The £1.4m fine is in addition to the £3.5m arrears already paid to the thousands of underpaid staff. Chairman of the Commons Business Select Committee, Iain Wright, stressed that underpayment of staff is not something which will be tolerated and that a clear message must be sent to companies.
However, despite these high profile cases and the size of the penalties, MPs remain concerned that other firms will continue to ignore the law.
The government has undertaken to name and shame employers who fail to set their pay levels at or above the national minimum wage since February 2013. Currently, the national minimum wage is an hourly rate of £6.95 for those aged between 21 and 24 years and £7.20 per hour (national living wage) for employees over 25.
The £1.4m fine amounts to an average of £2,000 per firm. However, some have been ordered to pay in excess of £20,000. Despite its size, the fine represents just 40 percent of the total amount underpaid. While HMRC retains the power to impose fines of up to 200 percent of the shortfall in wages, this potential deterrent is simply not being used to its full effect. Wright maintains that to properly address the situation, companies need to be hit where it hurts – financially – with fines exceeding any savings they might potentially make by breaking the law.
However, in cases where businesses are very small, owners suggest they have not received enough assistance to comply to the recent practical and legal changes.
To date, the 687 firms have not been prosecuted criminally. It is felt that the public humiliation of naming and shaming alone proves the most effective way to ensure workers are paid any arrears as quickly as possible.
There is some anger amongst MPs that criminal charges have not been brought against the 687 firms and they have asked that tougher measures are imposed against companies guilty of unlawful activity. On Wednesday, it was heard that that Sir David Metcalf, previously Migration Advisory Committee chairman, was to become the first person in the country to hold the position of Director of Labour Market Enforcement. The aim of the role is to apply greater pressure upon rogue employers.
The situation has been allowed to go on for too long, with few strict measures in place to ensure employers cannot take advantage of honest employees, while also undercutting other businesses. Metcalf will now work hard to ensure exploitation of this nature is punished and persecuted. Regardless of size or sectors, all firms are responsible for adhering to the law, by paying their employees the correct wages.
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