Employers who fail to pay workers the minimum wage could face fines of up to £20,000 in new plans announced by the Government, who are working closely with HM Revenue & Customs (HMRC) on the issue.
Currently, employers who break the law on the minimum wage must pay the unpaid wages of their workers plus a financial penalty calculated at 50 per cent of the total underpayment for all employees found to be underpaid and the maximum penalty is £5,000.
However, the Government has now decided to increase the percentage of the financial penalty to 100 per cent, which will raise the maximum fine to £20,000. MPs are expected to back the proposal, with the new fines coming into force next month.
In 2012, there were 1.4 million people being paid the minimum wage, which for those over 21 is £6.31 an hour. This rate falls to £5.03 for people aged 18 to 20 and £3.72 for young people aged under 18.
Employers with the highest levels of arrears will be targeted first and those who have underpaid by more than £20,000 to any worker will pay the new level of penalty for each one that has been underpaid.
In the last financial year, HMRC identified 736 employers across the UK who had failed to pay the minimum wage, leading to the recovery of £3.9m in unpaid wages for more than 26,500 workers. This was down from the previous year’s figure of 968.
Business Secretary Vince Cable said that paying anything less than the minimum wage is “unacceptable, illegal and will be punished by law”. He has also asked the Low Pay Commission to look into raising it, as long as this does not harm business or risk jobs.