Low Pay Commission recommends actions to reduce minimum wage non-compliance


The Low Pay Commission (LPC) has recommended that the government publishes details of organisations which do not comply with national minimum wage legislation at regular timed intervals, for example quarterly or every six months, in order to regularly raise awareness of non-compliance.

The recommendation forms part of its Non-compliance and enforcement of the national minimum wage: September 2017 report, which considers the nature and extent of national minimum wage non-compliance, reflects on current national minimum wage policies, and makes policy recommendations.

In its recommendations, the LPC states that naming non-compliant organisations more regularly would create more media anticipation and momentum. It would also enable stakeholders to prepare and gain support before the next naming round if required.

The report also advises improved guidance around the technical errors that employers have made to allow other organisations to learn from previous mistakes. It also suggests that the government looks to increase the number of prosecutions to act as a deterrent to non-compliant employers, as well as work to increase publicity around successful prosecutions and enforcement activity.

The LPC further recommends that the government accelerates its communication efforts to utilise all available channels, and include publicity around the third-party complaints process, case studies and guidance on successful complainants, and publicise the improvements made in the time taken to resolve a case.

Its report also advises that the government implements systems and processes that enable it to gather and share information regarding national minimum wage non-compliance, to monitor the success of the policy, specific groups and issues, and help it to take action.

Bryan Sanderson, chair of the LPC, said: “The Low Pay Commission has always had a strong interest in compliance with the minimum wage rates it recommends. There is, after all, little point in having a minimum wage if [employees] do not receive the correct rate.

“With more [employees] than ever paid the minimum wage or close to it, more people are at risk of being underpaid. 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 [employees] at its highest point, although it is a difficult thing to measure.

“The LPC welcomes the recent increases in funding for HMRC’s [HM Revenue and Customs] enforcement of the minimum wage, and recognises the progress it has made. However, we also think there is more the government could do to identify non-compliance and stop it happening in the first place. In our report, we lay out recommendations for ways the government could go further.”

Jacob Demeza-Wilkinson, employment law consultant at ELAS Group, added: “There are two key things this report brings to light, the issue of paying the minimum wage correctly, and the issue of equal pay.

“It is vitally important that employers pay their employees at least the minimum wage for the work that they do. These rates change annually so it is important to keep an eye on this and know what the current rate is. If an employer doesn’t comply with these requirements, the consequences can be very severe. Firstly, there is the obvious consequence that underpaid employees can bring claims to remedy this, and they would be entitled to the deficit. If a number of employees are being underpaid this could open the floodgates.

“Secondly, the sanctions that can be imposed by HMRC are now as severe as ever. The penalties and fines that can be imposed have been doubled to 200% of the arrears in pay, up to a maximum of £20,000 per employee. This would mean that [employers] could [be] paying twice if the employees also make claims. Further, and perhaps more importantly, if [an organisation] is found to be deliberately underpaying staff then [organisation] directors can now be disqualified for 15 years. HMRC now has more funds to pursue criminal prosecutions if necessary.

Sign up to our newsletters

Receive news and guidance on a range of HR issues direct to your inbox

This field is for validation purposes and should be left unchanged.

“The second point raised here is that of equal pay. This report highlights that there may still be businesses where this is not happening. This is a particularly serious matter because it is set out in the Equality Act, meaning a breach is considered as discrimination. It should be noted that there is no upper limit on the compensation which can be awarded for a discrimination claim and, while most cases will attract a much smaller amount than the multi-million pound record award, the fine will not be negligible. It is far easier to comply with the laws to begin with.

“It is deplorable that there are still employers in this day and age that either will not or do not comply with the laws, particularly when these laws are in place to try and ensure equality among employees. Given the possible consequences set out above, it seems sensible to comply with the law rather than risking the future of [a] business for the sake of a couple of pounds an hour.”