Section Menu

Proposed changes to how the National Minimum Wage is enforced

The Government is proposing changes to the National Minimum Wage (NMW) Act to create a clearer deterrent to non compliance and to provide a fairer way of dealing with arrears of NMW.

The changes are being taken forward in the Employment Bill which is currently going through Parliament. Subject to parliamentary approval, the Government intends the NMW provisions to come into force on 6 April 2009.

The proposed changes will introduce:

• A fairer method of calculating arrears for workers who have been underpaid;
  
  
• A penalty payment for employers who do not pay their workers the NMW.
  
  
• New inspection powers for NMW compliance officers; and
  
  
• A strengthening of the criminal regime for NMW offences.

What is the new method of calculating arrears?

Changes in the Employment Bill will mean that the arrears of NMW which are owed to any worker who has been paid less that the NMW will be calculated by reference to the current rate of NMW when the current rate is higher than the rate in force at the time of the underpayment. This means that the worker will be repaid any underpayment of NMW by his employer at a higher rate if the NMW rate has increased since he was underpaid. The formula for this calculation is set out in the Bill and this provision ensures that the calculation of arrears takes into account the length of time that arrears have been outstanding.

The new method of calculating arrears will apply to any arrears of NMW that are outstanding on or after the date the Bill comes into force. This includes arrears resulting from underpayments of NMW made before that date.

What changes to enforcement of the NMW does the Bill make?

In addition to introducing a fairer method of calculating arrears for workers and a penalty payment for employers who fail to pay the NMW to a worker, the Bill gives further powers to HMRC officers in obtaining NMW information from employers, allowing them to take information away from the employers premises in order to copy it.

The Bill also makes changes to the way the criminal offences existing under the NMW Act are investigated and enforced: in particular, for the most serious cases, offences will be triable in the Crown Court.

For full details of the proposed changes see the Employment Bill 2007-2008 and the accompanying Explanatory Notes.

What happens next?

The Department will be issuing guidance to employers and workers later in 2008 and is currently working with stakeholders to ensure an effective implementation process for the new enforcement regime.