News Alerts

National Minimum Wage

David Reid
3rd Sep 2008

A recent proposal that 21 year old workers should be included in the adult rate has been rejected, while the annual increase in National Minimum Wage, (NMW) announced by the government earlier this year, comes into force from 1 October 2008.

 

What’s happened?

The annual increase in National Minimum Wage, (NMW) announced by the government earlier this year, comes into force from 1 October 2008.

  • The adult rate will rise from £5.52 to £5.73
  • The rate for 18-21 year olds will also increase from £4.60 to £4.77
  • The 16-17 year old rate will rise from £3.40 to £3.53

A proposal that 21 year old workers should be included in the adult rate has been rejected.

 

The confidential National Minimum Wage helpline number is 0845 6000 678. The number for Northern Ireland is 0845 6500 207. As well as receiving and investigating complaints about non-payment of the minimum wage, the helpline offers advice and information in more than 100 languages.

 

In addition to the above rates the new rate for ‘accommodation offset’ (the amount that an employer providing accommodation can count towards national minimum wage pay) is fixed at £4.46 per day (£31.22 per week).

 

The government is also proposing a new strategy to deal with cases where employers have been found to be underpaying NMW. This is based on what they describe as a fairer way of dealing with NMW arrears, and a simpler, more effective penalty regime to deter non compliance.

 

In 2005/06 over £3.2 million in NMW arrears was recovered for over 25,000 workers. However, if the arrears accrued in years before subsequent increases in the NMW rates then they will be worth less in real terms if they are recovered in a later period at the old rate as the arrears will have lost purchasing power since the under payment happened. The government sought views on how it could remedy that by calculating fairer arrears.

 

It also consulted on a simpler system of penalties regime following the 2007 Low Pay Commission (LPC) recommendation that a new penalty be introduced for underpayment of the NMW.

 

The changes are being taken forward in the Employment Bill which is currently going through Parliament. Subject to parliamentary approval, the Government intends the NMW provisions to come into force on 6 April 2009.

 

The proposed changes will introduce:

  • A fairer method of calculating arrears for workers who have been underpaid;
  • A penalty payment for employers who do not pay their workers the NMW.
  • New inspection powers for NMW compliance officers; and
  • A strengthening of the criminal regime for NMW offences.

 

What is the new method of calculating arrears?

Changes in the Employment Bill will mean that the arrears of NMW which are owed to any worker who has been paid less that the NMW will be calculated by reference to the current rate of NMW when the current rate is higher than the rate in force at the time of the underpayment. This means that the worker will be repaid any underpayment of NMW by his employer at a higher rate if the NMW rate has increased since he was underpaid. The formula for this calculation is set out in the Bill and this provision ensures that the calculation of arrears takes into account the length of time that arrears have been outstanding.

 

The new method of calculating arrears will apply to any arrears of NMW that are outstanding on or after the date the Bill comes into force. This includes arrears resulting from underpayments of NMW made before that date.

 

What changes to enforcement of the NMW does the Bill make?

In addition to introducing a fairer method of calculating arrears for workers and a penalty payment for employers who fail to pay the NMW to a worker, the Bill gives further powers to HMRC officers in obtaining NMW information from employers, allowing them to take information away from the employer’s premises in order to copy it.

 

The Bill also makes changes to the way the criminal offences existing under the NMW Act are investigated and enforced: in particular, for the most serious cases, offences can by prosecuted in the Crown Court in England and Wales.

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