The Low Pay Commission (LPC) today publishes its third stand-alone report into compliance with and enforcement of the National Minimum Wage (NMW). The report uses data from 2019 to investigate the nature and extent of underpayment. This dates from prior to the current Covid-19 outbreak and shutdown, which have had significant impacts for many low-paid workers and their employers.
Bryan Sanderson, Chair of the LPC, said:
The current situation has brought to the attention of all of us the importance of low-paid workers to many of our vital services, including health and social care and the production and distribution of food. The priority is clearly to try to secure the survival of businesses and jobs which are very much at risk. Ultimately, an effective enforcement regime is an essential contributor to the objectives of protecting workers and ensuring a level playing field for businesses too.
The Government has made progress in recent years but more can still be done to protect the most vulnerable, in particular apprentices.
The report examines underpayment of all groups of low-paid workers, but focuses in particular on apprenticeships, where surveys show around one in five apprentices earn less than their legal entitlement. The LPC’s analysis suggests that confusion around the requirement to pay apprentices for their training hours is likely to account for a large proportion of this underpayment. The LPC makes several recommendations to Government to better protect apprentices, by reviewing how it investigates these cases and better communicating the risks they face.
The report also looks at the problems workers face in accessing their payslips and understanding whether or not they are underpaid. Recent changes to the rules have improved workers’ rights, but still need to be publicised and enforced.
Overall, the report finds that the amount of measured underpayment fell slightly in 2019 from 2018, with over 423,000 workers recorded as underpaid. But this level remains higher than in many previous years, and the prevalence of underpayment varies significantly by occupation. HM Revenue and Customs’ enforcement activity in 2018/19 secured the repayment of more arrears for more workers than ever before. The report considers what HMRC’s statistics do and do not tell us about their work, and what more needs to be done to ensure the enforcement regime is as effective as possible in meeting the needs of underpaid workers.
In full, the LPC’s recommendations to the Government in its 2020 non-compliance and enforcement report are:
We recommend the Government evaluates what data are recorded in non-compliance investigations, and considers how this can be used to develop measures of cost-effectiveness.
We recommend the Government monitors the effects of the increase in the threshold for naming employers found to have underpaid workers.
We urge the Government to take responsibility for the delivery of the new higher NLW target in the sectors where it is the main source of funding.
We recommend the Government uses targeted communications to both apprentices and their employers to highlight underpayment risks, and in particular the problem of non-payment of training hours.
We recommend HMRC review the way they record apprentice underpayment, and to publish the numbers and profile of the apprentices they identify as underpaid.
We therefore recommend that HMRC review their approach to investigations involving apprentices, to understand whether these investigations would identify non-payment of training hours.
We join the Director of Labour Market Enforcement in recommending that the Government reviews the regulations on records to be kept by an employer, to set out the minimum requirements needed to keep sufficient records.