Low Pay Commission finds Minimum wage underpayment increasing

Low Pay Commission finds Minimum wage underpayment increasing
29 Apr 2019

In its second standalone report on non-compliance and the enforcement of the national minimum wage (NMW), the Low Pay Commission has found that the number of people paid less than the statutory minimum wage in the UK increased in 2018.

Its executive summary estimates that in April 2018, up to 439,000 individuals were underpaid in total, including 369,000 who were paid less than their entitlement under the national living wage (NLW) and makes a number of recommendations and urges:

 

  • Urging the Government to use all available opportunities to improve the measurement of underpayment, and to investigate new methodologies for assessing the scale of noncompliance
  • Recommending the Government continues to invest strongly in communications to workers
  • Urging the Government to consider how to build confidence in the complaints process, and to work with trade unions to understand the current barriers to reporting
  • Recommending that the Government’s communications should build confidence in the third-party complaints process, including via guidance or case studies around successful complainants
  • Urging the Government to work closely with Acas, trade unions and other bodies to achieve this
  • Urging the Government to invest time in getting the guidance to employers right, as this will simplify the task of enforcement in the longer term
  • Recommending that the Government restart regular naming rounds to create momentum, increase coverage and allow stakeholders more time to prepare and support 

What is interesting is chapter 2 which talks about the groups and workers that are affected by the underpayments, specifically those that were paid at less than the NLW.  This shows amongst other things that underpayment is not confined to just one employer size but almost equal in micro, small, medium, large and very large employers.  As you would expect, hourly paid workers are most affected, predominantly in the private sector.  What is surprising is that is not only traditionally low paying occupations that are underpaying but also professions that are non-low paying.  Of the low paying occupations, the following are the biggest underpayers of the NLW:

  1. Retail
  2. Cleaning & maintenance
  3. Hospitality

When it comes to UK regions, the top regions for underpaying were London, the East, South East and South West.  Only Wales and the North West showed drops compared to April 2017.

Global Payroll Association Comment

 

Employers are faced with difficulties all along the way with national minimum and living wage compliance.  It is a policy set by the Department for Business, Energy and Industrial Strategy (BEIS) yet enforced and policed by HM Revenue and Customs (HMRC).  So there are two sets of guidance and communications and this causes confusion.  Members tell us that HMRC’s rules on compliance are conflicting and lack clarity and consistency, something that is pointed out in the report.  So we strongly agree with the report’s recommendations that the government needs to invest time (and money) in getting employers’ guidance right.

 

We strongly believed that the complications between a BEIS policy and HMRC enforcement is the major cause of confusion for employers, the majority of who want to pay correctly.  Only once this is done should the government recommence its naming and shaming regime, another of the recommendations in the report.

 

In its second standalone report on non-compliance and the enforcement of the national minimum wage (NMW), the Low Pay Commission has found that the number of people paid less than the statutory minimum wage in the UK increased in 2018.

Its executive summary estimates that in April 2018, up to 439,000 individuals were underpaid in total, including 369,000 who were paid less than their entitlement under the national living wage (NLW) and makes a number of recommendations and urges:

 

  • Urging the Government to use all available opportunities to improve the measurement of underpayment, and to investigate new methodologies for assessing the scale of noncompliance
  • Recommending the Government continues to invest strongly in communications to workers
  • Urging the Government to consider how to build confidence in the complaints process, and to work with trade unions to understand the current barriers to reporting
  • Recommending that the Government’s communications should build confidence in the third-party complaints process, including via guidance or case studies around successful complainants
  • Urging the Government to work closely with Acas, trade unions and other bodies to achieve this
  • Urging the Government to invest time in getting the guidance to employers right, as this will simplify the task of enforcement in the longer term
  • Recommending that the Government restart regular naming rounds to create momentum, increase coverage and allow stakeholders more time to prepare and support 

What is interesting is chapter 2 which talks about the groups and workers that are affected by the underpayments, specifically those that were paid at less than the NLW.  This shows amongst other things that underpayment is not confined to just one employer size but almost equal in micro, small, medium, large and very large employers.  As you would expect, hourly paid workers are most affected, predominantly in the private sector.  What is surprising is that is not only traditionally low paying occupations that are underpaying but also professions that are non-low paying.  Of the low paying occupations, the following are the biggest underpayers of the NLW:

  1. Retail
  2. Cleaning & maintenance
  3. Hospitality

When it comes to UK regions, the top regions for underpaying were London, the East, South East and South West.  Only Wales and the North West showed drops compared to April 2017.

Global Payroll Association Comment

 

Employers are faced with difficulties all along the way with national minimum and living wage compliance.  It is a policy set by the Department for Business, Energy and Industrial Strategy (BEIS) yet enforced and policed by HM Revenue and Customs (HMRC).  So there are two sets of guidance and communications and this causes confusion.  Members tell us that HMRC’s rules on compliance are conflicting and lack clarity and consistency, something that is pointed out in the report.  So we strongly agree with the report’s recommendations that the government needs to invest time (and money) in getting employers’ guidance right.

 

We strongly believed that the complications between a BEIS policy and HMRC enforcement is the major cause of confusion for employers, the majority of who want to pay correctly.  Only once this is done should the government recommence its naming and shaming regime, another of the recommendations in the report.

 

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