Nearly 700 firms fined total of £1.4m for not paying minimum wage

Nearly 700 firms, including Brighton and Hove Albion and Boris Becker’s favourite Wimbledon restaurant, have been fined nearly £1.4m for paying staff below the minimum wage.

The penalty is on top of the previously announced £3.5m in owed wages these 687 employers – which also include a Huddersfield branch of discount chain Poundstretcher and the Dudley division of listed construction group Interserve – have paid in arrears to thousands of staff.

However, MPs are worried even a combined £5m of arrears payments and penalties will not deter other firms from flouting the law. Iain Wright, the chairman of the Commons business select committee, told the Guardian that companies must be sent a “clear” financial message that underpaying staff will not be tolerated.

Since February 2013, the government has “named and shamed” employers that have failed to pay the national minimum wage, which is currently £6.95 per hour for 21 to 24 year-olds and, under the newly coined national living wage, is £7.20 an hour for over-25 year-olds.

The additional £1.4m penalty for those named has been revealed in a parliamentary written answer from Baroness Lucy Neville-Rolfe, the former Tesco director who is now a minister in the Department for Business, Energy and Industrial Strategy.

The fine averages at a little more than £2,000 for each firm, but it is understood that bigger culprits have paid about £20,000 each.

The overall fine, though, amounts to only about 40% of the total they underpaid. HM Revenue & Customs (HMRC) has had the power to impose penalties of up to 200% of the money owed since last year and previously it was still as much as 100%.

Wright said there needs to be “an effective deterrence in operation to stop companies from not paying workers the minimum wage”.

He added: “That has to mean hitting the companies in their pockets where necessary and fining them much more than the monies saved on breaking the law to send out a clear message that exploitation of low-paid workers will not be tolerated.”

But many of the businesses are small and their owners argue they did not have sufficient help to adapt to legal and practical changes in recent years.

San Lorenzo restaurant in south-west London, which was found to have underpaid 30 workers by nearly £100,000, was dealing with family crises and had not been advised to update its payroll when the owners discovered the problem.

The upmarket eatery has carefully fostered an outstanding reputation, with three-time Wimbledon champion Becker quoted on its website as saying “no other restaurant has felt like this to me”.

Directors at Brighton and Hove Albion, which was found to have owed one worker £2,861.64, are still angry about being named.

They argued there was a simple administrative error regarding expenses paid to someone on work experience and received external legal advice that the club was not in breach of employment regulation – yet still saw the Seagulls’ image “unfairly tarnished”.

None of the 687 firms have been criminally prosecuted, although four unnamed companies were last year. They were not pursued through the civil courts because the offences were considered so damning.

Naming and shaming is the ultimate punishment enforced through civil proceedings. Neville-Rolfe said the public humiliation was considered “the most effective means” of ensuring workers received arrears quickly.

Some MPs are furious that none of the 687 companies have faced criminal charges, putting pressure on the country’s first director of labour market enforcement to get tougher with guilty firms.

It was announced on Wednesday that Sir David Metcalf, the former chairman of the Migration Advisory Committee, would take up the role to crackdown on rogue employers.

Clive Lewis, the shadow business secretary, said: “Not only is the ‘living wage’ not enough to live on, but too many employers are getting away without paying even that. Honest businesses are being undercut and honest workers are being underpaid.

“For too long ministers have been soft on hard labour. The new director must now ensure that illegal exploitation is prosecuted and punished – crime shouldn’t pay, and work should.”

HMRC said: “All businesses, irrespective of their size or business sector, are responsible for paying the correct minimum wage to their staff. HMRC continues to crack down on employers who ignore the law, ensuring that their employees receive the wages they are entitled to.”