National Living Wage: What penalties do non-paying employers face?

A National Living Wage has come into effect across the UK, with 1.3 million workers expected to benefit directly from the pay rise. Tougher penalties for employers who do not pay up have been rolled out alongside the new policy, which include disqualifying employers from being a company director for up to 15 years.

Middle-households employing workers for cash-in-hand domestic services such as cleaning and car washing are among employers most likely to try to avoid paying the increased wages, the Guardian reported. So what are the penalties employers face if they attempt to evade paying the National Living Wage?

The government will double the enforcement budget for non-paying firms. Penalties will be doubles from 100% of arrears owed to 200% – although this will be halved if the amount owed is paid within two weeks. The maximum penalty is £20,000 per worker. There will also be a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the payment they are owed under the National Living Wage.

How do I ensure I am paying my employees the correct amount?

Firstly, check you know who is eligible for the National Living Wage in your organisation – you can find out on the GOV.uk's employment status page. There is a guide to taking the appropriate payroll action in the HMRC's tutorials, which you can access here.

Let your staff know the new pay rate. The government also advises to ensure staff under the age of 25 are being paid the correct rate of National Minimum Wage – it changes every October. Workers aged 21 to 24 are eligible for £6.70 an hour, workers aged 18 to 20 should be paid £5.30, under-18s earn £3.87 and the minimum wage for an apprentice is £3.30.

Am I eligible for the National Living Wage?

Both full-time and part-time workers aged 25 and above will be eligible for the National Living Wage, which will be initially set at £7.20 an hour. To find out if you are eligible for the pay rise, you can use this calculator. The rest is up to your employer.

You should see the increase in your pay automatically if you currently earn less than £7,20 an hour, so it is advisable to check your payslip this month. If you are entitled to a payslip but do not receive one, you can speak to Acas on their helpline.

If you are entitled to the new National Living Wage but have not been paid correctly, the government advises to speak to your employer or contact Acas.