Author Mark Fairlie
The Low Pay Commission, an independent body that advises the government about minimum rates of pay in the UK, has published a report showing that women are far more likely to be paid less than the minimum wage than their male counterparts.
The report stated that up to 1 in 5 minimum wages worked may be paid less than their legal entitlement, equivalent to up to 580,000 workers at any one time.
What are the legal minimum wage requirements?
At the time of writing, workers in the UK must be paid the following amounts per hour as a minimum:
- Over 25’s – £7.50
- 21-24-year-olds – £7.05
- 18-20-year-olds – £5.60
- 16-17-year-olds – £4.05
- Apprentices – £3.50
The government’s current target is to achieve a minimum of £9.00 per hour for over 25-year-olds by 2020.
What did the low pay commission report find?
Women make up the largest group of workers recorded by the Low Pay Commission as receiving less than the minimum wage – 65%. This is because, in part, a higher proportion of minimum wage workers are female (63%).
The report also found that when the minimum wage levels are increased (which happens every year), then employers don’t always adjust their rate to reflect the new pay level fast enough. However, over the course of the 3 to 6 months following a raise, levels of underpayment fall significantly as employers begin to comply with their legal obligations.
For workers on salaries, those people who are paid monthly and whose employment contract does not have a specified hourly rate, they make up 44% of the people paid underneath the national minimum wage despite only making up 11% of the group.
The report states that there is likely to be a significant amount of underpayment in the informal economy. The informal economy is the part of the UK economy that is not taxed or monitored by HRMC or the government – this is more commonly referred to as “under the table”, “off the books”, or “working for cash” type of work.
Who polices the minimum wage?
It is a criminal offence not to pay someone the minimum wage. HMRC have the right to enter employers’ premises at any time and ask to see payment records. This happens most often when they have been tipped off by a worker unhappy that they are not receiving their legal minimum entitlement.
HMRC’s workload enforcing the minimum wage is likely to increase rapidly as economists predict that the number of people being paid at the minimum wage (because the level rises each year) will be 3.3 million in 2020, as opposed to the current 2.3m. HMRC funding to monitor compliance in this area has increased in recent years with further money earmarked going forward.
What does the report recommend?
Speaking to HMRC, Bryan Sanderson, chair of the Low Pay Commission, stated, “The LPC welcomes the recent increases in funding for HMRC’s enforcement of the minimum wage, and recognises the progress it has made. However, we also think there is more the Government could do to identify non-compliance and stop it happening in the first place. In our report, we lay out recommendations for ways the Government could go further.”
The Department for Business, Energy and Industry Strategy, speaking to the Financial Times, said: “There are no excuses for underpaying minimum wage rates. Workers should get the wages they are owed and the government will come down hard on employers that break the law…Last year HMRC identified almost £11m of back pay for more than 98,000 of the UK’s lowest paid workers — around two-thirds of which were women.”