Tinkering with the national minimum wage.

January 16, 2014 3:04 pm Published by

As we come out of recession and into growth (hurrah! at last!) the Government says it wants everyone to share in the benefit from the upturn. Fair pay for hardworking families is a bit of a political theme at present, on all sides of the political divide. One easy way to be seen to act on this is to give a bit more power to the National Minimum Wage (NMW).

It has therefore been announced that employers who do not pay at least the NMW will face an increased penalty of up to £20,000. Currently employers that break NMW law must pay the unpaid wages, plus a financial penalty calculated as 50 per cent of the total underpayment for all workers found to be underpaid. This is up to the present maximum penalty of £5,000. Soon that financial penalty will increase from 50 per cent to 100 per cent of the unpaid wages owed to workers, in other words it will double. The maximum penalty will increase from £5,000 to £20,000.
The increased penalties are expected to be in force in February 2014. The Government intends to go further and change the law to set a new maximum penalty of £20,000 applied to each underpaid worker.

A substantial increase in the national minimum wage itself is another way in which the Government may use the NMW regime to try to spread the benefits of any economic upturn. The NMW is currently £6.31 per hour for most adults, reviewed annually and usually increased a little. Whether the minimum wage should be substantially increased is a matter of debate, as to raise it much makes workers more expensive and may stop jobs being there in the first place.

More work will also be done to detect NMW breaches and to action reports made on the Pay and Work Rights Helpline (0800 917 2368). Business Secretary Vince Cable said:
“As well as higher penalties, we have made it easier to name and shame employers who fail to pay their workers what they are due. We are working with HM Revenue and Customs to investigate non-compliance and facilitate prosecutions in the most serious of cases. We also make sure that every complaint made to the free and confidential Pay and Work Rights Helpline is looked at.”

With the lowness of the NMW compared to what is referred to as being a ‘living wage’ there is considerable scope for increase, and the political benefit of being seen to champion the poor may be disproportionate to the actual benefit. Some will find that the increase in their wages will be offset by a decrease in benefit, meaning that the employer pays and the Government saves. And the NMW is likely to stay so low that it will never reach high enough up the earnings level to have any benefit at all on the ‘squeezed middle.’ Still, for those in the lowest paid jobs perhaps every little does help and just so long as the recovery keeps going everyone should benefit –especially the Government!

For more information contact Frances Barker at our Ipswich office on 01473 230033 or e-mail frb@blockslegal.co.uk.

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This post was written by Frances