A new report by the Low Pay Commission (LPC) has found that the number of people being paid less than the national minimum wage (NMW) has increased.
The estimate, derived from an analysis of the Annual Survey of Hours and Earnings, shows that of the 439,000 workers who were paid less than the NMW in April 2018, just under 370,000 were aged 25 or over and paid less than the National Living Wage (NLW).
This equates to 23 per cent of those paid at or below this rate and represents an increase of about 30,00 or a 2 percentage point rise in the share of workers entitled to the rate on the previous year’s level of underpayment of the NLW. About 135,000 people were paid below £7.20 per hour (the 2016 introductory NLW rate). These estimates represent a trend of increasing underpayment since its introduction.
Women are more likely than men to be paid less than the minimum wage. Underpayment is also higher for the youngest and oldest workers. The largest numbers of underpaid individuals work in hospitality, retail and cleaning and maintenance; while childcare is the occupation with the highest proportion of underpaid workers.
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. In particular it urges 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 underpayment.
Whilst acknowledging that 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.
Matthew Pull, of Thompsons Solicitors, commented: “The key point for the Government to take away from the report is the need for HMRC to move from a reactive to a proactive approach to enforcement. Such a shift, coupled with the proposals aiming to build confidence in the complaints process, would undoubtedly lead to more effective enforcement of the NMW, which is essential if it is to have the desired effect of bettering the lot of the lowest paid within our society.”
To read the report in full, go to the government website.