On 25 November 2016, two new sanctions came into force which can be used by HMRC where it finds a failure to pay the applicable rate of National Minimum Wage/National Living Wage.
The new sanctions are:
Labour Market Enforcement Undertakings (LMEUs)
- A binding agreement between the non-compliant individual or business and HMRC, under which the individual or business agrees to rectify any breaches of the National Minimum Wage Act 1998 (NMWA).
- The LMEU will set out how this is to be done and by what date.
- Once compliance has been achieved, the LMEU will be removed.
- Where there is a risk of continued non-compliance, the LMEU may remain in place for up to two years.
Labour Market Enforcement Orders (LMEOs)
- Issued where a non-compliant individual or business does not agree to a LMEU within the 14-day deadline; or
- Where a LMEU has not been complied with, HMRC may apply to the court for a LMEO; or
- Where an individual or business has been convicted for a breach of the above legislation, the court may make a LMEO in addition to any sentence given.
Non-compliance with an LMEO is a criminal offence. The sentence for failure to comply with a LMEO is a fine and/or up to 2 years’ imprisonment.
The government’s decision to give HMRC these additional powers gives further teeth to its stated aim of enforcing compliance with the National Minimum Wage/National Living Wage.