Penalties increased for those paying less than minimum wage

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Employers failing to pay their workers the national minimum wage face paying up to £20,000 in penalties, an increase of £15,000.

Under the current rules, employers that fail to pay at least £6.31 an hour to over 21-year-olds, must pay the unpaid wages plus a financial penalty. This is calculated as 50% of the total underpayment for all workers found to be underpaid – and the maximum penalty an employer can face is £5,000.

The government will increase the financial penalty percentage to 100% of total underpayment and the maximum financial penalty to £20,000, subject to Parliamentary approval and expected to be in force in February.

Plans are also underway to introduce legislation to enable the maximum £20,000 penalty to apply to each underpaid worker.

“Anyone entitled to the national minimum wage should receive it,” said Vince Cable, business secretary. “Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules.”

Cable added that the government has also made it easier to name and shame employers who fail to pay their workers what they are due.

This comes as Chancellor George Osborne called for the minimum wage to increase by 50p per hour – above the rate of inflation.

Osborne’s announcement was met by cynicism from some quarters, suggesting he made the announcement to appeal to Labour voters and undermine a speech to be delivered by Shadow Chancellor Ed Balls.

“I would like to ask the Chancellor whether this move is motivated by a will to improve people’s lives or whether it is politically motivated,” said Chris Smith, CEO at Opinio Group.

“If someone cannot make an impact on your business that yields a return above what you are paying them you need to ask why you are bothering in the first place – or find a way in which technology can drive down or replace that cost,” he added.