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Workers underpaid the minimum wage

Published Friday, June 1, 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

In 2017/18, HMRC investigators identified a record 200,000 workers who had been underpaid the minimum wage, more than double the number the year before. In total, these workers were owed £15.6 million in pay.

The increase is partly the result of a new online complaints service launched in January 2017, which contributed to a 132% rise in the number of complaints received in 2017/18 compared with the year before.

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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