National Minimum Wage enforcement changes
Enforcement of the National Minimum Wage following changes by the Employment Act 2008
Since 6 April 2009:
- employers face a penalty if HM Revenue & Customs (HMRC) discover they have failed to pay the National Minimum Wage (NMW)
- workers can have arrears of wages repaid at current NMW rates
- HMRC compliance officers have new inspection powers
The Employment Act 2008 brought in these changes.
Penalty where employers fail to pay the NMW
If HMRC find that there has been an underpayment of the NMW they may issue a notice of underpayment. This requires an employer to repay arrears to the workers and to pay a financial penalty to the Secretary of State. Employers can appeal against the notice of underpayment to an Employment Tribunal.
The penalty will only be charged in respect of underpayments of the NMW occurring in pay reference periods starting on or after 6 April 2009. There will be no penalty in respect of underpayments occurring before this date.
The penalty is set at 50 per cent of the total underpayment for periods starting on or after 6 April 2009. There is a minimum penalty of £100 and a maximum penalty of £5,000.
Employers who comply fully with the notice of underpayment within 14 days of service will receive a discount of 50 per cent on the penalty.
New method of calculating NMW arrears
Workers who are owed arrears of NMW for pay reference periods starting on or after 6 April 2009 will be entitled to have their arrears repaid at current rates where these are higher than the rate or rates that applied when the arrears arose. The increase to current NMW rates takes account of the length of time that the arrears have been outstanding (i.e. it compensates workers who have had to wait for their arrears).
The arrears must be calculated according to a formula which is set out in the Act and this change applies retrospectively (i.e. from 6 April 2009, workers will be entitled to have their arrears repaid at current rates for all periods that they have been underpaid, including periods prior to 6 April 2009). The formula only applies if the current rate is higher than the rate or rates that applied at the time the worker was underpaid.
New powers of inspection for HMRC compliance officers
Compliance officers will be able to remove NMW records from an employer’s premises for photocopying. The compliance officer will be entitled to remove complete records but must return them within a reasonable period.
New criminal regime for NMW offences
The Act gives HMRC the power to use the search and seize powers in the Police and Criminal Evidence Act 1984 when investigating criminal offences under the National Minimum Wage Act 1998.
The Act also makes changes to the way that criminal offences under the National Minimum Wage Act 1998 are investigated and enforced: in particular, with effect from 6 April 2009, the most serious cases will be triable in the Crown Court. This means that employers who deliberately fail to pay the minimum wage may face stiffer penalties.
