Wage theft scandal

More than a million people are barely eking out a living on the minimum wage, now set at £7.50 an hour – but a shock new report has revealed that among these low-paid workers, as many as 1 in 5 are illegally paid below this rate.

The Low Pay Commission (LPC), an independent body advising the government, has found that of those minimum wage workers aged 25 and over, between 305,000 and 580,000 workers may be earning less.

Underpayment is most common, the LPC says, when the minimum wage — known as the National Living Wage – is uprated each year as bosses fail to keep up with the new rate.

But between three and six months after the wage rate goes up, the percentage of workers being paid below falls from 20 per cent to 13 per cent.

Women are most likely to be underpaid – they make up more than 60 per cent of low paid workers who are paid below the NLW. But the LPC highlights that this may be because the minimum wage workforce is in any case mainly female, making up 63 per cent of all minimum wage workers.

Women are also much less likely to complain that they are being paid less than the minimum wage – even though the majority of those being underpaid are women, only half of complaints logged came from women.

Women and social care

Unite national officer for equalities Siobhan Endean said the report’s findings on low-paid women workers did not come as a shock.

She said, “While the glass ceiling is still something to be smashed, the bigger issue for the vast majority of women is being trapped in low paid work.

“Women are far more likely to be in minimum wage roles, so it comes as no surprise that they form the majority of people receiving less than the minimum wage.”

Endean said Unite is particularly concerned about the number of women in social care roles being denied the legal minimum.

“Social care workers are at particular risk from being underpaid, especially in small and private sector organisations that are less likely to be unionised,” Endean explained.

“Their pay slips can often be difficult to comprehend and hide the fact their wages have been reduced because travel or extra time needed to properly see to a client’s needs have not been taken into account.”

She added, “Overnight stays with clients are also problematic because firms will use the excuse that the normal rate doesn’t need to be paid if a worker is required to sleep during periods of their shift, an issue Unite has raised with the Low Pay Commission.

“The funding crisis in social care also needs to be urgently addressed to help resolve the problem of underpayment in the sector.”

Other sectors

Notably, salaried workers are at greater risk of being illegally underpaid – mostly because their work time isn’t measured in hours, so if they work longer days or weeks they can fall below the legally mandated rate without them or their employer realising.

Some sectors in which underpayment was high were not surprising, including hospitality, childcare, and office work.

But underpayment was also common in high paying sectors — the LPC says this is down to there being fewer minimum wage workers in these sectors, and so there’s less awareness of minimum wage law.

On the other end, underpayment was relatively low in some low-paying sectors such as food processing and textiles – again because so many workers in these sectors are on the minimum wage rate, their bosses tend to be more aware of minimum wage laws.

LPC chair Bryan Sanderson said the LPC has “always had a strong interest in compliance with the minimum wage rates it recommends. There is, after all, little point in having a minimum wage if workers do not receive the correct rate.

“With more workers than ever paid the minimum wage or close to it, more people are at risk of being underpaid,” he added. “Our analysis finds that up to 1 in 5 people who should be paid at least the minimum wage may in fact receive less. This equates to between 305,000 and 580,000 workers at its highest point, though it is a difficult thing to measure.

“The LPC welcomes the recent increases in funding for HMRC’s enforcement of the minimum wage, and recognises the progress it has made. However, we also think there is more the Government could do to identify non-compliance and stop it happening in the first place.”

The LPC recommended that the government beef up its awareness campaigns for both workers and bosses and also improve the way it informs workers of the complaints process. While it lauded the government’s ‘name and shame list’ of employers paying below the minimum wage, it recommended the government publish the list more often.

Enforcement call

The LPC also suggested that the government increase the number of prosecutions against underpaying employers.

“Prosecutions are limited, with only thirteen cases successful undertaken since 2007,” the report noted. “Prosecutions that are well publicised could have a powerful deterrent effect.”

Unite assistant general secretary Steve Turner argued that the government must go even further in combatting underpayment of the minimum wage.

“The government needs to crack down further on employers who failed to pay the national minimum wage to some of the most low-paid and vulnerable workers in the country,” he said.

“In America, bad bosses are jailed and heavily fined for ‘wage theft’ which is what this is, exploiting workers in such a shameful fashion.”

“To address growing levels of poverty a genuine living wage must be introduced, sector level collective bargaining introduced and stronger, more effective enforcement funded,” he added.

“This would mean proper resources for the agencies responsible for enforcement and the cuts they have suffered in recent years to be reversed.”

Turner also noted that Unite believes the government’s minimum wage of £7.50 an hour is “inadequate and pathetically low” and added that it is “leading to obscene levels of growing poverty in our communities.

“Unite strongly supports a minimum living wage of at least £10 an hour.”