A Low Pay Commissioner says underpayment is on the rise but there are simple steps the government could take to protect workersby Sarah Brown / May 9, 2019 / Leave a comment
This year we celebrate 20 years of the UK National Minimum Wage (NMW), which came into force in 1999 at £3.60 an hour. It is easy to forget just how controversial its introduction was. Many thought that it would force the low paid out of work. This has not been the case: over the last 20 years, the NMW has increased pay for the lowest paid without damaging employment. Pay for a full-time worker on the minimum wage is £5,000 a year higher in real terms than it would have been without it.
However, there are a number of workers who receive less than what they are entitled to. We cannot be complacent. Specifically, we cannot let the success of the minimum wage be undermined by those who pay workers less than the legal wage floor. Regrettably there are some employers who seek to flout the rules. Others fail to understand their obligations.
The Low Pay Commission has recognised this from the start, as we heard at a recent event to mark the NMW’s 20th anniversary. Former commissioners reflected on how the remit of the LPC did not originally include looking at compliance and enforcement. The remit was to advise on the rate itself. However, because they saw it as an intrinsic aspect of the policy, the original Commission closely monitored how far the newly introduced rate was observed in the real world, as well as the government’s enforcement of it. Since 1999, the Commission has reported on compliance and enforcement each year alongside its NMW rate recommendations.
The importance of focusing on compliance and enforcement is brought home by the findings of our latest report, which uses official statistics as well as evidence from stakeholders and the government, to reflect on the policy responses to non-compliance.
Worryingly, underpayment of the minimum wage appears to be on the rise, and has been since the National Living Wage (NLW), the higher rate for workers aged 25 and over, was introduced in 2016. In April 2018, 439,000 people were paid less than the hourly minimum wage they should have received. Of these, 369,000 were workers aged 25 and over paid less than the NLW—23 per cent of those paid at or below the rate (which was £7.83 in April 2018 but went up last month to £8.21).
This is an increase of 30,000 underpaid workers on 2017, or…