Government gets tough with employers failing to pay minimum wage
Employers who owe their workers thousands of pounds for failing to pay them the correct National Minimum Wage have been named and shamed.
Employers who owe their workers thousands of pounds for failing to pay them the correct National Minimum Wage have been named and shamed by Business Secretary Vince Cable today (28 February 2014).
The government is introducing a series of tougher measures to crack down on employers who flout National Minimum Wage law. The first of these, a tougher naming and shaming scheme, came into effect on 1 October 2013.
Five employers are the first to be named under the stricter rules, who between them owe workers a total of over £6,800 in arrears and have been charged financial penalties totalling £3,381.40.
The 5 employers are:
- Peter Oakes of Peter Oakes Ltd, Macclesfield, neglected to pay £3619.70 to 2 workers
- Lisa Maria Cathcart of Salon Sienna, Manchester, neglected to pay £1760.48 to a worker
- Mohammed Yamin of Minto Guest House, Edinburgh, neglected to pay £808.56 to a worker
- Anne Henderson of Chambers Hairdressers, Middlesbrough neglected to pay £452.22 to a worker
- Ruzi Ruzyyev a car wash operator in Carmarthen neglected to pay £225.38 to a worker
As well as being publicly named and shamed, employers who fail to pay their workers the National Minimum Wage will face higher financial penalties of up to £20,000 as of 7 March 2014.
The government also plans to legislate at the earliest opportunity so that employers will also be given penalties of up to £20,000 for each individual worker they have underpaid, rather than the maximum fine applying to each employer. In the most serious cases, employers can also face criminal prosecution.
Business Secretary Vince Cable said:
Paying less than the minimum wage is illegal. If employers break the law they need to know that they will face tough consequences.
We know that people are put off using a business’ service if it is found guilty of not paying its workers the minimum wage. This is a clear warning to employers: you will damage your reputation and face a stiff penalty, if you don’t pay the minimum wage.
Any worker who is entitled to the minimum wage should receive it. It’s not only fair, it’s the law. If anyone suspects they are not being paid the wage they are legally entitled to they should call the Pay and Work Rights helpline.
The new higher penalties that will come into force on 7 March 2014 will increase the National Minimum Wage financial penalty percentage from 50% to 100% of total underpayments and the maximum penalty applied from £5,000 to £20,000.
Employers have a duty to be aware of the different legal rates for the National Minimum Wage, which were increased on 1 October 2013, and may vary depending on the circumstances of their workers.
Employers are also encouraged to make sure they take into account all details that can affect how much workers are entitled to be paid - including such things as age, accommodation, travel time and deductions for uniform hire.
The 5 cases named today (28 February 2014) were thoroughly investigated by HM Revenue and Customs after the workers made complaints to the free and confidential Pay and Work Rights helpline. Employers who are unsure of National Minimum Wage rules can also get free advice and information from the Pay and Work Rights helpline on 0800 917 2368.
Notes to editors
1.The National Minimum Wage rates changed on 1 October 2013:
- the adult rate increased by 12p to £6.31 an hour
- the rate for 18 to 20 year olds increased by 5p to £5.03 an hour
- the rate for 16 to 17 year olds increased by 4p to £3.72 an hour
- the apprentice rate increased by 3p to £2.68 an hour
- the accommodation offset increased to £4.91
2.The government is committed to increasing compliance with minimum wage legislation and effective enforcement of it. Everyone who is entitled to the minimum wage should receive it. The BIS scheme to name employers who break minimum wage is one of a range of tools at the government’s disposal to tackle this issue. Employers who pay workers less than the minimum wage have to pay back arrears of wages at current minimum wage rates and face financial penalties of up to £5,000 increasing to £20,000 from 7 March 2014. In the most serious cases employers can be prosecuted.
3.From 1 October 2013 the government revised the naming scheme to make it simpler to name and shame employers who break the law. Under the previous scheme there were seven criteria for naming, and an employer had to meet 1 of these to be named plus the financial criteria.
4.These criteria have been removed and under the revised scheme the government will name all employers that have been issued with a Notice of Underpayment (NoU) by HMRC unless there are very exceptional cases. This notice sets out the owed wages to be paid by the employer together with the penalty for not complying with minimum wage law. These 5 employers are amongst the first complaints, where HMRC have finalised their investigations, since the revised scheme came into effect.
5.Employers have 28 days to appeal against the NoU. If the employer does not appeal or unsuccessfully appeals against this NoU, BIS will consider them for naming. The employer then has 14 days to make representations to BIS outlining whether they meet any of the very exceptional criteria: naming by BIS carries a risk of personal harm to an individual or their family or there are national security risks associated with naming, or there other factors which suggests that it would not be in the public interest to name the employer or company. Of these, the public interest criteria will only apply in very exceptional circumstances. BIS will normally expect to inform the employer of the outcome of any representations made within 14 days of receipt of any representation made by the employer. If BIS do not receive any representations or the representations received are unsuccessful, the employer will be named via a BIS press release under this scheme.
6.The government will continue to publicise the decisions of employment tribunals in cases where an employer has unsuccessfully appealed against a NoU. HMRC will also continue to publicise county court judgments and other orders made against employers who HMRC have had to take to court to recover arrears of wages for workers.
7.The current penalty for NMW is calculated as 50% of the total underpayment for all the workers specified in the NoU. Where the amount would be less than £100, the minimum penalty of £100 should be applied. Where this amount would be more than £5,000, the maximum penalty of £5,000 should be applied. The penalty is reduced by 50% if the employer pays back the arrears owed to workers within 14 days.
8.The government announced on 15 January 2014 that they will be increasing the financial penalty percentage from 50% to 100% of the unpaid wages owed to workers. From the 7 March 2014, the revised maximum penalty will increase from £5,000 to £20,000. Where this amount is less than £100, the minimum penalty of £100 should still be applied. Where this amount is more than £20,000, the maximum penalty of £20,000 should be applied. The government will also bring in legislation as soon as possible so that the maximum £20,000 penalty can apply to each underpaid worker. Primary legislation is needed to introduce a penalty of £20,000 per worker into the NMW Act 1998.
9.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.