Minimum wage plans – penalties and increases

Following an announcement of tougher penalties for employers found to be flouting the National Minimum Wage (NMW), the same week also saw proposals for an increase in the rate itself.

First, Business Secretary Vince Cable set out plans to quadruple fines for employers who fail to pay the current NMW of £6.31 per hour for workers aged 21 and over. It was confirmed that the maximum fine of £5,000 will rise to £20,000 this February, while the financial penalty will also increase from 50% to 100% of the missing wages.

Mr Cable said, ‘Anyone entitled to the national minimum wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crack down on those who do not play by the rules. The message is clear – if you break the law, you will face action’.

Shortly after this news, Chancellor George Osborne presented his proposal to dramatically increase the NMW, which is set by the independent Low Pay Commission. This would mark the first time since 2008 the rate has increased in any significant way with respect to inflation. Mr Osborne’s proposal is a 10% rise, which in real terms means moving up from £6.31 to £7 per hour by 2015, at the current 2% rate of inflation.
Frances O’Grady, General Secretary of the Trades Union Congress (TUC), welcomed both proposals, commenting, ‘The TUC has long argued that successive governments have been soft on minimum wage dodgers’.

O’Grady added, ‘We welcome George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage. But while this would help many, the Chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce’.
However, the Director General of the Confederation of British Industry (CBI), John Cridland, warned, ‘An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity’.

The Government may be hoping that these changes, coupled with the forthcoming reforms to national insurance, will put them in good stead for the 2015 election campaign.


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