NMW underpayment hits record high as employers struggle with guidelines<\/p>\n<\/p>\n
The LPC\u2019s analysis<\/a> identified 439,000 individuals who were underpaid in total. This figure includes 369,000 workers who were paid less than their entitlement under the National Living Wage (NLW) because they are aged 25 or over. That amounts to 23% of all individuals entitled to the NLW rate of \u00a37.83 an hour as it was then, or \u00a38.21 an hour as it is now after April 1, 2019. \u00a0<\/p>\n The LPC\u2019s figure does come with several caveats, however: It is derived from the Annual Survey of Hours and Earnings (ASHE).<\/p>\n This is not a true estimate of non-compliance for a number of reasons, but namely because certain cases of underpayment can be legitimate. For instance, if employers provide accommodation or commission and bonuses. The data may also fail to identify workers as apprentices.<\/p>\n That said, the LPC\u2019s report said the figure \u201cis consistent with a trend of increasing underpayment since the introduction of the NLW in 2016\u201d.<\/p>\n Despite the increase in underpayment, the LPC report is not highly critical of HMRC, the NMW\/NLW\u2019s rather unlikely enforcer. While the minimum and living wage is regulated by The Department for Business, Energy and Industrial Strategy (BEIS), enforcement is left in the hands of the tax authority.<\/p>\n And according to the LPC report, HMRC\u2019s capabilities have grown considerably in recent years due to budget increases since 2016 and the recruitment of more enforcement officers.<\/p>\n This view certainly aligns with the figures: HMRC enforcement teams recovered \u00a315.6m for 200,000 workers in 2017\/18, up almost 50% from the amount reclaimed the year previously. But the commission wasn\u2019t entirely satisfied, either.<\/p>\n \u201cThese increases were driven primarily by a relatively small number of large and complex cases, mainly involving employers in the retail sector,\u201d the report reads. Indeed, it does seem like the road to NMW ruin is mostly paved with good intentions.<\/p>\n Most of the big NMW enforcement cases reported on AccountingWEB were as a result of error. As RSM\u2019s head of employment solutions Bill Longe previously commented<\/a>, \u201cThe vast majority of employers are not making deliberate errors and are being caught out by the complexity of the rules\u201d.<\/p>\n Prominent names like Wagamama, TGI Friday, \u00a0Marriott Hotels<\/a>, Iceland<\/a> and the temping firm Staffline<\/a> are all examples of employers simply getting it wrong. Responding at the time, a \u00a0spokesperson for Wagamama characterised the chain\u2019s underpayment as an \u201cinadvertent misunderstanding\u201d.<\/p>\n The LPC\u2019s report did note that employers frequently complained about the opacity of NMW guidance and of the HMRC enforcement process. \u201cIn this respect, we see the recent consultation by [BEIS] on the NMW regulations as a positive step in meeting employers\u2019 concerns, but one that needs to be sustained by continued positive engagement with employers of all sizes.<\/p>\n \u201cWe urge the government to invest time in getting the guidance to employers right, as this will simplify the task of enforcement in the longer term.\u201d<\/p>\n