Approximately 439,000 employees were paid less than the hourly minimum wage in April 2018, according to research by independent body the Low Pay Commission (LPC).
The Non-compliance and enforcement of the national minimum wage: April 2019 report used up to date stakeholder and government evidence, including research such as the Annual survey of hours and earnings (ASHE) and the Labour force survey (LFS).
The report also found that, of those employees who were underpaid, 369,000 were aged 25 or over in April 2018 and were paid less than the national living wage rate; this was set at £7.83 an hour between 1 April 2018 and 31 March 2019 and has now increased to £8.21 an hour as at 1 April 2019.
Around 30,000 more employees were paid below the national living wage rate as at April 2018, compared to the previous year; 23% of eligible employees are paid either at or below this rate. Comparatively, 135,000 employees were paid below £7.20 an hour, the national living wage rate introduced in 2016.
Bryan Sanderson, chair at the LPC, said: “We recently celebrated 20 years of the minimum wage; it has raised pay for millions of [employees], but it is essential that people receive what they are entitled to. It is also vital for businesses to be able to operate on a level playing field and not be illegally undercut on wages.
“The government has made real progress with its enforcement of the minimum wage, but more needs to be done to ensure employers comply in the first place and [employees] know how to enforce their rights.”
The LPC further found that women are more likely to be paid less than the minimum wage than men, and that the youngest and oldest staff are also more vulnerable to underpayment. The largest numbers of underpaid employees work in the hospitality, retail, cleaning and maintenance sectors, although childcare is the occupation with the highest proportion of underpaid individuals.
The report notes that enforcement of the minimum wage, undertaken by HM Revenue and Customs (HMRC) has benefited from improved funding; this has led to a record number of individuals being identified as underpaid, arrears being repaid and fines levied on non-compliant employers in 2017 to 2018. Despite this, the research believes that these overall figures were driven by a minority of cases, observing the challenge in targeting resources effectively.
The LPC, which is comprised of employers, trade unions and experts, recommends that the government continue to invest in communications to both employers and employees regarding minimum wage compliance and enforcement. The report provides specific recommendations, guidance and information for employees and trade unions.
The LPC has recommended that the government use all available opportunities to improve the measurement of underpayment and to investigate new methodologies for assessing the scale of non-compliance.
Frances O’Grady, general secretary at the Trades Union Congress (TUC), said: “Every [employee] deserves fair pay for their work. There can be no exceptions to the minimum wage and there should be no hiding place for bad employers; that’s why the government must restart naming and shaming bad bosses who cheat their [staff] out of pay.”
The figures quoted in the final report are subject to some caveats that have influenced the results, for example legitimate causes of underpayment, such as the accommodation offset, commission and bonuses, piece rates and incorrectly identifying apprentices. Plus, some salary sacrifice deductions will not be shown as part of the research.