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Tougher penalties for unscrupulous employers

The government is set to introduce more onerous financial penalties for employers who fail to pay the national minimum wage (NMW). The original announcement was made before Christmas but today’s announcement makes clear that the government intends to go further than previously thought.
As things stand employers who fail to pay the NMW face a financial penalty of 50% of the unpaid wages up to a maximum of £5,000. Before Christmas it was announced that the government plans to increase the financial penalty to 100% of the unpaid wages up to a maximum of £20,000 from February 2014. It is now clear that the government has separate plans to introduce legislation so that the maximum £20,000 penalty applies in relation to each unpaid worker.
The government’s intention is to penalise those with the highest levels of arrears. The current regime had been criticised for its comparably low maximum fine in contrast to fines for offences such as fly-tipping which attract much higher penalties. The applicable fines under the new regime go some way to addressing this complaint. It is clear the new fines could run into many thousands of pounds more than under the current regime depending on the scale of the scandal in each particular case.
The NMW is enforced by HMRC. HMRC enforcement is initiated either by complaint or as a result of its own investigations. Officers can carry out inspections at any time, without providing a reason. If NMW is found to be in arrears a “notice of underpayment” will be issued and the financial penalty is payable to the Secretary of State within 28 days. If the employer does not comply HMRC will issue proceedings in the civil courts. In the most serious cases criminal prosecutions might ensue. In addition, once a notice of underpayment is issued HMRC will refer the case to the Department of Business Innovation and Skills to consider naming and shaming the employer in a press notice. So far only one employer, a hairdresser from Leicester, has been named and shamed. That said the regulations have been relaxed to allow naming and shaming in more serious cases. Whether or not such a list will act as a deterrent remains to be seen.
If you have not been paid at least the NMW you are entitled to raise a claim in the employment tribunal or sheriff court. Such claims must be brought in an employment tribunal, usually within three months of the failure to pay the NMW. For breach of contract claims in the sheriff court, claims must be brought up to five years after the breach in Scotland (up to six years in the county court in England).
The NMW is currently £6.31 per hour for workers aged 21 and over.
If you have any queries relating to this article or any employment law matter please contact a member of our Employment law team.

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