The Government has been accused of “window dressing” after announcing a crackdown against firms that fail to pay staff the new national living wage.
The Prime Minister said businesses face fines of up to £20,000, while bosses could be barred from acting as company directors for up to 15 years if they did not ensure the wage rise was passed on.
From next April, firms will have to pay all workers aged over 25 at least £7.20 an hour – up from £6.50 now.
The announcement, made in a newspaper article by David Cameron, drew criticism and scepticism from trade unions.
Len McCluskey, leader of Unite said: “Given the record of the Tory party on worker protection, it will take some leap of faith to believe they are now converted to the cause.
“This is the very party that weakened the powers of the Gangmasters Licencing Authority, scrapped the essential body protecting the wages of low paid farm workers and is planning to go into EU treaty negotiations looking to take the UK out of vital protections for workers.”
Martin Smith, national officer of the GMB, said: “This is more window dressing by the Tories. There have been few employers taken to court and the level of inspections has been pathetic.
“Unions are not allowed to complain to the enforcement authorities and local councils are also not allowed any role in enforcing the law.
“The Tories realise that allowing employers a free hand to exploit UK and migrant workers will impact on the EU referendum vote. This is why we are seeing a lot of ministerial announcements on migration and pay.”
Mr Cameron wrote in the Times that by the end of the decade, the new wage will reach at least £9 an hour.
“Combine that with an increase in the Personal Allowance to £12,500, and you can see the power of the modern Conservative Party’s One Nation message.
“But the National Living Wage will only work if it is properly enforced. Businesses are responsible for making that happen, and today I’m announcing how we will make sure they do.”
Currently a firm is fined 100% of arrears for non-payment of the minimum wage but that will double to 200% when the new living wage comes in to force. The maximum is expected to be £20,000.
“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 wrote.
“We will significantly increase the enforcement budget, set up a new team in HMRC to take forward criminal prosecutions for those who deliberately don’t comply, and, from this autumn, ensure that anyone found guilty will be considered for disqualification from being a company director for 15 years.
“All that will be all overseen by a new Labour Market Enforcement Director. So 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.”
Business Secretary Sajid Javid said a new team of HM Revenue and Customs compliance officers will be established to investigate the most serious cases of failure to pay the minimum wage.
The team will have powers to use sanctions including fines, prosecutions and “naming and shaming” the most exploitative employers, and the budget for enforcement will be increased in 2016/17, he said.
Mr Javid said: “There is no excuse for employers flouting minimum wage rules and these announcements will ensure those who do try and cheat staff out of pay will feel the full force of the law.”
The Government will consult on a new offence of aggravated breach of labour market legislation, as well as on extra investigatory powers for the Gangmasters Licensing Authority.
Katja Hall, the CBI’s deputy director-general, said: “Businesses back tough action against employers that deliberately fail to pay minimum wage or knowingly flout employment law.
“Action must be firmly focused on areas of concern and avoid burdening the vast majority of firms, which already comply with the law.
“We welcome the appointment of a new Labour Market Enforcement Director, and encourage them to focus on going after abuses rather than creating new licensing or approval processes.”
The news came as the first high street retail chain to become a living wage employer was announced.
Oliver Bonas, which has 43 stores across the UK, has committed to pay all its staff and contractors at least the living wage of £7.85 an hour, and £9.15 in London.
The Living Wage Foundation said it was a “significant milestone” for the campaign for higher pay.