Government proposes fixed penalty fines for employers paying less than the national minimum wage

The government is getting tough with employers that are paying workers less than the national minimum wage (NMW).

A consultation launched last week proposed a stricter enforcement regime designed to help the government crack down on organisations that flout minimum wage rules.

Under the new plans, employers that underpay their staff would be required to pay interest, as well as arrears. If they refuse to pay the increased wage and make the required back-payments, they face a fixed penalty fine linked to the number of employees underpaid.

In 2005-06, official figures show that 25,314 workers were underpaid – resulting in a total arrears of £3.29m – up 14,053 from the previous year.

Martin Warren, head of employment law at Eversheds law firm, said the proposals were tougher than expected. “Employers can currently repay arrears without penalty, but these proposals will require all employers found to be underpaying the NMW to pay a fixed penalty fine immediately,” he said.

“Employers will also be required to pay the employee interest in the form of a fixed price adjustment. For those that fail to or refuse to make the required back-payments and adjustments, a Crown Court prosecution could follow, leading to a £5,000 fine,” he added.

The NMW was introduced in April 1999. The current rate is £5.35 per hour, which will rise to £5.52 per hour in October.

Some problem sectors have been targeted by enforcement teams for special attention. Hairdressing was the first, with childcare second. The next industry to be put under the spotlight will be hotels, widening out next year to other areas of hospitality.

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