HMRC is increasingly tough on companies and directors failing to pay workers a minimum wage.
In early 2017, the Department for Business Energy and Industrial Strategy named and shamed 361 businesses that had underpaid 15,521 workers a total of £995,684. The employers were required to repay all arrears and pay fines totalling circa £800,000.
The National Minimum Wage ("NMW") is the wage to which almost all workers are entitled. If HMRC finds that an employer has not been paying the NMW, arrears must be paid immediately and a fine may be imposed (up to 200% of the arrears owed, with a maximum of £20,000 per worker). It is also a criminal offence and criminal investigations will be considered where appropriate.
HMRC will hold individuals responsible to account. Whilst unlikely, it is possible that directors will be targeted for criminal prosecutions. The more likely sanction is disqualification from being a company director for up to 15 years.
As HMRC continues to focus upon fair pay, the number of directors implicated in investigations is likely to continue to increase. D&O insurers will be interested to assess circumstances in which Investigation / Defence Costs might be advanced and, in particular, consider the potential application of exclusions relating to conduct in the event that a disqualification undertaking is agreed or an order to that effect is made.