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New penalties to be introduced alongside National Living Wage

New penalties for non-payment of the National Minimum Wage and the new National Living Wage are set to be introduced next year, under Government plans.

The introduction of the National Living Wage was announced in the Summer Budget and the new payment will come into effect in April 2016.

Under the new system, workers aged 25 and over will be entitled to receive £7.20 an hour, rising to £9 an hour by the end of the decade. The National Minimum Wage is set to rise from £6.50 to £6.70 in October 2015.

With effect from April 2016, alongside the introduction of the National Living Wage, the Government will double the penalty for non-payment from 100% of the amount owed to 200%, unless the arrears are paid within 14 days.

The maximum fine for non-payment will remain at £20,000 per worker. However, employers who fail to pay will be banned from being a company director for up to 15 years.

In addition, the Government will double the enforcement budget for pursuing criminal prosecutions.

Commenting on the announcement, Employment Minister Nick Boles said, ‘Most employers make a mistake and our priority is to make sure arrears are paid. Prosecutions will probably go up but they will remain a rare tool’.

He refuted recent claims from some business leaders that the new National Living Wage will threaten jobs, arguing that higher wages will encourage spending and boost the economy.