As the government’s mandatory minimum wage is set to rise to just £8.72 an hour in April, new research reveals that an astounding 25 per cent of minimum wage workers are being underpaid illegally.
The Resolution Foundation report found that while the implementation of the minimum wage in 1999 has largely been a success, with the number of employers flouting the law and paying their workers less than the wage floor falling, this trend has now for the first time in years gone into reverse.
Before 2016, about one in five workers were illegally paid below the minimum wage but since then more than one in four workers are being shafted by their bosses.
The extent of wage theft is much greater than what the government has stated publicly, according to the Resolution Foundation think tank. In 2018-19, HMRC identified 1,456 firms paying below the minimum wage. But the Resolution Foundation estimates, based on data taken from the Annual Survey of Hours and Earnings (ASHE) that there were at the very least 11,000 firms underpaying their workers in April 2018 alone. This means HMRC catches only 13 per cent of all minimum wage violators.
The report, Under the Wage Floor, highlighted that since a minimum wage was first instituted more than two decades ago, there have been “only a handful” of individual directors being persecuted for evading the law, and “only limited criminal fines levied for even the severest of violations”.
“Taken together, it is clear that the current NMW penalty and enforcement regime provides insufficient deterrence for firms contemplating underpayment,” the report noted.
The think tank went on to argue that the only way to increase minimum wage compliance is to increase the likelihood that violators will get caught and to likewise increase the penalties and associated risks for those who do get caught.
Serious doubts have been raised, however, that the present government will take more robust action against wage theft. After all, one of the few tools the previous Tory government used to deter minimum wage violators – their ‘name and shame’ list of offenders which was formerly published regularly – has not been made public since July 2018.
“The minimum wage has been one of the UK’s biggest policy successes in recent decades, delivering much-needed pay rises to millions of low-paid workers,” said Resolution Foundation senior policy analyst Lindsay Judge.
“Its success is dependent on employers taking it seriously, with those firms paying it not being undercut by a minority that fail to do so.”
Unite assistant general secretary Steve Turner agreed.
“The Resolution Foundation has put forward what we at Unite have been saying for a long time – a mandatory minimum wage is meaningless if there is no robust enforcement mechanism. Minimum wage enforcement must be strengthened and funded – it is a national scandal that we have only nine enforcement officers to cover 18,000 employment agencies.
“Let’s also not forget the disgraceful legal wage theft happening on a grand scale with workers under 25 being denied the higher minimum wage rate,” he added. “The government simply cannot justify paying younger workers less when so many of them have to pay bills, feed their families and make ends meet just like any adult.”
“Unite will continue to fight for a higher minimum wage of at least £10 an hour and a stronger enforcement regime to accompany it,” Turner went on to say. “We will also continue to campaign for stronger unions with the return of sector level collective bargaining to ensure low pay is banished from this country once and for all.”