What are the consequences if an employer pays workers less than the national minimum wage?
Where an underpayment of the national minimum wage is identified in an investigation by HM Revenue and Customs (HMRC) (including an underpayment of the national living wage rate), the compliance officer may issue a notice of underpayment requiring the employer to pay the arrears to the worker(s) and pay a financial penalty to the Secretary of State.
From 1 April 2016, the penalty is set at 200% of the total underpayment (for pay reference periods that began before 1 April 2016, the penalty is 100%). There is a minimum payment of £100 and a maximum payment of £20,000. The maximum payment applies for each worker who has been underpaid, not to the total payment for all workers.
The most serious cases of non-compliance with the national minimum wage legislation, for example producing false records or refusing to answer questions from a compliance officer, may be criminally prosecuted by the Revenue and Customs Prosecutions Office. The potential penalty on conviction is an unlimited fine.
The Government operates a scheme to publicly name employers that do not comply with the law on the national minimum wage. The Department for Business, Energy and Industrial Strategy periodically issues a press notice naming employers that have been issued with a notice of underpayment.
An employer that pays less than the national minimum wage may face individual claims from employees for unlawful deductions from wages or breach of contract. If an employee brings his or her own claim, HMRC cannot also enforce a complaint on the employee's behalf.