Underpayment of minimum wage workers peaks after pay rise (UK)
20/09/2017
Underpayment of the minimum wage peaks immediately after the rate has been increased, then falls by about 50% in the following 3-6 months, according to the latest Low Pay Commission report, which estimates that between 305,000 and 580,000 workers – equivalent to 1 in 5 – could be underpaid during such peak periods.
Apart from a large percentage of non-compliance arising from the time it takes for some employers to start paying new rates, ‘Non-compliance and enforcement of the National Minimum Wage: September 2017’ reveals underpayment is ‘very difficult’ to measure, statistics relating to it are hard to interpret and the worst cases of exploitation involve organised crime and forced labour and are almost certainly hidden.
As more workers are covered by the National Living Wage and NMW, the LPC estimates that, by 2020, HM Revenue & Customs will have to police the pay of 3.3m workers, who are at risk of being underpaid – up from 2.3m at present.
Other main issues raised by the report include
- The majority of underpaid workers are female, part-time and hourly paid – which reflects the characteristics of minimum wage workers as a whole.
- Salaried workers, who are paid monthly and do not have an hourly rate of pay, make up 11% of people paid at the NLW rate but 44% of those paid below it – probably because neither they nor their employers are tracking the hours they work.
- 31% of underpaid workers do not work in traditionally low-paying occupations, making them difficult for the Government to target.
The report found that real improvements in enforcement activity have been achieved by a shift to more proactive investigations and more use of ‘self-correction’ ie where employers found to have been underpaying some workers are asked to check the amounts paid to their other workers and ‘self-correct’ if necessary.
It suggests the government should go further by – among several other measures – improving guidance based on the technical errors made by some employers so others can learn from their mistakes.
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