‘National living wage’ dodgers face higher penalties

The prime minister said the new pay policy would only work if it were “properly enforced” and that the government would be funding a new unit at HM Revenue & Customs to crack down on firms thought to be flouting the law.

A new labour market enforcement director will be appointed to ensure that firms comply with the national living wage – effectively a higher minimum wage rate for workers over 25. From the autumn, anyone found guilty of non-compliance will be considered for disqualification as a company director for 15 years.

In an article in the Times, Cameron said the new measures were intended to send a message to “unscrupulous employers” that they would pay the price if they underpaid their staff. He claimed that the government initiative would ensure that “people properly benefit from the recovery” and he contrasted his approach with the “anti-business” stance being adopted by the Labour leadership candidates.

The national living wage, the surprise announcement in the summer budget, will start at £7.20 an hour from next April, rising to at least £9 an hour by the end of the decade, according to The Guardian.

For years, there were complaints that the penalties for non-payment of the minimum wage were too low but they were toughened significantly in the last parliament. Originally employers had to pay the amount they had underpaid workers, plus a penalty calculated at 50 per cent of the underpayment, up to a maximum of £5,000. Under the coalition, the penalty was increased from 50 per cent of the underpayment to 100 per cent, up to a maximum of £20,000.

In his article, Cameron said the penalty would go up again, from 100% of underpayment to 200 per cent, but government sources confirmed that the maximum penalty would remain at £20,000.

Labour leadership candidate Andy Burnham said that, if he was in charge, firms could face penalties including higher national insurance payments if they failed to pay a his proposed new higher living wage of around £11 an hour.

Burnham said: “We will be utterly intolerant of poverty pay in the UK. Too many people are working harder and harder just to make ends meet. It is disgraceful that apprentices earn just 2.73 an hour.

“The Labour party I lead will stand for a true living wage for everyone. It will be based on the simple principle that the same hour’s work deserves the same hour’s pay, regardless of your age. So I will abolish the youth rate minimum wage, apply the higher rate to everyone and give incentives for companies to go even further.”

In the past, relatively few firms have been fined for not paying the minimum wage but ithe Department for Business announced in February that a crackdown launched in October 2013 had led to 162 firms being fined for non-compliance, as well as being named and shamed.

Cameron suggested he wanted to see more prosecutions. “We will significantly increase the enforcement budget, set up a new team in HMRC to take forward criminal prosecutions for those who deliberately don’t comply and, from this autumn, ensure that anyone found guilty will be considered for disqualification from being a company director for 15 years,” he writes.

He claimed that the combination of the national living wage with the increase in the income tax allowance meant the Conservatives were “the true party of working people in Britain today”.

And he claimed that developments in the Labour leadership contest showed that the opposition was becoming more anti-enterprise. “By making sure that working people properly benefit from the recovery, we are winning the argument for pro-business, pro-enterprise economics,” he writes.

“That argument has to be won by every political generation. Those of us who fought socialism in the 1980s and perhaps thought that the ‘red in tooth and claw’ variety was dead were clearly wrong. Look at today’s Labour leadership candidates. All of them are in a race to the left, vowing to borrow, tax and spend more — all the things that failed in the last century and were rejected at the last election.

“Listening to some of the anti-Nato, anti-American, profoundly anti-business and anti-enterprise debates is like Groundhog Day. Labour aren’t learning. They’re slaves to a failed dogma that has always left working people paying the price.”