National Minimum Wage – New Rates from 1st October and New Enforcement

Sunday, August 9, 2015

The Department for Business, Innovation and Skills (BIS) has announced a raft of new measures aimed at strengthening the enforcement regime for the National Minimum Wage and in advance of the introduction of the new National Living Wage (NLW), which comes into effect from April 2016. It will be a mandatory rate of £7.20 per hour for all workers aged 25 and over.

In a statement issued on 1 September, the Business Secretary, Sajid Javid announced the new measures which are intended ‘to ensure that hardworking people receive the pay they are entitled to’. 

The announcement refers to:

  • Doubling the penalties for non-payment of the National Minimum Wage and the new National Living Wage
  • Increasing the enforcement budget
  • Setting up a new team in HMRC to take forward criminal prosecutions for those who deliberately do not comply
  • Ensuring that anyone found guilty will be considered for disqualification from being a company director for up to 15 years

A new team of compliance officers in HMRC will investigate the most serious cases of employers not paying the National Minimum Wage and National Living Wage when it is introduced in April 2016. The team will have the power to use all available sanctions, including penalties, prosecutions and naming and shaming the most exploitative employers.

The enforcement budget for the National Minimum Wage and Living Wage will also be increased in 2016 to 2017. Future budgets will be agreed as part of the Spending Review process.

Employers who fail to pay staff at least the minimum wage they are legally entitled to will have to pay double what they do now. This reform is intended to increase compliance and make sure those who break the law face tough consequences.

The calculation of penalties on those who do not comply will rise from 100% of arrears to 200%. This will be halved if employers pay within 14 days. The overall maximum penalty of £20,000 per worker remains unchanged.

A new Director of Labour Market Enforcement and Exploitation will be created to oversee enforcement of the National Minimum Wage, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority (a non-departmental public body of the Home Office). The Director will set priorities for enforcement based on a single view of the intelligence about exploitation and non-compliance.

A consultation will be launched in the Autumn on the introduction of a new offence of aggravated breach of labour market legislation. The consultation will also propose giving the Gangmasters Licensing Authority additional investigatory powers and a wider remit to tackle serious labour exploitation more effectively.

NEW NATIONAL MINIMUM WAGE RATES FROM 1 OCTOBER 2015

Workers aged 21 and over

£6.70 (minimum rate per hour)

Workers aged 18-20

£5.30 (minimum rate per hour)

Workers aged under 16 and 17

£3.87 (minimum rate per hour)

Apprentices under 19

£3.30 (or aged 19 and over in the first year of their apprenticeship)

Accommodation offset amount

£5.35 per day

 

Lorraine Laryea, Solicitor and Legal Adviser to the REC writes:

Employers need to take care not to fall foul of discrimination legislation by favouring younger workers to avoid paying the NLW rate.

Age is a protected characteristic under the Equality Act 2010 and refusing to employ someone or provide services as a recruiter could give rise to unlawful discrimination. While both direct and indirect age discrimination can be objectively justified where the less favourable treatment is a proportionate means of achieving a legitimate aim, case law has illustrated that an employer’s desire to reduce cost will not on its own be enough to justify any discrimination.

The Supreme Court has ruled that direct age discrimination can only be justified by reference to legitimate public interest objectives, rather than individual objections that are particular to an employer. A business would need to:

1. Clearly identify the legitimate social policy aim, for example increasing employment amongst young people; and

2. Establish that the social policy objective is legitimate for the business; simply relying on this public interest objective may not be enough. For example, if the public interest objective is to increase employment amongst young people, ideally the business should be able to establish that it struggles to employ individuals in that particular age group.

If employing individuals in that age group is not a problem for the business, it may not be legitimate for to require all applicants to be in a particular age group; and

3. Establish that the decision to only consider applications from individuals in a particular age group is proportionate given the public interest in increasing employment amongst young people. For example, could the same result be achieved in a more proportionate way?

Decisions to provide recruitment services or offer employment based on age must be carefully considered in light of the risk of unlawful discrimination under the Equality Act 2010 where no defence applies.

Working from offices in Stoke-on-Trent, Cream Personnel Services is a name that is synonymous with recruitment in North Staffordshire and South Cheshire. Established in 1973 we have become the first choice Recruitment Agency for job seekers and employers throughout the region.

To contact the Cream Team about recruitment send an e-mail to: stoke@creampersonnel.co.uk  or call: 01782 262731.