One in five apprentices underpaid

One in five apprentices earn less than their legal entitlement according to analysis from the Low Pay Commission (LPC), which is calling for urgent action from HMRC to improve national minimum wage (NMW) enforcement

The LPC report looked at compliance with and enforcement of the NMW, based on data from 2019, so before the current Covid-19 crisis.

For apprentices specifically, among some age groups, as many as one in three apprentices are reported as underpaid.

The highest levels of underpayment are recorded for apprentices aged 19 and over in their second year – that is, after their minimum wage has increased from the apprentice rate to the appropriate NMW for their age.

Large proportions of younger, 16-18-year-old apprentices in their first year, also reported underpayment, with LPC analysis suggesting there is strong evidence for non-payment of training hours as the main driving factor for this.

Overall, the LPC estimates that over 420,000 workers were reported as receiving less than the minimum wage they were entitled to in April 2019, while around 360,000 workers entitled to the national living wage (NLW) did not receive it – 22% of all workers covered by the rate. Both of these estimates represented slight falls on the previous year.

Some of the measured underpayment involved fine margins and could reflect employer error or slow adaptation to incoming rates, but some 115,000 NLW workers were reported to be paid more than £1 per hour less than they were entitled to.

LPC says HMRC’s enforcement work identified more underpayment for more workers in 2018/19 than ever before: £24.4m in arrears for 220,000 workers.

In addition, the report noted signs of more successful targeting of resources, with the numbers of cases based on targeted (rather than complaint-led) enforcement rising particularly quickly. The total volume of cases closed has risen, as has the ‘strike rate’ of successful cases.

However, LPC points out the volume of underpayment-related enquiries received by HMRC fell in 2018/19 and remains small compared with its estimates of the numbers of underpaid workers. It wants the government to do more to build workers’ confidence in the complaints and enforcement processes.

The report also looks at the problems workers face in accessing their payslips and understanding whether or not they are underpaid. Recent changes to the rules have improved workers’ rights, but still need to be publicised and enforced, it concluded.

LPC makes a number of recommendations for the government, including the need to evaluate what data are recorded in non-compliance investigations, and consider how this can be used to develop measures of cost-effectiveness.

It also wants the government to monitor the effects of the increase in the threshold for naming employers found to have underpaid workers.

For apprentices in particular, the LPC recommends HMRC review the way it records apprentice underpayment, and to publish the numbers and profile of the apprentices it identifies as underpaid.

It also wants HMRC to review its approach to investigations involving apprentices, to understand whether these investigations would identify non-payment of training hours, and says the government should start using targeted communications to both apprentices and their employers to highlight underpayment risks, and in particular the problem of non-payment of training hours.

Bryan Sanderson, chair of the LPC, said: ‘The current situation has brought to the attention of all of us the importance of low-paid workers to many of our vital services, including health and social care and the production and distribution of food.

‘The priority is clearly to try to secure the survival of businesses and jobs which are very much at risk. Ultimately, an effective enforcement regime is an essential contributor to the objectives of protecting workers and ensuring a level playing field for businesses too.

‘The government has made progress in recent years but more can still be done to protect the most vulnerable, in particular apprentices.’

Non-compliance and enforcement of the National Minimum Wage 2020

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