U.K.: Tougher Sanctions for Nonpayment of Minimum Wage

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By Ali Qassim

Sept. 9—A series of initiatives “to ensure hardworking people receive the pay they are entitled to” was announced by Her Majesty's Revenue and Customs Sept. 1. The reform is intended to increase compliance with the minimum wage laws and make sure those who break the law face tough consequences.

“There is no excuse for employers flouting minimum wage rules and these announcements will ensure those who do try and cheat staff out of pay will feel the full force of the law,” Business Secretary Sajid Javid was quoted in the HMRC release.

Tougher sanctions include doubling penalties for nonpayment of the national minimum wage and ensuring that anyone found guilty will be considered for disqualification from being a company director for up to 15 years.

The new national living wage–intended to be high enough for workers aged 25 and over to afford an average standard of living—will start at 7.20 pounds ($11) an hour beginning in April 2016 and rise to 9.00 pounds ($13.70) an hour by 2020, Chancellor George Osborne announced in the summer budget.

The current national minimum wage for workers aged 21 and over is 6.50 pounds ($9.95), 5.13 pounds ($7.85) for 18 to 20 year olds and 3.79 pounds ($5.80) for 16 to 17 year olds.

New Team of Enforcement Officers

As part of the new measures, the government said it will create a new team of compliance officers within HMRC responsible for enforcing the national minimum wage on behalf of the Department for Business, Innovation and Skills.

The team will have the power to use all available sanctions, including penalties, prosecutions and naming and shaming the most exploitive employers. (In 2013, HMRC introduced a policy of naming noncompliant employers. Since then, 285 employers, which together owed over 788,000 pounds ($1.2 million) in arrears, have been charged a combined 325,000 pounds ($497,000) in penalties under the program.)

The government will also create a so-called Director of Labour Market Enforcement and Exploitation to oversee enforcement of the national minimum wage, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority, the latter a nondepartmental public body in the Home Office that oversees crime and immigration.

The government also announced that it will improve the compliance guidance and support provided employers and work with payroll providers to ensure payroll software contains checks that staff are being paid what they are entitled to.

In 2014-2015, HMRC investigated 2,204 cases of possible noncompliance with the wage laws, found arrears in 735 cases for 26,318 workers totalling over 3.29 million pounds ($5 million) and charged over 934,000 pounds ($1.4 million) in penalties.

Qualified Support From Unions

The Trade Unions Congress, which represents almost 6 million workers and has lobbied for tougher sanctions for noncompliant employers, welcomed the measures.

“At least a quarter of a million workers are currently underpaid the existing national minimum wage,” TUC General Secretary Frances O'Grady said in a statement. “There must be no hiding place for cheating employers.”

“There is still much more to be done to protect low-paid workers,” however, O'Grady said, suggesting as examples that government pay minimum wage arrears when the employer cannot and enforce statutory holiday pay entitlements.

To contact the reporter on this story: Ali Qassim in London at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

Guidance on the national minimum wage is available at http://tumbleweed-prod.bna.com/documents/www.acas.org.uk/nmw, and employers or employees can ask questions at http://tumbleweed-prod.bna.com/documents/www.acas.org.uk/helplineonline. The HMRC press release is available at https://www.gov.uk/government/news/measures-to-ensure-people-receive-fair-pay-announced.

For more information on British HR law and regulation, see the U.K. primer.