Government’s minimum wage policy being undermined by record number of underpaid workers – report

The Low Pay Commission puts the number at more than 400,000 despite extra resources being put into chasing miscreants. It's time to consider a change in approach

James Moore
Chief Business Commentator
@JimMooreJourno
Friday 26 April 2019 11:41
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HMRC has been given extra resources to tackle non payment of the minimum wage
HMRC has been given extra resources to tackle non payment of the minimum wage

According to the Low Pay Commission, a record number of people were underpaid last year by those that chose to do just that.

In a report published just a few weeks after the minimum wage celebrated its 20 year anniversary, it put the number at 439,000 and rising.

Younger workers were particularly vulnerable, even though employers are allowed to pay them less. Ditto women. The report tagged childcare as the occupation with the highest proportion of underpaid workers, with hospitality and retail, which similarly employ an unusually high proportion of female workers, also high on the list.

But hang on a second, I hear you say. Wasn’t HM Revenue & Customs (HMRC) given a bunch of extra cash by the Department for Business, Energy & Industrial Strategy (BEIS) to bring enforcement actions?

That is indeed the case, as BEIS was keen to stress in response to the report. And there is evidence that it is having results. HMRC identified an all-time high number of workers as underpaid in the 2017-18 financial year, securing pay rises and arrears for them while also levying fines.

Yet the number of cases overall stood still. The figures were driven by a relatively small number of big cases.

What this tells you is that HMRC is deploying its resources where it can get the most bang for its buck. An eminently sensible policy given that its budget is not unlimited, even after the increases it has enjoyed and the complexities and expense involved in investigating underpayment – and bringing miscreant employers to book.

The trouble is that this is inevitably going to lead to a long tail of often smaller employers that are cheating the system and may justifiably feel there is little risk to them in doing so.

That problem could easily get worse as the rates rise and the temptation to flout the rules correspondingly increases. Sometimes it can be as simple as delaying the introduction of new rates. Sometimes it’s a lot worse than that.

Helpfully the commission, which also advises on the rates themselves, has some sensible ideas for addressing the issue, which can be summarised as calling for a more holistic approach.

As part of this, it wants to see more investment in communicating with workers, and employers, together with efforts to build confidence in complaints processes, and to help workers to use them.

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It would also like government to work more closely with unions, which obviously have considerable expertise in this area through the work they do for low paid members and could provide a great deal of assistance.

Cheating the minimum wage not only cheats workers. It cheats the competitors of businesses that fail to pay it by disadvantaging them.

In treating unions as the enemy, as the Conservative government is frequently guilty of doing, it risks undermining the success of one of its flagship policies. It’s time they were brought in from the cold.

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