Small and medium businesses owners will face fines of up to £20,000 and huge financial penalties if they fail to pay their staff a minimum wage, according to a government report unveiled on Wednesday.
Up until now rogue SME employers that broke the law had to pay a maximum fine of £5,000 plus a financial penalty of 50% of the unpaid wages.
Following an announcement made by David Cameron just before Christmas last year, the financial penalty percentage has been raised from 50% to 100% of the unpaid wages owed to workers and the fine will increase from £5,000 to £20,000.
In a move that would dramatically increase the amount any employer not paying the minimum wage would have to pay, the government is looking to introduce legislation in the Queen’s speech that would mean the new £20,000 is levied for every underpaid worker and not just the one-off fine as of now.
Vince Cable, Secretary of State for Business, Innovation and Skills, said, “Anyone entitled to the National Minimum Wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law."
"So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules. The message is clear – if you break the law, you will face action. The national minimum wage plays an important role in supporting low-paid workers whilst making sure they can still find work. Enforcing this is a key to fairness in our workforce," he added.
As regulations introducing these new laws are subject to approval by the Parliament the legislation is expected to come into force in February, next month.
Last year (2012/13), HMRC named and shamed 736 SME owners across the UK who had failed to pay the national minimum wage. This led to a recovery of £3.9m in unpaid wages for more than 26,500 workers. It seems to have had a positive effect as this number is down from the previous year’s (2011/12) total of 968.
Frances O’Grady, general secretary of the Trades Union Congress, said: "The plans announced today to quadruple penalties for rogue bosses who cheat staff out of the minimum wage should make employers think twice before illegally underpaying their staff.
"It’s great that the penalties for flouting the minimum wage have been raised and that it’s easier to name and shame offending employers. It’s crucial now that HMRC is given the resources they need to enforce these new rights properly."
The current National Minimum wage sits at £6.31 per hour, but there have been discussions amongst government MPs to raise it by 50p or more.