A report published last week by a think tank and an anti-poverty charity in London has revealed systemic failures in the way that national minimum wage (NMW) compliance is enforced.

The study entitled “Settle for Nothing Less - Enhancing National Minimum Wage Compliance and Enforcement” by the Centre for London and Trust for London found that:

  • Over 300,000 people in the UK earn less than the legal minimum wage
  • Only nine employers have ever been prosecuted for paying below the rate
  • Only one employer has ever been named and shamed
  • Weak deterrents and excessive centralisation make the NMW enforcement ineffectual.

The report found there were particular problems in London where 10 per cent of all calls to the national Pay and Work Rights Helpline come from Londoners. It also identified that:

  • 10 per cent of the arrears owed for underpaid work nationally are due to short-changed workers in London - more than any other region of the UK
  • In eight of London's boroughs, at least five per cent of workers earn at or below the legal minimum, leaving one in 20 workers at risk of exploitation
  • Only one employer has ever been prosecuted for paying below the national minimum wage in London and there has never been a company named and shamed in the capital for breaching minimum wage law.

The report recommends a number of reforms, including:

  • Partially devolving NMW enforcement to local authority level to sit alongside and complement central functions that should be retained and reshaped
  • Removing the limit on fines levied against employers paying below the NMW as the current cap of £5,000 is too low
  • Introducing high-profile “naming and shaming” and a more rigorous pursuit of repeat offenders for prosecution
  • Banning the advertising of unpaid internships
  • Insisting on NMW payment for home carers’ travel time

Compliance with the NMW is currently enforced centrally by Her Majesty’s Revenue and Customs on behalf of the Department for Business, Innovation and Skills. This arrangement costs about £8 million per year and identifies roughly £4 million each year of arrears owed to workers who have been paid below the minimum rate.

Iain Birrell from Thompsons Solicitors, said: “This study paints a bleak picture of working life in the UK. A minimum wage is only a protection if it is paid or it is no protection at all. This study comes within a week of the Joseph Rowntree Foundation reporting that for the first time more than half of the 13 million people in the UK living in poverty were in a working family and around 5 million people are paid below the living wage. With benefits topping up poverty pay it is a disgrace that bad employers can flaunt the NMW with apparent impunity.”

To read the report, go to: http://www.trustforlondon.org.uk/SETTLE%20FOR%20NOTHING%20LESS%20.pdf