the previous year’s level of underpayment of the NLW, or a 2 percentage point rise in the share of workers entitled to the rate.
135,000 people were paid below £7.20 per hour (the 2016 introductory NLW rate). These are estimates but are consistent with a trend of increasing underpayment since the introduction of the NLW in 2016.
The estimate of 439,000 workers paid less than the minimum wage is derived from analysis of the Annual Survey of Hours and Earnings (ASHE). It is not a true estimate of non-compliance for a number of reasons. Some cases of underpayment can be legitimate: for example, because of the Accommodation Offset; commission and bonuses; piece rates; and because the data may fail to identify workers as apprentices. Equally, some underpayment – for example, resulting from deductions to pay through salary sacrifice – will not be shown in ASHE. In addition, employers who are knowingly non-compliant are unlikely to admit this in the survey. And importantly when discussing estimates of underpayment, ASHE is unlikely to include data on the informal economy, where it would be expected to find a large share of non-compliance. Enforcement of the minimum wage by HM Revenue and Customs has benefited from increased funding, with a record number of workers identified as underpaid, arrears repaid, and fines levied on non-compliant employers in 2017/18. But other important measures – for example, the numbers of cases opened and closed – stood still, and the overall figures were driven by a relatively small number of cases.
The LPC has welcome the Government’s continued focus on minimum wage enforcement, but notes the continuing challenge in making sure resources are targeted as effectively as possible.
The LPC recommends that the Government continues to invest strongly in communications to both workers and employers around minimum wage compliance and enforcement. The report makes specific recommendations around information for workers and trade unions, guidance for employers and publicity around the enforcement regime. Measuring the full extent of minimum wage non-compliance remains a significant challenge. The LPC urges the Government to use all available opportunities to improve the measurement of underpayment, and to investigate new methodologies for assessing the scale of non-compliance.
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Chancellor plans significant rise in minimum wage 9 May 2019
According to The Times the Chancellor is to be giving serious consideration to raising the minimum wage to as high as 66% of median earnings, meeting the Organisation for Economic Co-operation and Development’s definition of low pay.
The main minimum wage rate is due to rise to 60% of median income next year, or about £8.67 an hour. Mr Hammond has reportedly held meetings with union officials over his ambitions to secure a legacy of ending low pay.
Low Pay Commission annual review of Minimum Wage As they celebrate 20 years of the National Minimum Wage, the Low Pay Commission is currently carrying out its annual review which seeks views from the widest possible range of contributors.
To support the CIPP written response to the 2019 consultation the policy team have published a survey to collect views and opinions as to the:
• affordability of the National Living Wage (NLW) rate and effects of an increase to the ‘on target’ rate for April 2020 – currently around £8.67 • evidence of the impact of increases in the NLW since its introduction – including the April 2019 uprating – on workers, employers, the labour market and the economy • evidence of how employers are seeking to improve productivity • evidence on how the economic outlook is affected by the process of leaving the European Union.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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