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Workers underpaid the minimum wage

Published Wednesday, February 21, 2018

The minimum wage is one of the fundamental employment rights in the UK. But the minimum wage doesn’t enforce itself. This briefing looks at what is known about workers paid less than the minimum wage.

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What is non-compliance with the minimum wage?

Non-compliance with the minimum wage is when an employee is paid less than the rate they are entitled to under National Minimum Wage legislation.

To determine whether an employee is paid at least the minimum wage, the employee’s hourly rate must be calculated. The rate is calculated by taking the employee’s pay and dividing it by the hours worked:

     Hourly rate = Pay / Hours of work

Employers found to underpay the minimum wage

HMRC concluded investigations into 2,674 employers in 2016/17, and found 98,150 underpaid workers. That was the largest annual total on record, with 69% more workers found to be underpaid than the year before.

This increase is largely the result of HMRC adopting a more targeted, proactive approach to the enforcement of the minimum wage.

Estimating the number of underpaid workers

There is considerable uncertainty around the total number of underpaid workers because earnings surveys struggle to accurately capture non-compliance with the minimum wage. It is not possible to point to a specific figure with much confidence, but only to a broad range.

Excluding unpaid time, estimates suggest that underpayment affects between 300,000 and 580,000 people aged 25 and above.

If unpaid time is taken into account, the number of people underpaid the minimum wage is substantially higher. The true extent of underpayment is very difficult to estimate, but a range of 1 to 2 million underpaid workers is likely, or between 4% and 9% of employees aged 25 and above.

Commons Briefing papers CBP-8235

Authors: Federico Mor; Jennifer Brown

Topics: Employment, Pay

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