We provide Legal & HR advice to protect and support your business.

3 minutes reading time (593 words)

New Report Reveals Extent of Minimum Wage Underpayment

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.

At its peak in the year, between 305,000 and 580,000 workers are paid less than the legal minimum. However, the LPC highlights that a large percentage of non-compliance is ‘frictional’, meaning that it takes time for some employers to start paying the new minimum wage rates after they are introduced. Levels are at their highest immediately after an uprating and decline by around half over the three-six months that follow.
 

Report Findings

Additional key findings of the LPC’s report include:
  • 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 Low Pay Commission has always had a strong interest in compliance with the minimum wage rates it recommends,” commented Chair of the Low Pay Commission Bryan Sanderson. “There is, after all, little point in having a minimum wage if workers do not receive the correct rate.”
 
“With more workers than ever paid the minimum wage or close to it, more people are at risk of being underpaid,” he added. “Our analysis finds that up to one in five people who should be paid at least the minimum wage may in fact receive less. This equates to between 305,000 and 580,000 workers at its highest point, though it is a difficult thing to measure.”
 

LPC Recommendations

In its report, the LPC has made a number of recommendations for further action by Government, including:
  • 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 LPC will soon be making recommendations to Government on the levels of NLW and NMW rates to apply from 1st April 2018.
 
In advance of this, the TUC has call for greater provision for younger workers. In particular, it is calling for:
 
  • 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.

Contact Us

For expert legal advice on employment rights, including pay-related rights, then contact our specialist employment lawyers today.

 

Compensation for Injury to Feelings
Employees Penalised for Flexible Working Requests

Related Posts

Make an enquiry

Contact Kalra Legal Group

Please let us know your name.
Invalid Input
Please let us know your email address.
Please write a subject for your message.
Invalid Input
Please let us know your message.
CAPTCHA
CAPTCHA
Refresh Invalid Input

Call us 0808 1685860

 

What our clients say

“I am extremely grateful for the support I received from Anita during a very difficult time with a previous employer. It felt I was in a battle, but someone else was fighting that battle for me. Anita had my best interest at heart all the way, I really cannot praise her enough.”

R.B – Director at Software company

“I cannot thank you enough for all your efforts over the last 6 months working with our company to ensure we have taken all the necessary steps to protect our business and treat all our female staff equally.”

A.B - Managing Director of a Software Company

Contact us

KLG
Head Office
Suite 4, Ground Floor
Braywick House West, Windsor Road,
Maidenhead
Berkshire
SL6 1DN 

KLG
4th Floor
86-90 Paul Street
London
EC2A 4NE

Tel: 08081685860
Email: info@klglaw.co.uk

This website uses cookies to improve functionality and performance. By continuing to browse the site you are agreeing to our use of cookies.