A new report from the Low Pay Commission finds that the number of people paid less than the statutory minimum wage in the UK increased in 2018.
In April 2018 439,000 people were paid less than the hourly minimum wage they are entitled to, a new report from the Low Pay Commission (LPC) finds. Of these, 369,000 were workers aged 25 and over paid less than the National Living Wage (NLW): this equates to 23% of those paid at or below the rate. This is an increase of around 30,000 on the previous year’s level of underpayment of the NLW, or a 2 percentage point rise in the share of workers entitled to the rate.
135,000 people were paid below £7.20 per hour (the 2016 introductory NLW rate). These are estimates but are consistent with a trend of increasing underpayment since the introduction of the NLW in 2016.
The estimate of 439,000 workers paid less than the minimum wage is derived from analysis of the Annual Survey of Hours and Earnings (ASHE). It is not a true estimate of non-compliance for a number of reasons. Some cases of underpayment can be legitimate: for example, because of the Accommodation Offset; commission and bonuses; piece rates; and because the data may fail to identify workers as apprentices.
Equally, some underpayment – for example, resulting from deductions to pay through salary sacrifice – will not be shown in ASHE. In addition, employers who are knowingly non-compliant are unlikely to admit this in the survey. And importantly when discussing estimates of underpayment, ASHE is unlikely to include data on the informal economy, where it would be expected to find a large share of non-compliance.
Enforcement of the minimum wage by HM Revenue and Customs has benefited from increased funding, with a record number of workers identified as underpaid, arrears repaid, and fines levied on non-compliant employers in 2017/18. But other important measures – for example, the numbers of cases opened and closed – stood still, and the overall figures were driven by a relatively small number of cases.
The LPC has welcome the Government’s continued focus on minimum wage enforcement, but notes the continuing challenge in making sure resources are targeted as effectively as possible.
The LPC recommends that the Government continues to invest strongly in communications to both workers and employers around minimum wage compliance and enforcement. The report makes specific recommendations around information for workers and trade unions, guidance for employers and publicity around the enforcement regime.
Measuring the full extent of minimum wage non-compliance remains a significant challenge. The LPC urges the Government to use all available opportunities to improve the measurement of underpayment, and to investigate new methodologies for assessing the scale of non-compliance.
Source: The Chartered Institute for Payroll Professionals (CIPP)