Briefing Note - National Minimum Wage

07 February 2014

A briefing note has been published which provides an update about some important changes to National Minimum Wage policy, which will have an impact on all employers.

What's Changing?

 

Naming and Shaming

From 2011, the Department for Business Innovation and Skills (BIS) has been able to 'name and shame' employers if they employed people who were paid below the minimum wage and the employer's behaviour met certain conditions. Only one employer has been named by BIS since the scheme started.

From October 2013, these conditions have been relaxed. This means that every employer who receives a Notice of Underpayment from HMRC will be considered for 'naming and shaming' even if their actions are unintentional. Employers will be able to make representations to BIS against being named. BIS will consider whether naming would carry risk of personal harm to an individual or a family member, pose a national security threat or otherwise not be in the public interest but the expectation is that in most cases details will be published.

You can find full details of the scheme in:

Higher Penalties

In addition to changes to the 'Naming and Shaming' scheme, the Prime Minister announced in November 2013 that there would be much higher penalties for employers who fail to pay the National Minimum Wage. He said:

“We are also clamping down on those who employ people below the minimum wage. They will pay the price with a fine of up to £20,000 for every under-paid employee - more than four times the fine today.”

Statutory Instruments were laid mid-January to effect an interim change which will quadruple the maximum existing penalty, (from £5,000 to £20,000) and charge 100% of the total underpayment, rather than 50% as at present. The 50% reduction for paying all arrears within 14 days remains. This change is expected to come into effect for pay reference periods from early March 2014. Primary legislation to give effect to the £20,000 penalty, per worker, is timed for the end of 2014.

Background

HMRC administers and enforces NMW on behalf of the Department for Business Innovation and Skills (BIS). The NMW team has around 160 staff spread across 18 locations tackling non-compliance by employers - ranging from large national retailers to small local businesses. Complaints are passed on to the NMW team from the Pay and Work Rights Helpline for examination and the team also does some risk assessed work which isn't complaints driven.

Last year out of 2645 referrals, arrears were identified in 736 of them. Sometimes the failures to pay the right amount are deliberate but at other times the employer has misunderstood what's required of them or even just used incorrect personal details such as dates of birth, (the rates can change on birthdays).