Announcing the tougher approach last week, trade and industry secretary Alistair Darling said, 'Workers have the right to a decent minimum wage and we are determined that they get it. To those employers avoiding the minimum wage the message is, don't pay it and you'll pay the fine.'
The move follows last month's pre-Budget report in which Chancellor Gordon Brown signalled his backing for imposing heftier penalties on the worst offenders. He doubled, to 9m, the funding provided for monitoring and policing compliance with the wage laws.
Who enforces the NMW?
Her Majesty's Revenue and Customs (HMRC) enforces NMW requirements on the Government's behalf. It has 16 compliance teams spread across the country.
The teams educate employers and employees about their rights and responsibilities and, where necessary, take enforcement action.
What happens if you fail to pay your staff the NMW?
Actions taken against employers depend on the scale of non-compliance and range from educating employers to launching criminal prosecutions. At present, employers have 28 days in which to pay back any arrears. The HMRC has up to now rarely used its powers to serve penalty notices.
What will happen in future?
Actions against employers will continue to depend on the scale of the non-compliance. However, a Department of Trade and Industry spokesperson said that enforcement processes would be applied more rigorously and consistently, as follows:
* If the HMRC finds you are not paying your staff NMW rates, you will be asked to pay back arrears.
* If you fail to do so, you will be issued with an enforcement notice, giving you just seven days (down from 28 days) to repay the money or four weeks in which to appeal to an employment tribunal.
* If you fail to repay any money due within the appeal period, you will be issued with a penalty notice, which levies a fine. You again have four weeks to appeal.
* The fines are calculated by a statutory formula, based on twice the main adult hourly rate (5.35) for every underpaid worker and for each day that they were underpaid.
* The minimum fine for each employee would be 224.70 - (5.35 x 2 hours) x (1 worker) x (21 days of non-compliance with the enforcement notice).
* The HMRC may fine you even if it is the first time you have failed to comply with an enforcement notice.
* Note also that if you fail to comply with the enforcement notice within 28 days, the HMRC may not wait for you to pay or appeal any penalty but may press ahead with action in a civil court to recover the arrears.
* The most serious cases of non-compliance may be prosecuted in the criminal courts, with employers risking a criminal record and a maximum fine of Pounds 5,000.
Will HMRC teams target specific industries?
It is part of Government policy to target low-paying sectors for educating employers about their responsibilities and enforce the NMW requirements, and nurseries are currently under scrutiny.
The enforcement drive, launched last July, followed the discovery that about one-third of the 400 nurseries visited by HMRC teams over three years were non-compliant. However, some nursery owners were found to be confused by the requirements, rather than trying to be unscrupulous.
What are the current NMW rates?
The most recent rises took place on 1 October last year, when:
* the NMW for workers aged 22 and over rose from 5.05 to 5.35 an hour
* the development rate for 18- to 21-year-olds rose from 4.25 to Pounds 4.45 an hour
* the development rate for 16- to 17-year-old increased from 3 to Pounds 3.30 an hour.
What are the findings of the National Minimum Wage - Annual Report 2005-06?
The NMWannual report, published in November, found that in 2005-06:
* the incidence of non-compliance found in investigations remained high, at 32 per cent
* more than 61,000 calls were made to the NMW helpline
* 25,314 workers were helped to recover unpaid wages amounting to 3.29m (compared with 3.76m in 2004-05 and 2.55m in 2003-04)
* the number of employers subject to a completed investigation was 4,904, down from 5,153 the previous year
* the value of arrears in cases where enforcement notices were served was 69,711, compared with 81,347 in 2004-05 and 8,787 in 2003-04.
Where can you go for more information?
Anyone who wishes to make a query or complaint can call the NMW helpline on 0845 6000 678, open Monday to Friday 9am to 5pm. All calls are taken in strict confidence.
Information on the NMW, including penalty notices, is available at www.dti.gov.uk/employment/pay/national-minimum-wage/index.html
The National Minimum Wage and the Childcare Sector, also available on the DTI website, is a guide to NMW requirements and clarifies the rights of 'non-employed status' trainees and apprentices.
