The National Minimum Wage

an employment law guide to the minimum wage

A surprising number of workers continue to be paid at a rate less than the national minimum wage (‘NMW’) notwithstanding that the National Minimum Wage Act 1998 has been in force for many years. Historical NMW rates have gradually increased as have the number of complaints of underpayment to HMRC from 2,210 in 2006/07 to 2,850 in 2009/10.* With Trades Union Congress estimating that 950,000 workers would be affected by the increase in the adult NMW hourly rate on 1 October 2010 to £5.93** it is increasingly important for employers to be vigilant that they do not fall foul of the provisions of the 1998 Act which can render them liable to criminal and civil penalties as well to legal proceedings by workers.

Workers have access to various remedies which they can seek as individuals. Perhaps the most obviously valuable right is the ability to make a claim either in the County Court or in the employment tribunals for breach of contract, or in the employment tribunal on the basis that the non-payment amounts to an infringement of the right not to suffer unauthorised deductions. Frequently, where employers pay less than the NMW they have done so for several months or even several years. In such circumstances provided that the non-payments form a series of uninterrupted deductions the worker can obtain recompense for the whole period he or she has not been paid the NMW. This can amount to many thousands of pounds. Allied to the duty to pay a wage that is not less than the NMW are various other duties such as the employer’s obligation to keep records sufficient to establish that the worker has been paid at least equal to the NMW, a worker’s right to access and obtain a copy of such records in order to determine this fact, and the employment tribunal’s power to award 80 times the value of the hourly rate of the NMW in the event that the employer fails to allow such access or copies to be taken. Unhelpfully for employers they are presumed to have paid workers less than the NMW unless they prove to the contrary.

As for civil penalties in the year ending March 2010 HMRC imposed penalties in 480 cases where notices of underpayment of the NMW were served on employers requiring them to pay arrears of the NMW to workers.* Penalties can be up to £5,000 and an employer’s only recourse is to appeal to the employment tribunal.

Regarding enforcement through the criminal courts there are a variety of offences of which an employer may be convicted, not least that of refusing or wilfully neglecting to pay the NMW. Such offences are regarded in an increasing serious light and may now be dealt with in the Crown Court that has the power to impose unlimited fines. Nor can individuals avoid criminal liability by reason of the employer possessing a corporate structure – any company officer or other person exercising managerial responsibility is liable where the offence is committed with his or her connivance or consent, or the offence is otherwise attributable to their neglect.

Workers and employers without legal assistance wishing to seek information about compliance with the 1998 Act might find helpful guidance at the Low Pay Commission.

 

* Source: The National Minimum Wage: Low Pay Commission Report 2011, Table 4.1 and [4.65] respectively.

** http://www.tuc.org.uk/workplace/tuc-18574-f0.cfm