Whistleblower reports of national minimum wage violations fell to just 2,488 for the past year, down from 2,580 in the previous 12 months.
This puts direct complaints for the financial year 2020-21 at the lowest level in four years.
Law firm Pinsent Masons, which collated the figures, said that although extensive furlough in hospitality and retail sectors during the pandemic was partly responsible for the decline in numbers, they also showed that employers were getting much better at ensuring workers were not being paid rates below the NMW.
Staff in hospitality and retail were among the most likely to be paid close to the minimum wage, and therefore would have been among those most likely to submit a NMW complaint, said the law firm.
Compliance had improved among companies, the firm claimed. Many firms breached national minimum wage law in the past due to technicalities, such as extra time spent in work but not technically working. For example, this could have included staff at airports having to spend an extra 30 minutes going through security to get to work, or warehouse staff having to go through multiple security checks at the start/end of each shift.
If HMRC finds an employer has not paid at least the minimum wage, they can issue a fine for not paying the correct rate of pay. In addition, HMRC will regularly “name and shame” businesses that have paid their employees below the minimum wage.
In 2017, HMRC launched an online complaint system for reporting potential breaches of NMW laws. This initially led to a sixfold increase in complaints from 710 in 2016/17 to 4,237 in 2017/18. However, the numbers have since fallen significantly as businesses become better at complying with NMW laws.
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Pinsent Masons said that it had found more companies were conducting internal reviews to identify problems and ensure they were paying their employees at least the national minimum wage.
Steven Porter, tax partner at Pinsent Masons, said: “Businesses are getting a lot better at making sure they aren’t paying their staff below the minimum wage. These numbers show compliance is improving.”
He warned that the consequences for employers of underpaying could be very serious with significant reputational damage being caused by HMRC’s policy of naming and shaming. “This can be very damaging for businesses as their reputation, and ultimately revenue, will take a hit,” he said.
Neil Black, employment partner at the law firm said companies undertaking regular internal reviews were ensuring they met “even the most stringent, technical aspects of the regulation”.
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However, he added: “The recently announced rise to £9.50 from April next year will further increase the risk of non-compliance for low paid staff. Employers will need to ensure their existing checks and balances remain robust and compliant in the face of this rise”.
