The scheme to "name and shame" saw its debut on 1 January 2011 when government released its policy as a method to encourage employers to pay NMW to their workers. The scheme was intended to allow workers to make informed choices about whether they want to work with a particular employer and for businesses to decide if they want to carry out business with certain employers.
The new scheme applies to all investigations which take place after 1 October 2013, making it easier to name and shame employers who do not follow the law. The previous schemes apply will continue to apply to investigations which began before this date.
What are the processes?
With NMW laws being enforced by HMRC, the process begins with a complaint being made. Surprise inspections can be carried out without giving any reason to the employer and the employer can be made to produce records and other such material as required to assist HMRC in determining whether the employer has complied with its NMW duties. At the same time, the employer will be given an information sheet which details the naming scheme.
If upon conclusion of investigations, HMRC finds that the employer has breached its duty to pay NMW, HMRC is likely to carry out civil enforcement by issuing a Notice of Underpayment. Under this notice, the employer will have 28 days to repay arrears of NMW as well as a financial penalty although the employer is entitled to appeal the notice during this same period. If no appeal is lodged or the employer's appeal was unsuccessful, HMRC refers the employer to the BIS' for automatic naming (albeit employers with arrears equalling £100 or less will not be named).
What are the penalties?
Before the 2014 NMW came into operation, the penalties employers had to pay to the HMRC were 50% of the total underpayment to a maximum of £5,000. The new regulation allows HMRC to give penalties of 100% of the total underpayment with a minimum penalty of £100 and a new maximum penalty of £20,000.
Although the government has increased the maximum penalty fourfold from the previous figure to the current figure, there is the "incentive" of paying the penalty within 14 days which will allow employers to pay a reduced penalty of 50%.
Are there circumstances where an employer can't be named?
The employer will receive a HMRC case closure letter and will have 14 days from the date of the letter to make written submissions stating whether it falls under one of the limited exceptional circumstances for not being named under the scheme i.e.:-
1. The naming will carry a risk of personal harm to an individual or their family;
2. National security risks; and/or
3. Other factors which suggest it is not in the public interest for the employer to be named (although this public interest criteria will apply in very limited and very exceptional circumstances)
The BIS will normally inform the employer of the outcome within 14 days and if satisfied of one of the reasons above, then the employer only needs to pay the penalty. If no written representation is received or the employer fails to satisfy one of the above reasons, then the employer is automatically named under the scheme via a BIS press notice.
How seriously does the government take breaches of NMW law?
Between 2012 and 2013, 736 employers were found in breach of NMW laws and HMRC recovered £3.9 million in arrears for over 26,500 workers.
Recent figures for 2013/ 2014 (released 5 June 2014) show that the HMRC has recovered in excess of £4.6 million in NMW arrears for more than 22,000 workers. As of 8 June 2014, a further 25 employers were named and shamed, facing reputational damage as well as having to pay arrears in excess of £43,000.
Tougher sanctions are being imposed on employers who pay below the NMW with greater financial penalties being made as well "naming and shaming" employers who flout the law.
The Government has also issued draft National Minimum Wage (Consolidation) Regulations for consultation with a view to consolidating and simplifying more than 20 NMW regulations which are currently in force. The new regulation is anticipated to come into force in 2015.
In addition, government has a view in legislating for even greater powers which could see employers pay a maximum penalty of £20,000 for each underpaid worker.
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