Maximum fine for non-payment of national minimum wage to increase to £20,000

The Government has confirmed that employers who fail to pay their workers the national minimum wage (NMW) will face an increased financial penalty of up to 100 per cent of the unpaid wages and a higher maximum penalty of up to £20,000. Regulations introducing these new limits are subject to Parliamentary approval and are expected to come into force in February 2014. The Government also intends to legislate at the earliest opportunity so that the maximum £20,000 penalty can apply to each underpaid worker.

Currently, the penalty is calculated as 50 per cent of the total underpayment for all workers specified in the Notice of Underpayment (NoU) issued to employers by HMRC. Where this amount would be less than £100, a minimum penalty of £100 is applied. Where this amount would be more than £5,000, a maximum penalty of £5,000 is applied. The penalty is reduced by 50 per cent if the unpaid wages are paid within 14 days. It is not clear whether the fine will still be reduced if paid within 14 days under the new penalties scheme.

The increase in the penalties for non-payment follows changes made last year to make it easier to ‘name and shame’ employers who fail to pay the NMW. Under the previous scheme, launched in 2011, HMRC only referred cases to BIS where the total arrears owed to workers were at least £2,000 and the average arrears per worker was at least £500. In addition, an employer had to meet one of seven criteria for naming. Under the revised scheme, if an employer does not appeal a NoU from HMRC within 28 days, or unsuccessfully appeals against the NoU, BIS will consider it for naming. The employer then has 14 days to make representations to BIS outlining whether it meets any of the following criteria:

• naming by BIS carries a risk of personal harm to an individual or their family

• there are national security risks associated with naming, or

• there are other factors which suggest that it would not be in the public interest to name the employer or company.

If BIS do not receive any representations, or the representations received are unsuccessful, the employer will be named via a BIS press release.