More than 400,000 workers paid below minimum wage

A new report from LPC found, that in April 2018, 439,000 people were paid less than the hourly minimum wage they are entitled to.

Of these, 369,000 workers, aged 25 and over, were paid less than the National Living Wage (NLW): this equates to 23 percent of those paid at or below the rate. This is an increase of around 30,000 on the previous year’s level of underpayment of the NLW.

135,000 people were paid below £7.20 per hour (the 2016 introductory NLW rate). The LPC said these are estimates, but are consistent with a trend of increasing underpayment since the introduction of the NLW in 2016.

The estimate of 439,000 workers paid less than the minimum wage is derived from analysis of the Annual Survey of Hours and Earnings (ASHE). The LPC said it is not a true estimate of non-compliance for a number of reasons. Some cases of underpayment can be legitimate: for example, because of the accommodation offset; commission and bonuses; piece rates; and because the data may fail to identify workers as apprentices.

Equally, some underpayment – for example, resulting from deductions to pay through salary sacrifice – will not be shown in ASHE. In addition, employers who are knowingly non-compliant are unlikely to admit this in the survey. And importantly when discussing estimates of underpayment, ASHE is unlikely to include data on the informal economy, where it would be expected to find a large share of non-compliance.

Enforcement of the minimum wage by HMRC has benefited from increased funding, with a record number of workers identified as underpaid, arrears repaid, and fines levied on non-compliant employers in 2017/18. But other important measures – for example, the numbers of cases opened and closed – stood still, and the overall figures were driven by a relatively small number of cases.

The LPC has welcomed the government’s continued focus on minimum wage enforcement, but notes the continuing challenge in making sure resources are targeted as effectively as possible.

It has also urged the government to use all available opportunities to improve the measurement of underpayment, and to investigate new methodologies for assessing the scale of non-compliance.