With effect from the 6th April 2020, the practice of naming and shaming employers for breaches of the national minimum wage regulations was reintroduced. Naming and shaming was last carried out in July 2018. However, the practice of naming and shaming was then put on hold whilst a review was carried out. As a result of that review, a number of changes have been made, which the Government believe will make the policy more proportionate, with a greater emphasis on "educating" employers in relation to compliance.
During the financial year 2018/19, over 220,000 workers were found by HMRC to have been underpaid to the tune of £24.4 million. £17 million in fines were imposed
Naming and Shaming Reintroduced
As a result of the review into the naming and shaming of employers, the following changes have been made to the policy:-
- The arrears threshold at which employers can be named and shamed has been increased from £100.00 to £500.00.
- Under the old policy, the naming and shaming of employers who breached the rules occurred every quarter. However, under the new regime, naming and shaming will occur more frequently, most likely every 2 months
- Employers who breach the rules will be obliged to pay their employees back pay, and will face fines of up to 200% of the arrears
- Regulation 21(5) of the National Minimum Wage Regulations 2015 has been amended to broaden the meaning of 'salaried hours'. Previously, to qualify as 'salaried hours' work, a worker had to be paid an annual salary in equal weekly or monthly instalments for a set basic number of hours each year. Under the new rules, the definition has been expanded to mean workers receiving an annual salary in equal instalments for a set number of contracted hours. This change will allow workers whose hours vary, such as those in the care sector, to be classified as 'salaried hours' workers. Employers can now also choose their own calculation year.
- Where a salary sacrifice scheme, deductions scheme, or benefits scheme takes employees wages below the national minimum wage, the employer will still have to pay back arrears, but the employer will not be subject to naming and shaming, and will not face any fines
Reaction
The former Business Minister, Kelly Tolhurst (now the Minister of Transport), stated: "Anyone who is entitled to the minimum wage should receive it – no ifs, no buts – and we’re cracking down on companies that underpay their workers. We also want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply with the NMW rules, which is why we’re reforming regulations." Matthew Taylor, the Director of Labour Market Enforcement, added: "I welcome today’s announcement by the government and believe employers will benefit from the greater clarity these revisions bring to the minimum wage rules for salaried workers. Particularly welcome is the news of the reintroduction of the NMW Naming Scheme, that both recognises the sharper focus advocated by my predecessor and follows a stronger compliance and education approach to help employers get it right." Nevertheless, Iain Wright, the ICAEW’s Director for Business and Industrial Strategy, pointed out that: "This is a good example of a stick being used to try to change unacceptable behaviour......While the rules sound simple in theory, in practice there are many ways for businesses to fall foul of them, often unintentionally, sometimes unfortunately for more sinister reasons. Either way, the lowest paid suffer the most, so the government’s move to stamp out unacceptable behaviour is welcome.....Lack of knowledge isn’t an excuse as far as HMRC is concerned.”
