Non-Compliance and Enforcement of the National Minimum Wage

by | May 29, 2020 | News, Payroll

Non-Compliance and Enforcement of the National Minimum Wage

by | May 29, 2020 | News, Payroll

The National Minimum Wage is statutory and legally binding.

Companies must comply. However, the Low Pay Commission (LPC) published a report on 7th May 2020 which highlighted the fact that there is still a lot of non-compliance about. It also discussed the area of enforcement.

More than 423,000 Workers are Underpaid

The LPC’s report, which uses data from 2019, focuses on the nature and extent of underpayment, and points out that more than 423,000 workers were still recorded as being underpaid. This is a high number and one which is higher than in the previous two reporting years. The data also showed that underpayment varies significantly dependent on occupation.

Apprentices, in Particular, are Underpaid

The report showed that there appears to be a widespread practice of apprentices being underpaid, with in five apprentices earning less than the amount that they are legally entitled to under the National Minimum Wage legislation

Interestingly, this particular problem appears to be mainly caused by confusion on the part of employers as to what apprentices should be paid and the requirement under NMW legislation that apprentices should be paid for hours that they spend in training, in addition to payment for the hours that they are at work.

HMRC Continues its Enforcement Crackdown

HMRC’s on-going enforcement of the NMW laws in 2018-19, ensured that repayments were made to more workers than ever before where they had previously been underpaid. The report actually suggests further steps could be taken to ensure that the enforcement regime is even more effective than currently.

The Government is Targeting Continued Improvements in the National Living Wage

In its remit to the LPC this year, the Government set a further target for the National Living Wage (NLW) to reach two thirds of median earnings by 2024. In addition, the age threshold for the NLW is set to be reduced to 23 in 2021, and to 21 by no later than 2024.

It is important to point out that this new remit was announced in the early stages of the Covid19 outbreak, and before the scale of its effects on the economy were clear. The LPC will almost certainly have to reassess the effects of Covid19 when making their recommendations to the Government on the 2021 NLW and NMW rates in the autumn of 2020.

Whatever the speed at which any age changes or rate increases take place, it will continue to be important for Government to evaluate and improve the enforcement system, to consolidate the advances of recent years and address the remaining gaps in compliance.

Talk to us for Help and Advice on the National Minimum Wage

New figures are set every year by the Government for the National Minimum and Living Wages. There are also some exemptions. Contact us for help and advice in this area.


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