GovWire

The Low Pay Commission (LPC) today publishes a report into compliance and enforcement of the National Minimum Wage. The LPCs report estimates that around 371,000 workers were underpaid in April 2024. This represents a slight increase on the previous year but is below estimated numbers from the pre-pandemic period.

It also comes in the context of overall minimum wage coverage jumping substantially between 2023 and 2024. This means that numbers underpaid as a share of coverage a measure used to think about the relative probability of low-paid workers being underpaid fell in the latest data.

Baroness Philippa Stroud, LPC Chair, said:

Too often the low-paid workers we speak with feel powerless and cut adrift from the institutions which exist to protect them. This can cause low-paid workers to put up with poor employment conditions and underpayment for fear of repercussions.

The all-too-common experience of insecurity and uncertainty over their rights can discourage workers from reporting underpayment or trying to find better jobs. A strategy to end underpayment will begin with restoring low-paid workers confidence.

The Governments ambitions for the minimum wage should be backed by a similar level of ambition for enforcement. The Fair Work Agency is a unique opportunity to reform labour rights enforcement; and the Employment Rights Bill picks up several relevant recommendations previously made by the LPC. Our report restates the scale of this problem and suggests some fundamental ways the new agency could build confidence in the enforcement system.

The report published today looks at the scale and nature of underpayment; its persistence for workers; and the performance of the enforcement regime. Evidence from the last decade suggests that for many underpaid workers, underpayment lasts a long time, and one in three remain stuck in underpaid jobs from one year to the next. In recent years, the tight labour market has enabled more underpaid workers to move into jobs where they get the correct wage. This has slowed in the most recent data as the tight labour market which followed the pandemic has started to unwind.

The LPC make several recommendations to Government on the enforcement system, from ensuring the right information is available for workers and employers to building its data and intelligence on the kinds of non-compliance which exist.

Notes for editors

1. The Low Pay Commission is an independent body made up of employers, trade unions and experts whose role is to advise the Government on the minimum wage. Its recommendations are agreed unanimously by the Commission.
2. The LPCs role is to advise the Government on the National Minimum Wage, including the National Living Wage. It also publishes regular reports on compliance and enforcement, which draw on the evidence it gathers from workers, employers and others as well as labour market data.
3. The headline figures in todays report are estimates produced using the Annual Survey of Hours and Earnings (ASHE). ASHE provides the best available estimate of underpayment, but comes with a number of caveats. In some cases, it is likely to record legitimate practices as underpayment (for example, if accommodation charges are deducted from workers); in others, underpayment will go unrecorded (for example, if an employer doesnt accurately log working hours for payroll). Because it is based on PAYE, it will not capture any underpayment in the informal economy, where a lot of underpayment is likely to take place. In addition, the prevalence of underpayment changes over the year, with its highest point in April, immediately after new rates have come into force.
4. In a 2018 report on one-sided flexibility, the LPC recommended several measures to address this problem. These included a right to switch to a contract which reflects your normal hours; a right to reasonable notice of work schedule; compensation for shift cancellation or curtailment without reasonable notice and improved information to workers detailing their rights. These measures are being taken forward in the Employment Rights Bill.
5. The current Low Pay Commissioners are: Baroness Philippa Stroud (Chair), Nigel Cotgrove, Matthew Fell, Andrew Goodacre, Louise Fisher, Professor Patricia Rice, Simon Sapper and Professor Jonathan Wadsworth.
6. Baroness Philippa Stroud can be contacted via the Low Pay Commissions press off
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