Caroline Lucas – 2016 Parliamentary Question to the Department for Business, Innovation and Skills

The below Parliamentary question was asked by Caroline Lucas on 2016-03-10.

To ask the Secretary of State for Business, Innovation and Skills, pursuant to the Answer of 8 March 2016 to Question 26318, what the reasons are for the differences between the total amount of arrears owed by the 92 employers named and shamed by his Department on 5 February 2016 for non-compliance with the national minimum wage and the total amount of the financial penalties imposed on those employers; and if he will make a statement.

Nick Boles

Penalties are calculated based on the value of arrears on the Notice of Underpayment issued by HM Revenue and Customs (HMRC) but vary according to the penalty regime in place at the time underpayments took place and how quickly the employer pays back arrears to the worker.

The rate at which penalties are calculated has increased twice since the beginning of the naming scheme, demonstrating our continued commitment to the enforcement of minimum wage law:

• For underpayments which occurred before 7 March 2014, the penalty rate was set at 50% of arrears owed;
• For underpayments which occurred on or after 7 March 2014, the rate was set at 100% of arrears owed;
• From April 2016, underpayments will result in penalties set at 200% of arrears owed.

The amount at which penalties are capped has also increased. Before 7 March 2014 penalties were capped at £5,000 per employer. The Government increased the cap to £20,000, and began to apply it on a per-worker basis from 26 May 2015.

Currently, an employer who pays back arrears within 14 days of receiving a Notice of Underpayment from HMRC are subject to a 50% penalty rate, which incentivises quick repayment of the money owed to employees. After penalties are doubled to 200% of arrears in April, this prompt payment rate will also double to 100% of arrears.

Of the 92 employers named on 5 February, 66 paid back the arrears they owed within 14 days, and were therefore subject to a reduced penalty rate.