Updated Government Policy Paper on National Minimum Wage Enforcement

The government has re-issued its policy paper on national minimum wage enforcement to take account of recently increased penalties and forthcoming new measures under the Immigration Act 2016.

The updated policy covers both civil and criminal enforcement strategies.

Recent developments in this area include:

  • An increase in the maximum penalty for non-compliance with the national minimum wage, which rose from 100% to 200% of the underpaid wages on 1 April 2016. By increasing penalties for underpayment of the minimum wage it is intended that employers, who would otherwise be tempted to underpay, comply with the law and working people receive the money they are legally due.  The maximum penalty per worker is £20,000, with the minimum being £100. The penalty is also reduced by 50% if the unpaid wages and the penalty are paid within 14 days.
  • The Government will create a new role of the Director of Labour Market Enforcement, under the Immigration Act 2016. The relevant provisions of the Act came into force on 12 July 2016. The role will provide better leadership and co-ordination of the efforts of the three enforcement bodies working across the spectrum of labour market enforcement – the HMRC National Minimum Wage team, the Employment Agency Standards and the Gangmasters Licensing Authority – with a common view of risk and priorities drawn from shared intelligence.
  • Forthcoming new Labour Market Enforcement Undertakings – HMRC will have the power to request that a business which has already repeatedly or very seriously breached labour market legislation enters into an undertaking to take steps to prevent further labour market offending.
  • Labour Market Enforcement Orders – the Government is creating a new type of enforcement order, supported by a criminal offence for non-compliance. The new order is specifically targeted at those employers who deliberately, persistently and brazenly commit breaches of labour law and fail to take remedial action. This cannot always be done satisfactorily through repeated use of existing penalties or offences, which may lead to continued exploitation of workers.
  • Where an employer is found to be breaking minimum wage law, it will be issued with a Notice of Underpayment by HMRC. The employer will have 28 days to appeal against the Notice of Underpayment. If it does not appeal, or where an appeal has been unsuccessful, HMRC will refer the employer to the department for Business, Innovation & Skills to be considered for “naming and shaming”.  

If you have any questions arising from this article or would like further information, please get in touch with a member of our Employment team.