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Emma O'Connor
Emma O'Connor,
HEAD OF TRAINING
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National Minimum Wage - 2015 Changes
22 April 2015

The National Minimum Wage

The National Minimum Wage (“NMW”) increase is eagerly anticipated every year, and was increased to £6.50 for adult workers (those 21 or over) in October last year. The NMW is estimated to currently affect 1.2 million adult workers. Given the importance of the NMW being paid, the current government has put a huge emphasis on its enforcement. The procedures and penalties should be understood by all employers to avoid unsavoury consequences.

Notice of Underpayment

Both workers themselves and HMRC can raise complaints about the non-payment of the NMW. Once HMRC are aware of the complaint, a dedicated NMW Risk Unit will carry out a thorough investigation, and if the complaint is found to be warranted, a Notice of Underpayment (“Notice”) will be issued to the employer.

Consequences of underpayment of the NMW

  1. A worker is entitled to be paid in arrears the difference between the pay they received and the NMW. Further, if the underpayments span different levels of NMW, the entire period of NMW arrears money will be payable at the most recent NMW level in question. For example, if a complaint is made this week regarding underpayments from 2010 to present date, an adult worker would be entitled to be paid the arrears at the current NMW of £6.50. Therefore, employers could end up paying more money to the employee now, than they would have paid if they had complied with the NMW rates in the first place.

  2. In the vast majority of cases a penalty will also be attached to the Notice. The rules have recently changed as to the level of penalty. Any penalty relating to a pay reference period on or after March 2014 will be equivalent to 100% of arrears, subject to a cap of £20,000. Further, as of 1 October 2014, the employer must pay a penalty per worker, whereas previously the penalty was capped at £20,000 in total per employer.

  3. Finally – employers will be named and shamed!! Any investigation commenced on or after 1 October 2014 that results in the issue of a Notice will automatically be added to the BIS “Naming Scheme”. The employer will have 28 days to appeal the Notice before HMRC refers the employer automatically for naming and shaming! Once BIS is in receipt of this referral, the employer has a further 14 days to make written representations as to why they should be exempt from being named. Exemptions fall within narrow categories i.e. the risk of personal harm to an individual or their family, national security risks associated with the naming and/or that it would not be in the public interest.

October 2015 Increases

From October 2015, the NMW will increase as follows:

  • Adult rate - £6.50 up to £6.70 p/hr
  • 18-20 years - £5.13 up to £5.30 p/hr
  • 16-17 years - £3.79 up to £3.87 p/hr

The rate of increase of the NMW is also a hot topic in the upcoming election. 

The consequences for failing to pay the NMW are severe not only financially, but also to the employer’s reputation which is likely to cause long term damage to a business. The importance of complying with the NMW cannot be stressed enough – the consequences are simply not worth non-compliance!

For more information about the issues in this article or to find out more about how the Employment team can help you please contact the team on 0118 952 7284 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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