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Employers fined almost £2 million as record number of workers underpaid

Out-Law News | 10 Jul 2018 | 12:12 pm | 1 min. read

The UK government has fined 239 employers a total of £1.97 million after it found 22,400 workers were cumulatively underpaid £1.44m from what they were entitled to under National Minimum Wage and National Living Wage legislation.

The government published its latest list of the offending employers last week. The number of affected employees is a record since HM Revenue & Customs (HMRC) began identifying employers which were underpaying their staff.

“This latest list demonstrates the government’s commitment to identifying and enforcing minimum wage breaches across employers of all shapes and sizes,” said employment law expert Emma Malczewski of Pinsent Masons, the law firm behind Out-Law.com.

The government’s scheme to enforce the National Minimum Wage (NMW) and National Living Wage (NLW) is in its fifth year and the funding for enforcement has more than doubled since 2015, with the government set to spend £26.3m in 2018/19. Since HMRC began the exercise, it has identified £10.8m in back pay for 90,000 workers and fined over 1,900 employers a total of £8.4m.

The reasons why employers were named included deductions from wages for costs such as uniforms and using incorrect time periods for calculating pay. The government is currently running a campaign to raise awareness of the NMW and NLW, while also encouraging workers to complain to HMRC if they are underpaid.

Employers in the latest list of those named include both large corporates and smaller businesses. Some had underpaid thousands of workers, while in other companies just a handful were affected. Average arrears per worker ranged from less than £10 up to almost £8,000.

Employers who pay workers less than the minimum wage have to pay back arrears of wages to the worker at current minimum wage rates and face financial penalties of up to 200% of the arrears, capped at £20,000 per worker.

In May the first report by the recently-appointed director of labour market enforcement, Sir David Metcalf, recommended higher fines for companies not complying with the law, as well as making “brand names” at the top of the supply chain jointly responsible for non-compliance further down the chain.

Earlier this year figures obtained by Pinsent Masons showed that the number of complaintsabout underpayment had more than doubled in a year. The rise followed an increase in the NLW to £7.50 per hour last year for workers aged 25 or over. At the same time, the number of workers covered increased from one million to 1.6 million.      

All of the above factors mean that it is "therefore more important than ever for employers to review their current arrangements as a priority", said Malczewski. "Taking action now is particularly important because employers will generally not be allowed to ‘self-correct’ after HMRC has begun an investigation and our audit service can mitigate against this and the wider risks in this area” she said.

The NLW increased again in April 2018 to £7.83 per hour, while the NMW for workers aged 21-24 is now £7.38 per hour.