Employers fall foul of the National Minimum and Living Wage regulations
It is hard to believe that the National Minimum wage (NMW) was first introduced in April 1999. At that time the rate of the NMW was £3.60 per hour (£3.00 for 18 to 21-year-olds). In April 1999 1.9 million people were believed to be paid below the minimum wage.
On the 1st April 2016, the Government introduced a new mandatory National Living Wage (NLW) for workers aged 25 and above, initially set at £7.20 - a rise of 50p relative to the current NMW ) rate.
The rate is reviewed annually each April and we publish all statutory payment increases so you can be informed of any changes.
It is therefore something of a surprise that there are still many employers who, for whatever reason, fail to pay the minimum pay rates for their staff. The Government has taken a clear public stance in identifying employers who fail to pay the minimum wage and their policy of ‘naming and shaming’ has led to the publication of a list of 260 employers that have failed to pay 16,000 workers a combined total of £1.7m in back-pay.
Sports Direct and Primark have been named as two of the worst offenders on a Government list and the Government has reinforced their commitment to continue to take enforcement action against any employers who fail to the pay their staff the minimum wage.
Small Business minister Margot James said: “There is no excuse for not paying staff the wages they’re entitled to and the government will come down hard on businesses that break the rules.”
Penalties for non-compliance
If you fail to pay the required minimum wage you face the risk of an investigation by HM Revenue and Customs and the issue of a notice of underpayment, which can include the payment of arrears to worker(s) and a financial penalty.
The penalty is set at 200% of the total underpayment. There is a minimum payment of £100 and a maximum payment of £20,000. The maximum payment applies for each worker who has been underpaid, not to the total payment for all workers. For the most serious cases involving fraud and deception, employers may be criminally prosecuted by the Revenue and Customs Prosecutions Office. The potential penalty on conviction is an unlimited fine.
Employers can also face claims from their employees for unlawful deductions from wages or breach of contract, where they are paying below the minimum wage.
Current National Minimum Wage and National Living Wage rates
25 and Over - £7.50
21 to 24 - £7.05
18 – 20 - £5.60
Under 18 - £4.05
Apprentice * - £3.59
Apprentices are entitled to the apprentice rate if they’re either:
Aged under 19
Aged 19 or over and in the first year of their apprenticeship
It is important that you review your current pay rates to ensure that you pay the appropriate rate to your staff. Recent case law has highlighted the need for employers, under certain circumstances, to pay staff for travelling between jobs, overtime and to ensure deductions are not made from pay for providing uniforms.
HR Services Director
This article is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employment law, speak to one of our advisors by calling 01455 444222 or click here to complete our online enquiry form and an advisor will contact you shortly.