the maximum fine to £20,000. Regulations introducing these new limits are subject to Parliamentary approval and are expected to be in force in February 2014. The government also plans to introduce legislation at the earliest opportunity so that the maximum £20,000 penalty can apply to each underpaid worker.

Business Secretary Vince Cable said:

"Anyone entitled to the National Minimum Wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules. The message is clear – if you break the law, you will face action.

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 HM Revenue and Customs 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."

Meanwhile, George Osborne, Chancellor of the Exchequer has suggested that the NMW for workers over 21 (such rate proposed on an annual basis by the Low Pay Commission) should be increased to £7.00 per hour, an increase of almost 11%. It remains to be seen whether the suggested rate is followed, with the announcement form the Low Pay Commission expected in spring of this year.