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Employment Law

Legal guidance - compliance - software

11 SEP 2015

New proposals to enforce the National Minimum Wage and National Living Wage

New proposals to enforce the National Minimum Wage and National Living Wage

Michael Halsey
Partner,  Veale Wasbrough Vizards

On 1 September 2015, the Department for Business Innovation and Skills (BIS) announced measures to increase compliance with the National Minimum Wage (NMW) and National Living Wage (NLW).

BIS have not said when the measures will come into force. The measures include doubling penalties for non-compliance and disqualification from being a company director.

What are the NMW and NLW?

The national minimum wage currently stands at £6.50 per hour for adults of 21 years and over. The national living wage is a premium applied to employees over 25 years old. It will be introduced in April 2016 at £7.20 per hour, and will effectively replace the NLW for that age bracket.

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The measures

The measures BIS proposes to introduce include the following:

  • If an employer fails to pay their staff at least the NMW, the penalty will be 200% (rather than the current 100%) of the money the employer owes their staff. However, this penalty will be halved if it is paid within 14 days. The cap of £20,000 per staff member remains the same. 
  • A new team will be set up in the HMRC to investigate the most serious criminal cases regarding companies who deliberately obstruct the NMW and NLW. They will have the same powers as the HMRC including the ability to 'name and shame' employers. The HMRC currently tackle the most high-risk areas, which are in social care, hairdressing and retail. 
  • A new role called the Director of Labour Market Enforcement and Exploitation will be made to oversee enforcement of the NMW and NLW, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority (a non-departmental public body of the Home Office). 
  • Anyone found guilty of not paying the NMW or NLW will be 'considered' for disqualification from being a company director for up to 15 years. 
  • There will be an increased budget for the NMW and NLW in 2016 to 2017.
  • A consultation will be launched in the Autumn for a new offence of aggravated breach of labour market legislation and to propose giving the Gangmasters Licensing Authority wider powers. 

Best practice

These proposed measures show the increased hard-line approach the government is taking to ensure employers comply with their obligations to pay the NMW and the NLW. However we wait to see how forceful and effective these measures will be when enacted.

If the measures are used to their full potential, it is important that employers keep a close eye on their lower paid staff's wage, particularly when new NMWs, and now new NLWs, come into effect.