7,000 firms undercut wages council rates

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The Independent Online
ILLEGAL underpayment of workers whose minimum pay rates were set by wages councils rose sharply in the run-up to the abolition of the councils last year, but only a tiny fraction of underpaying employers were prosecuted, according to a study by the Low Pay Network.

The Government's Wages Inspectorate found that more than 7,000 establishments illegally underpaid staff in 1992, but there were only 12 prosecutions for underpayment during the year.

The LPN fears that the growth in underpayment is a bad omen for low-paid workers in industries such as shops, catering, hotels and clothing manufacture, which had been covered by wages councils. A fifth of vacancies in these industries were offering less than the old minimum rates within two months of abolition.

The Wages Inspectorate found that nearly 15,000 workers in Great Britain were illegally underpaid in 1992, the last full year before abolition of the wages councils. With total underpayments reaching almost pounds 2m, this meant that the average underpayment per worker totalled pounds 135.32 - more than a week's wages.

This figure for average underpayment was 16.4 per cent higher than in the previous year, continuing a trend that began in 1987. The number of establishments found to be underpaying staff exceeded 7,000, compared with fewer than 6,000 in 1991 and fewer than 4,500 in 1987.

'The uncertainty over the future of the wages councils from 1986 meant that many people felt they had been abolished long before August 1993', Jonathan Fry of the LPN said. 'The lack of government commitment to maintaining minimum wage levels may also have given a green light to some employers to underpay staff.'

Underpayment in former wages council industries was highest in hairdressing, at an average of pounds 230.10, around a fortnight's wages.

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