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Reforms to NMW legislation announced

BY Margaret Anne Soderqvist-Clark
Employment Law & HR
BG Purple

This week has seen the Government turn its attention to National Minimum Wage legislation with proposals being announced to raise the NMW and to increase employer penalties for non-compliance. 

The Chancellor George Osborne has indicated that the “economy can now afford” an increase to the NMW and has suggested that NMW must increase to £7 an hour by 2015 to match pre-credit crunch values. In response the CBI has warned that "An unaffordable rise would end up costing jobs and hit smaller businesses in particular".  

The most recent rise to NMW came in October 2013 when it was raised by 12p to the current rate of £6.31 for over 21s. Previous increases have been modest and the Government faces criticism that, in recent years, the cost of living has far outstripped rises to NMW. Shadow Treasury Minister Chris Leslie has claimed that working people are on average £1,600 a year worse off than before the coalition came to power.

In tandem with this announcement, the Government has published draft regulations to increase financial penalties for employers who fail to pay workers the NMW. The current maximum financial penalty for employers is £5,000 and the regulations, which are expected to come into force in February, propose that this be increased to £20,000. Crucially, the government has also indicated that it intends to introduce further changes which would mean that fines apply separately for each underpaid worker.

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