A quarter of minimum wage workers underpaid

A new study has found that a quarter of people aged 25 and over, who should be receiving the National Living Wage (NLW) are being underpaid by their employer.

The research was conducted by the Resolution Foundation think tank and claims indicate that a large number of businesses are not complying or keeping up with the NLW requirements that were introduced in 2016.

Prior to the introduction of the NLW, the think tank said that about one in five workers aged 25 and over was underpaid, which suggests that more employers are failing to remain compliant with the new wage rates.

In response to the study’s finding, the government told the BBC that it wanted to ensure all those eligible were correctly paid. It said:

“All businesses, irrespective of size or business sector are responsible for paying the correct minimum wage to their staff. HM Revenue & Customs (HMRC) won’t hesitate to take action to ensure that workers receive what they are legally entitled to.

In the last tax year (2018/19), HMRC conducted more than 3,000 investigations into claims of underpayment from more 220,000 workers, identifying over £24.4 million owed to staff – the highest amount in a single year.

Those who do not comply with the NMW and NLW regulations face fines of up to 200% of the arrears, risk being named and shamed publicly and the worst offenders can even be prosecuted for a criminal offence.

Lindsay Judge, the Resolution Foundation’s senior policy analyst, said: “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.”

“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.

“The welcome introduction of the National Living Wage in 2016 has led to a worrying rise in minimum wage underpayment. As the government plans to increase the legal wage floor through this Parliament, it is essential to strengthen the incentives for firms to comply.”

Companies cannot run the risk of fines, prosecutions or being named, which is why it is important that your payroll processes remain compliant.