The scheme is expected to restart in April this year with
the hopes to act as a deterrent to businesses
UK’s Minimum Wage law prohibits employers from hiring employees for less than a given hourly, daily, or monthly minimum wage. But what if employers fail to play by the rules? The government has announced plans to resume publicly naming companies who fail to pay their workers the National Minimum Wage or National Living Wage in a series of new reforms as part of an overhaul of employment law enforcement.
Businesses who fail to pay their staff minimum wage will be called out by the government, along with the implementation of new regulations to increase support for employers and comply with the National Minimum Wage legislation.
The government will also introduce a less harsh punishment for employers who fail to pay their workers minimum wage. Previously, firms who owed their employers £100 in National Minimum Wage payments were called out. But now, this will be increased to those who owe arrears of more than £500. This means that businesses who do not pay their workers by minimal sums will not be named provided they correct their errors. However, if businesses fail to comply, they could face fines of up to 200% of the arrears.
“Anyone who is entitled to the minimum wage should receive it – no ifs, no buts – and we’re cracking down on companies that underpay their workers,” Business Minister Kelly Tolhurst said. “We also want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply with the NMW rules, which is why we’re reforming regulations.”
The HMRC identified £24.4 million in arrears owed to over 220,000 workers in the year to April 2019. In addition, a record amount of penalties of over £17 million were issued to businesses last year for failing to pay National Minimum Wage to employees.
The scheme, which is expected to come into force on April 6 this year following Parliamentary approval, will see name calling rounds occurring more often with hopes to make this an effective deterrent to businesses. The government is upping its NMW enforcement budget to £27.4 million, following the creation of a Single Enforcement Body (SEB) which aims to protect worker’s employment rights and exploitation of workers as part of the government’s new employment bill.
In addition to that, HMRC is also implementing new changes to regulations of “salaried hours workers” – employees who are paid according to a set number of hours each year under their contract. These workers have different pay checks per month, such as those in the retail industry. Under the new changes, salaried workers will be provided more flexibility in how they are paid without reducing their protection and rights. These employees will be given additional payment cycles, such as fortnightly and four-weekly cycles to ensure they are paid on time. Employers will be able to choose the “calculation year” for their workers to better monitor their salary and identify any instances where their wages could be underpaid. Also, the new changes will ensure salaried workers receive higher pay, such as working on Bank Holidays, without losing their regular pay instalments.
“I welcome today’s announcement by the Government and believe employers will benefit from the greater clarity these revisions bring to the minimum wage rules for salaried workers,” Matthew Taylor, Director of Labour Market Enforcement, said. “Particularly welcome is the news of the reintroduction of the NMW Naming Scheme, that both recognises the sharper focus advocated by my predecessor and follows a stronger compliance and education approach to help employers get it right.”
The government is also putting in more effort to ensure businesses pay their workers the right salary on time. The government will now make National Minimum Wage guidance more accessible and easier for businesses to navigate through the Gov.uk website. HMRC will also visit selected small businesses to better educate them on National Minimum Wage and help them get their practises right from the get-go. In addition, HRMC will provide a new helpline to support to employers who operate deduction or salary sacrifice schemes.
It is important workers’ rights are protected according to the law. Naming and shaming employers who fail to follow the rules and pay their staff the National Minimum Wage can serve as an effective deterrent and in the long-run and prevent companies from breaching the legislation. However, some businesses can easily fall foul of wage rules simply by misunderstanding the rules. Therefore, it is important companies, particularly small businesses, are given added support and guidance to ensure their practises are correct.