The Low Pay Commission (LPC) published its report into compliance and enforcement of the National Minimum Wage.
The LPC estimates (based on statistics from the employers ASHE data) that around 371,000 workers were underpaid in April 2024. This represents a slight increase on the previous year but is below estimated numbers from the pre-pandemic period.
The headline figures in the report are estimates produced using the Annual Survey of Hours and Earnings (ASHE). ASHE provides the best available estimate of underpayment, but comes with a number of caveats.
In some cases, it is likely to record legitimate practices as underpayment (for example, if accommodation charges are deducted from workers); in others, underpayment will go unrecorded (for example, if an employer doesn’t accurately log working hours for payroll).
Because it is based on PAYE, it will not capture any underpayment in the informal economy, where a lot of underpayment is likely to take place. In addition, the prevalence of underpayment changes over the year, with its highest point in April, immediately after new rates have come into force.
Baroness Philippa Stroud, LPC Chair:
Too often the low-paid workers we speak with feel powerless and cut adrift from the institutions which exist to protect them. This can cause low-paid workers to put up with poor employment conditions and underpayment for fear of repercussions.
The all-too-common experience of insecurity and uncertainty over their rights can discourage workers from reporting underpayment or trying to find better jobs. A strategy to end underpayment will begin with restoring low-paid workers’ confidence.
The Government’s ambitions for the minimum wage should be backed by a similar level of ambition for enforcement. The Fair Work Agency is a unique opportunity to reform labour rights enforcement; and the Employment Rights Bill picks up several relevant recommendations previously made by the LPC. Our report restates the scale of this problem and suggests some fundamental ways the new agency could build confidence in the enforcement system.
The report looks at the scale and nature of underpayment; its persistence for workers; and the performance of the enforcement regime. Evidence from the last decade suggests that for many underpaid workers, underpayment lasts a long time, and one in three remain stuck in underpaid jobs from one year to the next.
In recent years, the tight labour market has enabled more underpaid workers to move into jobs where they get the correct wage. This has slowed in the most recent data as the tight labour market which followed the pandemic has started to unwind.
The LPC make several recommendations to Government on the enforcement system, from ensuring the right information is available for workers and employers to building its data and intelligence on the kinds of non-compliance which exist.
The reasons for underpayment
The following outlines the types of reasons and scale of underpayments:
So how much are these underpayments?
The LPC shows the following levels of underpayment each year:
So what does enforcement look like?
HMRC act as the current NMW enforcer. This, at a future point will come under the Fair Work Agency. the following illustrates the number of closes rates and the strike ratio.
Employment Rights Bill
In a 2018 report on one-sided flexibility, the LPC recommended several measures to address problems. These included
- a right to switch to a contract which reflects your normal hours;
- a right to reasonable notice of work schedule;
- compensation for shift cancellation or curtailment without reasonable notice and
- improved information to workers detailing their rights.
These measures are being taken forward in the Employment Rights Bill.
Think you’re being underpaid?
If you think you are being paid less than the minimum wage you can contact HMRC or Acas
PAYadvice.UK 20/12/2024