Labour Costs: National Minimum Wage and Proposed Enforcement Measures

On 1 October 2015, over one million workers received a pay rise with the increase in the National Minimum Wage (NMW).  The standard adult rate is now £6.70 per hour, the development rate is £5.30 per hour and the apprenticeship rate is £3.30 per hour.  The accommodation offset has increased to £5.35 per day.

From April 2016, the new mandatory National Living Wage (NLW) will be in force for workers aged 25 years and over starting at £7.20 and increasing to £9.00 by 2020.

Alongside rate increases, the Government is also turning its attention to compliance and enforcement.

According to a Government Report on National Minimum Wage published earlier this month, targeted enforcement in the care sector continues. NMW enforcement staff react to individual complaints and conduct proactive risk-based enforcement, investigating complaints received directly or referred from the ACAS helpline. Since 1 April 2015, complaints from care workers have been fast tracked for investigation and as of 30 August 2015, there were 37 open investigations. As of July this year, 285 employers across all sectors had been named under the BIS NMW Naming scheme.

The Government has also now just opened a consultation on proposals to improve employment law compliance generally.  They are proposing to create a new statutory Director of Labour Market Enforcement, who will oversee the HMRC (in its NMW remit) as well as other employment-related enforcement bodies.  The Director’s remit will stretch across the whole of the labour market – including direct employment as well as labour providers – and the whole of the spectrum of non-compliance, from accidental infringement to serious criminality.  The Government is also looking at a new offence of aggravated labour law breach to tackle those employers who commit more than minor breaches of the law but not anything as serious as that covered by the Modern Slavery legislation  (further to which, see here).  This aggravated offence would arise where an employer commits an offence with the motivation of depriving someone of their rights or has exploited the worker.  It is aimed at those employers who systematically abuse workers, and it could be cited in cases of deliberate NMW/NLW underpayment.

Those wishing to respond to the government consultation should email labourmarket.consultations@bis.gsi.gov.uk or complete a response form by 9 November 2015.

For advice on compliance with the National Minimum Wage, please contact a member of the Employment Team.

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