2015 National Living Wage, National Minimum Wage

The National Minimum Wage and the New National Living Wage

| Published on September 24, 2015

The National Minimum Wage and the New National Living Wage

On 1 October 2015 the current National Minimum Wage (NMW) standard adult rate (for workers age 21 and above) will increase from £6.50 to £6.70.

Next year, from April 2016, employers must pay a premium above the NMW for all workers aged 25 and over, known as the National Living Wage (NLW). This premium is proposed to start at £0.50p over the NMW,  effectively resulting in a higher NMW of £7.20 an hour for older workers.

The NMW (and forthcoming NLW) is enforced by HM Revenue and Customs (HMRC) and employers can face hefty fines for breaching NMW laws.

At present, HMRC officers can carry out inspections at any time, without providing a reason.  Employers can be required to produce records and provide other information or access to determine entitlement to the NMW and the level of pay received by workers.  It is a criminal offence to refuse to produce this information to HMRC.

If a compliance officer concludes that the NMW has not been paid, they may issue a notice of underpayment setting out the arrears of NMW to be repaid by the employer together with a requirement for the employer to pay a financial penalty to the Secretary of State within 28 days of service.  Employers can appeal against a notice of underpayment within 28 days of service.

Since 7 March 2014, the penalty has been set at 100% of the total underpayment of NMW with a minimum penalty of £100 and a maximum penalty of £20,000.

From 26 May 2015, the maximum penalty was extended to apply to each underpaid worker, rather than to each notice of underpayment. If the employer complies with the notice of underpayment within 14 days of its service, the financial penalty will be reduced by 50%. If the employer fully complies with the notice of underpayment there will be no further action.

If the employer does not comply with the notice of underpayment, the enforcement officer can:

  • issue civil proceedings to recover the sums that should have been paid to the workers on their behalf. If following judgement, the debt remains unpaid, HMRC will take steps to enforce the debt;
  • prosecute the employer.

Non-compliant employers may potentially be disqualified from holding company directorships.

Once a notice of underpayment is issued, or after an employer has unsuccessfully appealed, HMRC will refer the case to the Department of Business Innovation and Skills (BIS) to consider naming the employer in a BIS press notice. Employers can make written representations against being named.

For further advice please contact a member of our employment or commercial team, at our Poole office 01202 725400 or Dorchester office on 01305 251007.

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