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Minimum Wage

Volume 688: debated on Tuesday 9 January 2007

My right honourable friend the Secretary of State for Trade and Industry (Alistair Darling) has made the following Written Ministerial Statement.

In his Pre-Budget Report, the Chancellor announced that the Government will increase the resource devoted to national minimum wage enforcement. We must ensure that good employers are not put at a competitive disadvantage by those who underpay their workers. I am today publishing our policy to fine employers who ignore an official demand to pay the national minimum wage. We will do this through the consistent issue of penalty notices. This policy will encourage employers to comply with an enforcement notice, and in doing so persuade employers to pay arrears to workers and deter employers from failing to pay national minimum wage in the future. At current rates, a typical penalty for failing to comply with an enforcement notice in respect of underpaying one worker will be over £200.

We have an escalating enforcement process which ranges from educating employers to criminal prosecutions. Penalty notices sit within this regime. They impose a fine on employers who have ignored an enforcement notice and not paid in full the arrears outlined. They may be issued even if it is the first time an employer has underpaid workers. We have carefully considered the 2005 Low Pay Commission recommendation that the Government should,

“introduce interest charges payable on arrears arising from minimum wage underpayment”.

We are rejecting this recommendation as we believe penalty notices offer a greater financial incentive to comply, stronger deterrence and greater scope to remove the benefits of non-compliance.

Our policy to issue penalty notices is from today on the DTI website at www.dti.gov.uk/employment/pay/national-minimum-wage/index.html. Employers should remember that if they are persistently or wilfully non-compliant with national minimum wage legislation, they will be considered for criminal prosecution.