A change to UK employment laws will see rogue employers that fail to pay their staff the National Minimum Wage receiving fines of as much as £20,000.

The current laws state that businesses breaking this UK employment law pay all unpaid wages plus a penalty of 50% of all underpaid workers’ total underpayment up to a maximum value of £5,000, or to a minimum of £100. Some rogue employers may take advantage of these relatively low fines to exploit vulnerable workers for cheap labour.

As a result of the UK law review, employers that breach minimum wage laws will instead face a financial penalty of 100% of total underpayment up to a value of £20,000. The new law will mean that employers that underpay many different workers will only receive one fine of up to £20,000, but the government is reviewing UK laws to see that this penalty is levied for each underpaid employee. Primary legislation will be required to introduce this into the National Minimum Wage Act 1998, the law that created a minimum wage in UK employment law and a flagship policy of the Labour Party.

These new UK employment laws are still subject to parliamentary approval and are due to be enacted in February, when they will be given Royal Assent.

Analysing UK employment law changes

The intention of the new UK employment laws is to penalise employers in relation to the arrears they own. It is illegal to pay less than the minimum wage, as the legislation is intended to create fairness in the labour market and to ensure low-paid workers can find work and receive the support they need.

These new penalties are intended to send a message and punish those employers that do not adhere to these laws, which should result in a reduction in the number of employers that pay workers less than the minimum wage.

As well as increasing the penalties for breaches of minimum wage employment laws, the government has also made it easier for employers that breach these laws to be named and shamed. Ministers will work alongside HM Revenue and Customs to ensure companies that breach these laws are identified and prosecuted when required.

Recently, Liberal Democrat Party President Tim Farron told the Guardian that employers who breach minimum wage laws should be fined as much as £100,000. Ed Milliband told the Labour Conference that this figure should be £50,000 but Mr Farron said that this is the same fine as fly-tippers receive – something he described as a less serious offence.

Large fines would mean that it would never be worth it for employers to breach the UK’s minimum wage employment laws, he argued. “Example-setting” penalties would mean employers would not contemplate paying people under the minimum wage, he said.

Currently, the minimum wage for employees over the age of 21 is £6.31 per hour.

Stacey Aston studies UK employment law and reviews to UK law on behalf of personal injury compensation solicitors and accident at work compensation. She lives in Bolton with her family and love to drive around the countryside.