National Minimum Wage: new report reveals that too many employers are still underpaying their staff

What does the report say? 

The LPC estimates that, in total, around 371,000 workers may have been underpaid in April 2024 - a slight increase on the previous years figures, although less than pre-pandemic figures. The types of workers who are most affected are salaried workers, and there are more full-time workers than part-time ones that are underpaid. 

The problem with salaried staff are twofold:

• they are more likely to be working additional hours which are unpaid; and
• their annual salary may not be increased in line with NMW increases.

The majority of salaried hours workes who are not being paid correctly are being underpaid by more than £1 an hour. Employers tend to make smaller errors when it comes to their hourly paid employees.

Non-compliance can take various forms, ranging from inadvertent mistakes, negligence, deliberate underpayment and the most serious forms of abuse and exploitation. 

The LPC also make several recommendations for the government including explaining to employees how they can complain about being underpaid. They also say that the creation of the Fair Work Agency is a “significant opportunity to change the relationship of workers and employers with state enforcement.”

Fair Work Agency

The government has committed to creating a Fair Work Agency (FWA) in the Employment Rights Bill.

It published a factsheet which explains that the FWA will bring together existing state enforcement functions, including:

• Minimum wage and statutory sick pay enforcement
• Employment Tribunal penalty scheme
• Labour exploitation and modern slavery

It will also enforce holiday pay and, over time, take on the enforcement of a wider range of employment rights. 

The government believes that the current system of state enforcement is fragmented and inefficient which complicates the process for both workers and employers seeking help. It believes that many workers don't know how to enforce their rights which leads to certain breaches, like underpayments, going unchallenged. 

The impact of the FWA will depend on the pwowers it is granted and the level of funding it receives. We'll know more as the Employment Rights Bill progresses through parliament.

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