The Low Pay Commission (LPC) estimates that around 371,000 people were underpaid in the year to April 2024.
The figures published in the Compliance and Enforcement of the National Minimum Wage in 2024 report represents a slight increase on the previous year, but still a fall when compared to the pre-pandemic period. It also comes in the context of the number of workers who should receive at least the National Minimum Wage (NMW) increasing substantially between 2023 and 2024.
The LPC reported that most underpayment now affects salaried workers, and the leading cause of underpayment logged by HMRC are deductions and unpaid working time. In April 2024, 140,000 National Living Wage jobs were underpaid by more than 50 pence per hour, with a similar number paid within 10 pence of pay rate. For a full-time worker, being underpaid by 50 pence per hour would mean losing out on nearly £1,000 per year.
Evidence shows that it is more common for underpayment to be a long-lasting omission rather than a brief one. Compared however with the pre-pandemic period, there has been a big decline in the prevalence of persistent underpayment.
Recommendations made to the government
The LPC report repeats previous recommendations made to the government on the enforcement of the system, such as:
• Ensuring adequate information is available to workers about where and how to complain about underpayment; and
• Improving guidance on work types and the differences in calculating working time between salaried and unmeasured work.
In addition, the report encourages the government to publish more frequent naming rounds (giving the names of employers who have failed to pay workers at the correct rate) in the future, in an effort to reduce the backlog and act as a deterrent against underpayment.
The impact of the Employment Rights Bill
The Employment Rights Bill is set to introduce a broader range of rights for low-paid workers.
It is hoped that the increase in resources for NMW enforcement and the creation of a new single enforcement body, the Fair Work Agency, will represent a significant opportunity to change the relationship of workers and employers with state enforcement.
Extensive and robust enforcement powers are planned for the Fair Work Agency, with non-compliance potentially leading to criminal charges, including the ability to:
• Request information from individuals
• Access business premises to collect documents; and
• Require employers to make specific commitments.
Going forward
The LPC has urged the government to carefully consider the recommendations in its report in the process of setting up the Fair Work Agency. As with most of the proposed reforms in the Employment Rights Bill, it is anticipated that it will be unlikely to be set up and running before late 2026 at the earliest.
For help and advice on this topic or related issues, please contact Chris Cook by calling 01727 798089 or email chris.cook@salaw.com.
