Higher Fine For Dodging Minimum Wage
Mark Stevens on new penalties for not paying NMW
THE penalty for not paying the National Minimum Wage (NMW) has gone up. As from March 7, 2014, employers who fail to pay their workers the NMW are liable for up to 100% of the unpaid wages as well as a higher maximum penalty of up to £20,000.
There is also a proposal to increase the minimum wage from the current level of £6.31 to £7.
Background: The NMW was introduced in England and Wales in 1999 and set out the minimum level of pay that a worker is entitled to. There are different rates of NMW depending on the category of worker.
Standard adult rate: For workers aged 21 or over, the rate is £6.31 an hour;
Development rate: For workers aged between 18 and 20 (inclusive), the rate is £5.03 an hour;
Apprentice rate: For apprentices under 19 years of age or above 19 but in the first year of their apprenticeship, the rate is £2.68 an hour; and
Young workers rate: For workers aged under 18 but above the compulsory school age that are not apprentices, the rate is £3.72 per hour.
The rates are reviewed annually, with changes usually coming into force around the beginning of October each year.
Under the existing regime, the penalty for failing to pay a worker NMW is calculated as 50% of the total underpayment for all the workers specified by HMRC.
Where this amount is less than £100, a minimum penalty of £100 is applied. Where this amount is more than £5,000, a maximum penalty of £5,000 is applied. The penalty is reduced by 50% if the unpaid wages are paid within 14 days.
n The changes: The government says it intends to legislate at the earliest opportunity so that the maximum £20,000 penalty can apply to each underpaid worker. It is not clear whether the fine will still be reduced if paid within 14 days under the new penalties scheme.
n Who is entitled to the NMW?: The NMW is applied to most workers in the UK over compulsory school age.
Employees working under a contract of employment will almost certainly be entitled to the NMW, but what about the less typical working arrangements?
n Agency (‘Temporary’) workers: The NMW applies to agency workers with usually the employment agency responsible for paying the NMW.
Directors: Non-executive directors (who do not work for the company) are not entitled to NMW. Any director who does work for the company will be entitled to the NMW.
n Family members: Workers who live in their employer’s home, are treated as a family member and who are not charged for their accommodation or food do not qualify for NMW. Domestic workers genuinely treated as a member of the family unit have been found to be similarly exempt.
n Homeworkers: People working from home are entitled to NMW. This includes people who work from home and ask someone with whom they live to assist with the work.
n Overseas workers: The NMW applies to workers whilst they are working in the UK even if their employer is based overseas. In addition, a worker who ordinarily works in the UK is entitled to NMW while temporarily working abroad. Workers in UK territorial waters are also entitled to NMW.
n Volunteers: Engaging volunteers can be complicated. Employers cannot engage people to work on a voluntary basis if they would otherwise fall within the definition of a worker. Genuine volunteers are not entitled to the NMW, but specific rules apply to charities, fundraising organisations and voluntary bodies.
n Interns: Entitlement to the NMW does not simply depend on job title. An individual may be told that they are an ‘unpaid intern’ or ‘volunteer’, but this does not mean they are not considered a ‘worker’ for the purposes of NMW.
A case in 2008 involved an ‘assistant’ working in film production. Although the ‘assistant’ was only paid expenses, the tribunal concluded that he was in fact a worker and entitled to the NMW.
Similarly, an ‘intern’ in a publishing company, responsible for a team of writers and hiring new interns, was found by a tribunal to be a worker and to be entitled to the NMW.
Where there is an obligation on an individual to perform work for an employer, whether as an ‘intern’ or otherwise, that individual is likely to be entitled to receive the NMW.
Mark Stevens is a solicitor at Veale Wasbrough Vizards
This article has been reproduced from the Contract Flooring Journal website. You can find them at www.contractflooringjournal.co.uk.