Important changes to National
Minimum Wage from 6 April 2009
New Automatic Penalties for those who do not comply with National Minimum Wage Rules
From 6 April 2009, a new automatic penalty will be levied on employers where our compliance officers find arrears of the National Minimum Wage (NMW) after 6 April 2009. Penalties will range from £100 to £5,000 and those employers who settle within 14 days of notification will receive a 50 per cent discount of the penalty for prompt payment. The penalty must be paid in addition to any arrears owed to the workers. The most serious cases of non compliance may be tried in a Crown Court and subject to an unlimited fine.
To reflect this change, the current system of separate NMW enforcement and penalty notices will be replaced by a combined notice of underpayment and penalty. This will be issued whenever we discover that arrears were outstanding at the start of our enquiries.
The notice will detail the amounts due to workers (calculated according to the formula shown below) and any penalty due on those arrears. The penalty will be half the total underpayments shown on the notice, for pay reference periods starting on or after 6 April 2009. HMRC can pursue arrears claims for workers going back up to six years.
You will be able to appeal both the amount of the arrears and the penalty to an Employment Tribunal (an Industrial Tribunal in Northern Ireland) under new appeal rights. If you have any questions about the NMW you can call the National Minimum Wage Helpline in confidence on Tel 0845 6000 678.
Calculating NMW arrears
From 6 April 2009 the way employers calculate and pay arrears of the NMW to workers is also changing.
The new changes will require employers to pay arrears which will increase depending on the length of time they have been outstanding. The exact amount of an individual worker’s arrears will be calculated using a formula set out in legislation. This aims to restore the purchasing power of wages that were not paid at the proper time. For each pay reference period the formula is:
Original underpayment
_____________________ x Current NMW rate = Arrears
Original NMW rate
From 6 April 2009 arrears must always be calculated in this way. It does not matter whether or not the arrears are for periods prior to that date.
Other changes
Several changes are being made to the powers of investigating officers to increase the efficiency of NMW enforcement. For example, from April 2009 our officers will be able to remove NMW records from an employer’s premises for a reasonable period in order to copy them. In addition, our officers will be able to remove a complete record, rather than have to determine the part that relates only to NMW.
The most serious NMW offences can, in future, be subject to prosecution in the Crown Court and liable to a potentially unlimited fine. This strengthening of the criminal regime shows how seriously the Government regard failure to pay the NMW or the obstruction of investigating officers.
Further information
These changes are being introduced by the Employment Act 2008 which received Royal Assent on 13 November 2008. More information about NMW can be found under ''Paying Your Staff'' on the ''Employing People'' pages of the Businesslink website.
The Department of Business Enterprise and Regulatory Reform (BERR) are providing a decision making tool to enable employers to check whether an individual is eligible for the NMW, and if so at what rate. Where there has been an underpayment of the NMW, the tool will also help employers calculate the arrears that are due to a particular worker in respect of a specified pay reference period.
BERR have also recently revised their guidance on the NMW.
