LPC reports on record levels of NMW underpayments

The independent pay body reviews annual statistics to estimate underpayments.

In figures which reveal that 30,000 more individuals were underpaid National Minimum Wage (NMW) in 2018 compared to the year before, the Low Pay Commission’s (LPC) report reveals that an estimated 439,000 workers were paid less than they were entitled to in total. This figure includes 23 per cent of all those who were entitled to the National Living Wage (NLW), eg those aged 25 and over, with 25.4 per cent of those entitled to the apprentice rate estimated as being underpaid. Looking at the figures in more detail, the LPC highlighted the following:

  • female workers are underpaid more often than male workers
  • young and older workers are underpaid more than any other age group
  • the childcare sector has more underpaid workers than any other sector.

These statistics show a vast number of workers are estimated as being incorrectly paid. Whilst the introduction of itemised pay statements for all workers, alongside employees, will help staff identify whether they are being paid correctly, this report shows that organisations themselves are struggling with the legalities of minimum wage payments. The recent rise in the NMW and NLW was a public reminder that organisations need to pay the correct wages to their employees, and ensure any minimum wage payments are increased in line with the new statutory rates.

Turning to enforcement action against employers who are guilty of underpaying staff their legal entitlement, the LPC reported that a greater proportion of enforcement by HM Revenue & Customs (HMRC) is carried out reactively, rather than proactively. Although HMRC carries out targeted investigations, the LPC found that more employers were subject to enforcement action when an employee complaint was submitted to HMRC. As a finding, this is perhaps well understood as it is unlikely that an employee will make such a complaint unless they are aware that they are being paid under the legal minimum. What this does show, however, is that HMRC are following up on employee complaints and will take suitable action, including fining employers, where they have underpaid staff.

The LPC is recommending that the government reintroduces regular naming and shaming rounds of employers who have underpaid NMW and NLW. Those who read these naming lists with interest are likely to be aware that the last list was released in July 2018, with the LPC reporting that the Department for Business, Energy and Industrial Strategy are reviewing the effectiveness of the naming strategy. Therefore, it is likely that this review has led to the pause in the naming list. For organisations, whilst this provides a pause in the reputational damage that can be inflicted by the list, the naming and shaming is likely to recommence in the future and organisations can only avoid this by ensuring they are paying staff correctly. Now might be the perfect time to ensure staff payments are correct and legal.

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