The LPC publishes its report: Non-compliance and enforcement of the National Minimum Wage 2020

07 May 2020

The Low Pay Commission (LPC) is the independent body responsible for advising the government in relation to the National Living Wage (NLW) and the National Minimum Wage (NMW). It has published a report that discusses non-compliance and enforcement of the NMW.

The report places particular focus on the widespread practice of apprentices being underpaid and tries to identify potential solutions to the issue. Surveys have highlighted the fact that approximately one in five apprentices earn less than the amount that they are legally entitled to. The problem appears to stem from confusion around the requirement of employers to ensure that they pay apprentices for hours that they spend in training, in addition to payment for the hours that they are at work. The LPC has offered several recommendations to government which seek to ensure better protection for apprentices.

This is the LPC’s third stand-alone report into compliance with, and enforcement of, the NMW and draws data from 2019 to explore the nature and extent of underpayment. The information was gathered before the outbreak of coronavirus and subsequent shutdown, which will have inevitably had significant effects on many low-paid employees and the businesses that pay them.

The report also considers problems that workers face when attempting to access their payslips in order to understand whether or not they have been underpaid. Recent changes have made certain items on payslips mandatory, which has improved workers’ rights but more needs to be done to ensure that the changes are publicised and enforced effectively.

The report highlights the fact that the amount of measured underpayments dropped slightly in 2019 from 2018 but that more than 423,000 workers were still recorded as being underpaid. This level is higher than in many previous years, and it seems that underpayment varies significantly based on occupation. HMRC’s enforcement activity in 2018-19 ensured that repayments were made to more workers than ever before where they had previously been underpaid. The report looks at how HMRC’s statistics work and suggests further steps to be taken to ensure that the enforcement regime is as effective as possible.

The recommendations offered by the LPC are as follows:

  • The government should evaluate data recorded in non-compliance investigations, and consider how this can be used to develop measures of cost-effectiveness
  • The government should monitor the effects of the increase in the threshold for naming employers found to have underpaid workers (increased from £100 to £500)
  • The government is urged to take responsibility for the delivery of the new higher NLW target in the sectors where it is the main source of funding
  • The government should use targeted communications to both apprentices and their employers to highlight underpayment risks, with emphasis on the issue of non-payment of training hours
  • HMRC should review how they record apprentice underpayments, and to publish the numbers and profiles of apprentices they identify as being underpaid
  • HMRC should review its approach to investigations involving apprentices to understand whether they would accurately identify non-payment of training hours
  • As recommended by the Director of Labour Market Enforcement, the LPC agrees that the government should review the regulations on records that must be kept by an employer, to set out the minimum requirements needed to keep sufficient records

Chair of the LPC, Bryan Sanderson, said:

“The current situation has brought to the attention of all of us the importance of low-paid workers to many of our vital services, including health and social care and the production and distribution of food. The priority is clearly to try to secure the survival of businesses and jobs which are very much at risk. Ultimately, an effective enforcement regime is an essential contributor to the objectives of protecting workers and ensuring a level playing field for businesses too.

The Government has made progress in recent years but more can still be done to protect the most vulnerable, in particular apprentices.”

CIPP comment

The CIPP’s Policy and Research team is currently running a survey to inform a written response to the LPC’s consultation on National Minimum Wage rates for April 2021.

The survey can be accessed here and is open until Friday 22 May 2020, so don’t miss out on the opportunity to have your say!

 


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