Revealed: Most common reasons for underpayment of legal minimum wage

Almost one in six employers found to have paid staff less than the minimum wage did so because they did not pay the correct rate to apprentices, a major study has revealed.

The research, published by HM Revenue & Customs (HMRC), shows that a significant number of businesses are still falling foul of minimum wage rules.

According to the report, 208 businesses – including large, national firms and independent high street stores – were found to have paid less than the legal minimum wage.

In total, 12,000 workers were paid less than the legal rate for their age, meaning they lost out on more than £1.2 million in wages.

The number one reason for underpayment was improper deductions – such as for uniform – that reduced the employee’s hourly pay below the legal minimum rate, cited in over a third (37 per cent of cases).

This was followed by unpaid working time, such as mandatory training, trial shifts or travel time (29 per cent), failing to pay the correct rate to apprentices (16 per cent), and not increasing pay in line with mandatory annual increases (11 per cent).

Employers who fail to pay the correct rate may be fined up to 200 per cent of the wages owed and be publicly “named and shamed”.

Commenting on the figures, Bryan Sanderson, Chair of the Low Pay Commission, said: “The minimum wage is a success story welcomed by employees and employers alike, but it only works if everyone without exception obeys the law. We hope this latest naming round can continue to raise awareness of the most common mistakes businesses make and help protect low-paid workers from unfair treatment.”

Minister for Labour Markets Paul Scully added: “With Christmas fast approaching, it’s more important than ever that cash is not withheld from the pockets of workers. So don’t be a scrooge – pay your staff properly.”

The National Living Wage increased by 6.6 per cent to £9.50 per hour in April this year – the largest annual increase since 2016.

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Posted in Blog, Business Blog, Payroll.