The government is to target cheating employers with a new regime of fines if they pay below the national minimum wage.
In a consultation, the government has proposed options including fixed penalty fines linked to the number of workers who are under-paid.
It also proposes that employers would have to pay interest, or other cash, to workers they have underpaid as well as repaying arrears.
Trade and industry secretary Alistair Darling said: “Paying less than the minimum isn’t only unfair to the workers, it’s unfair to the vast majority of employers who obey the law, because it lets rogue businesses undercut them.
“I want to give this simple message to bad employers: pay less than the minimum wage and it will cost you.”
The government has identified an estimated £22.6m in unpaid wages, but until now, employers have not been punished, as long as they pay up when they are caught.
The consultation will also look at enforcement of employment agency standards, seeking views on whether offences should be sent for trial in the Crown Court, and whether the Employment Agency Standards Inspectorate should be given clearer investigative powers to obtain financial information on suspects.
Tony Woodley, joint general secretary of the new Unite union, said: “Unions have made a strong case to government to address the precarious position of agency workers that is undermining fairness at work and social cohesion, so we welcome tougher sanctions against rogue employers and agencies.
“But enforcement of the national minimum wage and agency standards must be meaningful both to employers and workers including more resources for enforcement teams,” he said.