A new report from the Low Pay Commission (LPC) has revealed that up to 20% of minimum wage workers may be receiving less than they are legally entitled to.
- A significant amount of non-compliance is thought to relate to work in the informal economy, with the most serious cases involving organised crime and forced labour. The LPC points out that these cases are not captured by official data.
- Women make up two thirds of underpaid workers in the earnings data but a lower share of those who make a complaint about underpayment.
- Salaried workers (those who are paid monthly and do not have an hourly rate of pay) make up 11% of people paid at the National Living Wage (NLW) but 44% of those paid below it. This is likely to be because neither these workers nor their employers are tracking the hours they are working.
- As more workers are covered by the NLW and minimum wage, more will be at risk of being underpaid. As the NLW rises, the LPC estimates that HMRC will have the job of policing the pay of 3.3 million workers by 2020, up from 2.3 million now.
- The Government should fully evaluate its communications campaign around the 2017 NLW and NMW upratings, pointing out that awareness of the minimum wage can contribute to increased compliance.
- Improved guidance around the technical errors employers have made so that others can learn from their mistakes.
- Naming of employers found to underpay could be made a more regular and predictable occurrence to build on the momentum the policy has acquired.
Next Year’s Rates to be Determined
- the top rate of the minimum wage to be extended to all workers aged 21 and above,
- the rates for 16 to 20-year-olds to be increased, and
- more resources for enforcement to ensure the new higher rate is being paid to all who qualify.