The Covid-19 pandemic has left low-paid workers more vulnerable and businesses under greater pressure than ever before. This increases the risk of minimum wage underpayment and demands a proactive and strategic response from the Government. These are the conclusions of a report into compliance and enforcement of the National Minimum Wage (NMW), published 11th May 2021 by the Low Pay Commission (LPC).
The report reviews progress in several key areas where the LPC has previously made recommendations. The Government has accepted over twenty separate recommendations from the LPC since 2017, but more remains to be done to build workers’ confidence in the enforcement system; to support employers to comply with the rules; and to target HMRC’s limited resources transparently and effectively.
Bryan Sanderson, Chair of the LPC, said:
Underpayment is a serious threat to the success of the minimum wage. The evidence we have heard, from workers and employers alike over the past year, leaves little doubt about the strains placed on low-paying sectors by the pandemic and the increasing risk of non-compliance.
The enforcement body has so far responded pragmatically to the challenges of protecting workers’ rights during Covid, and we welcome Government’s acceptance of our recommendations last year. It is however clear that the effects of the pandemic will outlast the lockdown period and will require a disciplined but innovative management response. We hope that today’s report makes a helpful contribution to that process.
The effects of the pandemic and the presence of the Coronavirus Job Retention Scheme mean it is not possible to produce statistical estimates of underpayment in 2020, comparable to previous years. Workers furloughed at 80 per cent of their normal pay may appear as underpaid in the data, but do not count as such for NMW purposes.
Today’s report also reflects on the widely-reported problems of labour market abuses in the textiles industry in Leicester. Low Pay Commissioners have heard extensive evidence of issues in Leicester through the years, and recognise there are no simple solutions to the difficulties faced by enforcement bodies. The most common prescriptions are for closer engagement with local communities; top-down changes within the wider sector; and a sustained enforcement effort to shift deeply ingrained practices.
Today’s report is the fourth stand-alone report the LPC has produced on compliance and enforcement. Previous stand-alone reports were issued in October 2017, May 2019 and May 2020. Before this, the LPC summarised the evidence it heard and made recommendations on compliance and enforcement as part of its main annual report to the Government.