The Department for Business, Innovation and Skills has issued an updated policy document detailing the changes made to reflect the introduction of the National Living Wage and the higher penalties coming into force on 1 April.

The National Living Wage applies to workers aged 25 and over from 1 April 2016. This new rate of pay was introduced through amendment to the National Minimum Wage Regulations 2015 to ensure that the rules that apply to the National Minimum Wage (NMW) rates for workers aged under 25 also apply to workers entitled to the National Living Wage.

The guidance sets out:

how the revised scheme to name employers who break national minimum wage (NMW) law (which came into effect on 1 October 2013) operates;

the changes made to the NMW financial penalty (which came into effect on 1 April 2016); and

how the government operates the civil and criminal enforcement regime of the NMW.

Penalty regime

The revised penalty will apply to any notice of underpayment relating to a pay reference period beginning on or after 1 April 2016.

The penalty percentage has been increased from 100% to 200%.

The maximum penalty is £20,000 per worker. The revised penalty is calculated as 200% of the total underpayment for all of the workers specified in a notice of underpayment relating to pay reference periods that commence on or after 1 April 2016.

Where this amount would be less than £100, the minimum penalty of £100 should still be applied. Where this amount would be more than £20,000, the maximum penalty of £20,000 per worker should be applied.

The penalty is reduced by 50% if the unpaid wages are paid within 14 days.

While BIS is responsible for NMW policy, compliance is enforced by HMRC.

The Policy on HMRC enforcement, prosecutions and naming employers who break National Minimum Wage and National Living Wage law is available here