The Low Pay Commission (LPC) has published its report on compliance with and enforcement of the national minimum wage (NMW) during 2024.
The report highlights the LPC’s concerns over the persistent challenges in ensuring compliance with the NMW. The LPC’s analysis indicates that approximately 371,000 workers were underpaid in April 2024, slightly more than in April 2023. However, this remains below the levels observed prior to the COVID-19 pandemic. The rise in underpayments may reflect the increased number of workers covered by the NMW, with more than 400,000 more workers covered in 2024 than in 2023. This means that the proportion of workers underpaid has actually decreased in 2024.
Demographic shifts
The demographics of underpaid workers have changed slightly, with salaried and full-time employees now more commonly affected. The LPC suggests that this may be a result of employers misunderstanding the NMW rules in relation to deductions, unpaid working time and salary sacrifice schemes, highlighting the importance to employers of getting these aspects right.
Enforcement
The report emphasises the need for effective enforcement mechanisms. The Employment Rights Bill proposes establishing a Fair Work Agency, which would have responsibility for enforcing the NMW alongside other rights. The LPC sees this as an opportunity for substantial change in the way the NMW is enforced. The LPC also highlights that complaints about failures to pay the NMW may increase as presently workers are worried about speaking out – being able to go to an independent body may encourage them to come forward. The LPC urges the government to ensure that adequate information is available to employees, so they know how to complain about underpayments.
Naming and shaming
The LPC recommends that employers who fail to pay the NMW are named more frequently, in response to only one round of “naming and shaming” taking place in 2024, which named 524 employers, and the long wait between offences being identified and companies being named.
Key recommendations for employers
Employers should:
- provide an internal mechanism by which employees can raise concerns that they have been underpaid, confident that they will not be subject to any negative repercussions.
- regularly audit salaries to ensure that any non-compliance is identified and rectified swiftly;
- monitor employees’ working hours to ensure unintended underpayments do not occur;
- ensure that they do not accidentally breach NMW due to deductions for employment-related costs (such as uniform costs), salary sacrifice schemes or unpaid working time (such as unpaid overtime or on-call time), where these reduce an employee’s earnings below the NMW; and
- provide an internal mechanism by which employees can raise concerns that they have been underpaid, confident that they will not be subject to any negative repercussions.
