Some employers failed to increase staff pay when 23-year-olds were brought into the scope of the national living wage, according to a minimum wage underpayment report for 2020-21 released by the Department for Business, Energy and Industrial Strategy (BEIS).
Despite the challenges posed by the Covid-19 pandemic, HM Revenue & Customs (HMRC) identified £16.8m in national minimum arrears for more than 155,000 workers in the 2020/21 financial year. It issued 575 penalties totalling £14.1m to non-compliant employers, and one person was prosecuted.
It found a small spike in underpayment of employees aged 20-24 years old, which BEIS says demonstrated that “some underpayment may have arisen from an employer’s failure to uplift their employees pay in line with the change in age band to bring 23-year-olds into scope of the NLW”.
“For example, the 2021 line shows a peak at around 92% of the 2021 rate, roughly equivalent to the 2020 21-24 rate (£8.20),” the report notes.
However, it urged caution in regards to its data, suggesting that its method of removing furloughed workers was imperfect.
The report says: “The 2020/21 financial year was a strong year for minimum wage enforcement despite issues caused by the Covid-19 pandemic. HMRC opened over 2,600 cases, and closed more than 2,700, with nearly 1,000 of these closing with arrears. The proportion of closed investigations where employers are found to be non-compliant was 39% compared to 42% in 2019/20.”
National minimum wage
The average arrears per case of underpayment was more than £6,000 in 2020/21 and the average arrears per worker was £108. The arrears per worker figure has increased slightly compared to the previous year, partly due to HMRC taking account of non-compliance across an employer’s whole business, rather than just the individual worker who complained.
Since the introduction of the national minimum wage in 1999, the government has ordered employers to repay over £156m to around 1.3 million workers, issued over £73m in financial penalties and completed over 84,000 investigations.
Last year, the Low Pay Commission – which advises the government on minimum wage rates – released a report that said more needed to be done to build workers’ confidence in the enforcement regime and to support employers to comply with the rules.
BEIS’s report says that HMRC has adapted its communications to make it clear to workers that they have the option to remain anonymous of they make a complaint, and that they can report a previous employer for minimum wage breaches.
It also says it will be more transparent about the most common minimum wage breaches it finds, which include deductions from workers’ pay and unpaid working time, to help organisations remain compliant.
“[BEIS] therefore publishes an educational bulletin with each naming round to help raise awareness of minimum wage rules and improve compliance. Bulletins include analysis of the most common breaches in each naming round, examples to ensure understanding of how such breaches can be avoided, and links to the government’s Calculating Minimum Wage guidance for further details,” it says.