Enforcement of the National Minimum Wage - The New Regime

From 6 April 2009, changes have been made to the way the National Minimum Wage (NMW) is enforced. In addition, where HM Revenue and Customs (HMRC) discover that a worker has been paid less than the NMW, he or she is entitled to have arrears of wages repaid at current rates. These changes were brought in by the Employment Act 2008. The Act also gives HMRC compliance officers new inspection powers and strengthens the criminal regime for NMW offences.

If HMRC find that there has been an underpayment of the NMW, they may issue a notice of underpayment requiring the employer to repay the arrears and to pay a financial penalty to the Secretary of State. Employers can appeal to the Employment Tribunal against the notice of underpayment.

A penalty set at 50 per cent of the total underpayment will be charged in respect of underpayments of the NMW occurring in pay reference periods starting on or after 6 April 2009. However, 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.

Where workers are owed arrears, the repayment must take account of the length of time that has elapsed since the underpayment. Where the rate of the NMW at the time the arrears are calculated is higher than the NMW in force at the time the underpayment occurred, the arrears will be calculated by reference to the current rate.

Compliance officers have the power 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.

The Employment Act 2008 also 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 and makes changes to the way that criminal offences are investigated and enforced. With effect from 6 April 2009, the most serious cases can be brought to trial in the Crown Court. This means that employers who deliberately fail to pay the NMW may face harsher penalties.

The Government has published a document setting out its policy on HMRC enforcement and prosecutions, which can be found at http://www.berr.gov.uk/files/file50812.pdf.

Telephone: +44 (0) 1753 486 777 (Slough Office)
Telephone: +44 (0) 1189 596031 (Reading Office)