Failure to pay national living wage likely to end in prosecutions for businesses

The prime minister has warned 'unscrupulous' employers face hefty fines and criminal prosecutions if they fail to deliver the 'national living wage' to their workers.

Employers who fail to pay the new and controversial living wage - unveiled by the Chancellor George Osborne in his first Conservative Budget - could be hit with fines of up to 200 per cent of the underpaid sum, subject to a maximum of £20,000.

The introduction of a living wage will see the statutory minimum wage rise from the current £6.70 an hour to £7.20 for over 25 year olds from April 2016.

The suggestion that the hourly wage could reach £9.00 in the next five years has caused some concern for small businesses worried about how they will meet the pay hike.

Writing today in The Times, David Cameron cautioned that the increased minimum wage will only work if it is enforced.

He said: 'To unscrupulous employers who think they can get labour on the cheap, the message is clear: underpay your staff, and you will pay the price.'

'We've already doubled the fines for non-payment of the national minimum wage - and we will double them again for that and the national living wage,' he continued.

Cameron added that the government planned to significantly increase its enforcement budget and would create a new HMRC team to bring criminal prosecutions against employers who deliberately fail to comply with the new wage.

Further, from this autumn, anyone found guilty of failing to pay the living wage will be considered for disqualification from being a company director for 15 years.

The prime minister's latest announcement comes hot on the heels of new provisions in the Immigration Bill, which could force UK businesses to close, albeit temporarily, as well as face potential prosecution and hefty fines if they employ illegal immigrants.

Kevin Poulter, SJ's editor at large and legal director at Bircham Dyson Bell, said the government's move to clamp down on companies not meeting their minimum wage obligations should act as a warning to rogue employers.

'Steps to double the enforcement budget will go some way in identifying those responsible, but the existing fines and policy of "naming and shaming" underpaying businesses do not seem to have gone far enough to deter some employers. The threat of a fine against an underperforming business is unlikely to hold much sway, but criminal prosecutions just might,' commented Poulter.