Record £15.6 million underpayment identified for workers on the minimum wage

24 September 2018

More than 200,000 workers who were paid less than the minimum wage have been identified following a record government clampdown.

The number of workers identified as underpaid was double that in 2016/17 and the highest number since the National Minimum Wage came into force.

In every case, the government instructs employers to repay their workers and enforces the return of the missing cash.

The rise in cases follows increased efforts by HMRC to promote compliance and improve employer awareness of the minimum wage.

The recently published statistics come from a BEIS report ‘National Living Wage and National Minimum Wage: government evidence on compliance and enforcement, 2017 to 2018’ which provides an overview of minimum wage enforcement activity during 2017/18, following a similar report published last year covering activity during 2016/17. Evidence presented in this report covers:

  • Estimated non-compliance with the minimum wage
  • Statistical estimates of low paid jobs
  • Awareness of the minimum wage
  • Routes to HMRC enforcement
  • Enforcement operations
  • Enforcement statistics

Over the past year, 56 employers took advantage of a HMRC pilot scheme where employers were encouraged to come forward outside of an investigation. This resulted in nearly £250,000 in arrears being declared for just under 700 workers.

The year also set a new record for penalties issued by the government, with £14 million in fines issued to employers.

More than 600 employers who were found to have underpaid their workers the minimum wage were named in 2017/18. This is the largest number in any single year since the scheme began in 2014.

This year, the social care, retail, commercial warehousing and gig economy sectors have been prioritised by HMRC for enforcement of the minimum wage. This is alongside employment agencies, apprentices and migrant workers. These sectors are where non-compliance with National Minimum Wage is believed to be more widespread.

Employers who pay workers less than the minimum wage have to pay back arrears of wages to the worker at current minimum wage rates and face financial penalties of up to 200% of arrears, capped at £20,000 per worker.

CIPP comment

The Chartered Institute of Payroll Professionals (CIPP) recognises that the increasing complexity of the NMW rules will no doubt have added to this total.  Although there are some employers who simply choose not to comply with NMW regulations, increasingly we hear that those employers who thought they were adhering to the rules, suddenly find that they are not, simply because there are subtle complexities which mean that they are inadvertently not complying.

Every year and this year is no exception, our members tell us that although they pay above minimum rates, they still experience difficulties when it comes to HMRC enforcement of the minimum wage and understanding government guidance, which still appears unclear and difficult to interpret.

The CIPP has long called for clear and concise guidance and an insight into how HMRC interprets the guidance which does not always appear to be the same as how BEIS and employers interpret it.

The CIPP continue to lobby for a cross-government consultation forum on minimum wage as a business as usual forum. We are told this is being considered by BEIS who would lead as they own this policy, and HMRC would also attend as they have a service level agreement to enforce compliance and provide educational material.

Don’t get caught out, the CIPP offers a training course on National Minimum Wage and other worker entitlements. Book your place here.