NMW clampdown - is your business complying?

From 1 October 2007, the rates of National Minimum Wage (NMW) increased again:

• the adult rate (workers aged 22 and over) increased to £5.52 (£5.35)
• the development rate for 18-21 year olds increased to £4.60 (£4.45)
• the development rate for 16-17 year olds increased to £3.40 (£3.30).

However, the government has become increasingly concerned that large numbers of employers are not paying the requisite hourly rates. In December 2006, the then Chancellor Gordon Brown announced an attempt to improve enforcement of the NMW by increasing the resources allocated to tackle non-compliance by 50%. There is also ongoing consultation on raising penalties for the seriously non-compliant.

HMRC do not have the resources to tackle non-compliance in every business around the UK at the same time, so they are addressing the issue by business sector. HMRC have let it be known that they are interested in three particular sectors so far - hairdressers, the childcare sector and the hospitality industry.

This stance has been supported by some high profile cases. In February of this year, the Court of Appeal ruled that Butlins and Haven holiday camps were in breach of the NMW legislation. It was found that some seasonal workers, such as bar staff and receptionists, were charged for gas and electricity when they lived on site between 2004 and 2005. In his judgment, Lord Justice Buxton said "if the sum of £3 per week were to be deducted from their wages that would reduce remuneration below the national minimum wage level."

In the first NMW criminal prosecution in August 2007, a children's nursery owner was fined £2,500 and £500 costs. The judge commented that the owner had "demonstrated a clear and deliberate intent to obstruct officers and this was a scandalous breach of the National Minimum Wage legislation."

Andy Millican, Criminal Investigation Team Leader for HMRC, said "we have a duty to ensure workers receive their salary entitlement. The majority of employers do assist us with our investigations, but if they don't we will pursue cases through the criminal courts."

It is clear that HMRC are serious about NMW non-compliance, so don’t be caught out. The NMW rules can be complicated, so please get in touch if you have any concerns about the legislation.