Government Signals Crackdown on Rogue Employers who Avoid Minimum Wage

The Government is to crack down on rogue employers with a range of new powers, including potentially unlimited penalties for the most serious offenders and stronger powers for inspectors to investigate evidence of wrong-doing.

The Department for Business, Enterprise and Regulatory Reform's (BERR) announced the changes as it published a response to a consultation on strengthening enforcement of the National Minimum Wage (NMW) and Employment Agency Standards (EAS).

Stakeholder groups, including unions, business organisations and sector associations, were overwhelmingly supportive of these changes, which will bring greater fairness to the labour market for both workers and businesses.

Results from the consultation response form part of the Government's Employment Bill, published on 7th December.

Minister for Employment Relations, Pat McFadden said:

‘The minimum wage was a very important new right for people at work and we want to see it properly enforced.

‘Paying less than the minimum wage and breaking agency legislation isn't only unfair to the workers - it's unfair to the vast majority of companies who obey the law, because it allows cheating operators to undercut them.

‘Until now, employers would only face a penalty if they continued to underpay the Minimum Wage once caught. Now there will be a penalty for all employers found underpaying.

‘Most businesses do treat their staff fairly. These reforms are targeted at those who don't. Legitimate businesses will therefore benefit from this clearer and more effective enforcement on those who do the wrong thing.’

Other changes which form part of the response to consultation include:
* A fairer method for dealing with national minimum wage arrears, calculated so that workers do not lose out as a result of underpayment.

* Toughening up penalties for those who break the law, increasing the maximum penalty for NMW and EAS offences from a £5,000 fine to an unlimited fine. The most serious cases of non-compliance will be tried in a crown court, which will have the power to impose an effectively unlimited penalty.

* Strengthening the investigative powers of the Employment Agency Standards Inspectorate, allowing them greater scope to access financial information to help them check whether a worker's complaint is an isolated instance, or an example of widespread abuse.

The Government has already helped over 78,000 workers recover around £27 million in unpaid wages since 1999. These new reforms include a simpler, more effective penalty regime where a fine will be due in all cases where underpayment is still outstanding when HMRC begins its investigation.

Any worker who believes they are not being paid the NMW should contact the Helpline on 0845 6000 678. For advice on employment rights contact Acas on 08457 474747.
The Government is working with business organisations to ensure that employers have access to the information they need to help them comply with the requirements of the new legislation.

An awareness raising campaign will be undertaken before the changes come into effect, including guidance to help employers understand and comply with their obligations are in relation to NMW. A confidential service will also be available for employers who want to check that they are compliant - contact would be guaranteed not to result in automatic enforcement action, though it could not prevent it if a case is also raised.