As a result of above-inflation increases in the National Minimum Wage (NMW) and the National Living Wage (NLW) earlier this month, the Low Pay Commission says in its 2018 analysis that all minimum wage workers are entitled to receive real terms increases.
However, despite the fact that the NLW rate is still only £7.83 per hour and the NMW rate is only £7.38 per hour, nearly 180 employers were named and shamed by the government recently for underpaying more than 9,000 minimum wage workers by £1.1 million at the old rates.
As well as having to pay back pay, these employers were fined a total of £1.3 million by the government for breaking national minimum wage laws. The most prolific offending sectors were retailers, hospitality businesses and hairdressers. Wagamama Ltd was the worst offender, followed by Marriott Hotels and Thursday (UK) Limited, trading as TGI Fridays.
Since 2013 the government’s “naming and shaming” scheme has identified more than £9 million in back pay for around 67,000 workers, with more than 1,700 employers fined a total of £6.3 million. The government has also committed £25.3 million for minimum wage enforcement in 2017 to 2018.
Employers who pay workers less than the minimum wage not only have to pay back arrears of wages to the worker at current minimum wage rates but also face financial penalties of up to 200 per cent of arrears, capped at £20,000 per worker.
This 14th “naming” round comes after the government published its so-called Good Work plan last month, which announced the right to a payslip for all workers. The new law is likely to benefit around 300,000 UK workers who do not currently get a payslip. For those paid by the hour, payslips will also have to include how many hours the worker is paid for, making pay easier to understand and challenge if it is wrong.
Iain Birrell of Thompsons Solicitors commented: “These relatively positive headlines mask several uncomfortable truths which we ought not forget. Firstly, the National Minimum Wage (NMW) remains well below the actual living wage rates of £10.20 per hour for London and £8.75 elsewhere. That is independently calculated every year to meet the real cost of living and so by definition the National Living Wage doesn’t.
Secondly, the National Living Wage is a work in progress as the government aims for it to reach 60% of median hourly earnings by 2020. That 60% target is the standard definition of the poverty line. The NMW is therefore a sub-poverty rate. Thirdly, the worst minimum wage offenders, in terms of total arrears owed and workers underpaid, are not actually fined for some or even most of the wages owed. This is because much of the identified arrears are self-reported by the employers themselves, under a self-correction mechanism quietly introduced by BEIS and HMRC in 2015.
Not only are those employers not named and shamed by BEIS for those self-corrected arrears, but no financial penalties are imposed in respect those self-corrected arrears. Which means those employers have enjoyed an interest-free loan equivalent to those arrears, which they may or may not repay in full. An enforcement system which relies so heavily on offenders turning themselves in is a flawed one.
These developments are therefore better than nothing, but UK workers deserve more than a ‘better than nothing’ response.”
Visit the government website to read the LPC’s analysis in full and Good Work plan.