Failure to pay the National Minimum Wage - section 152 of the SBEEA 2015
The rates for the National Living Wage (for those aged 25 and over) and the National Minimum Wage change every April. From 1 April 2017, the National Living Wage increased to £7.50 per hour and the implications for employers who fail to pay are significant.
The National Minimum Wage, and the Living Wage are specified minimum hourly rates of pay. Most workers will be entitled to one or the other. All employers are obliged to pay this to eligible workers, irrespective of their size. Under s.152 of the Small Business, Employment and Enterprise Act 2015 (SBEEA 2015) an employer can be penalised for failing to pay the National Minimum Wage, or the Living Wage.
In a recent case, a sole director of the company Cygnets To Swans Limited, a nursery, was disqualified for 6 years from being a director of a limited company. After HMRC had conducted their routine investigations in 2012 to 2013, they discovered the director had underpaid her employees. As a result, she was fined £5,000, which was the maximum penalty at the time. In 2015, when the company became insolvent, it was discovered that the penalty was still outstanding, and the director was disqualified.
Although the penalty in this case was not under s.152 of SBEEA 2015, the message that the government takes failing to pay the relevant minimum wage seriously is loud and clear! This message is emphasised by the revised scheme to name and shame employers who break the law in relation to payment of wages, and the increased penalty for underpayment that came into effect on 1 April 2016. Under s.152 of SBEEA the penalty has increased from 100% of the arrears owed to 200%, with the maximum penalty being £20,000 per worker.
In February 2017, the Department for Business, Energy and Industrial Strategy published the largest ever list of National Minimum and Living Wage offenders.
Business Minister Margot James said:
Every worker in the UK is entitled to at least the National Minimum or Living Wage and this government will ensure they get it.
That is why we have named and shamed more than 350 employers who failed to pay the legal minimum, sending the clear message to employers that minimum wage abuses will not go unpunished.
Well-known companies appear in this list and include:
- Debenhams Retail PLC - failed to pay £134,894.83 to 11,858 workers.
- Peacock Stores Limited - failed to pay £2,256.58 to 42 workers.
- Lloyds Pharmacy Limited - failed to pay £110.67 to 1 worker.
The above sums vary but it appears that no company will escape the naming and shaming approach taken by the government. This appears to be the government’s strategy for getting large companies to change their ways; as mentioned in a previous article on Access to Finance, s.3 of SBEEA 2015, large companies/LLPs will be named and shamed if their reports on payment practices showed they continually paid their suppliers late.
It very much appears that SBEEA 2015 is legislation that has teeth! We will continue to watch with interest to see how s.152 is enforced, and whether the naming and shaming approach will reduce the number of employers who underpay their staff.