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  • National Living Wage and National Minimum Wage Government evidence on compliance and enforcement 2018/19

    February 2020

  • © Crown copyright 2020

    This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.

    Where we have identified any third-party copyright information you will need to obtain permission from the copyright holders concerned.

    Any enquiries regarding this publication should be sent to us at: enquiries@beis.gov.uk

    http://nationalarchives.gov.uk/doc/open-government-licence/version/3/ mailto:psi@nationalarchives.gov.uk mailto:enquiries@beis.gov.uk

  • 3

    Contents Chapter 1. Executive summary _______________________________________________ 6

    Estimating the scale of Minimum Wage non-compliance ___________________________ 6 Enforcing the Minimum Wage ________________________________________________ 7 Promoting compliance and raising awareness ___________________________________ 7 Identifying underpayment ___________________________________________________ 8 Enforcement of the Minimum Wage in 2018/19 __________________________________ 8 Penalties, prosecution and naming ____________________________________________ 9 Enforcement in 2019/20 ___________________________________________________ 10

    Chapter 2. Introduction ____________________________________________________ 11 Background to the Minimum Wage ___________________________________________ 11 Report outline ___________________________________________________________ 13

    Chapter 3. Estimating the scale of non-compliance with the Minimum Wage ________ 14 Measuring low paid jobs and Minimum Wage coverage using ASHE ________________ 14 Non-compliance with the Minimum Wage in 2019 _______________________________ 15 Improving measures of non-compliance _______________________________________ 19

    Chapter 4. Enforcing the Minimum Wage _____________________________________ 21 Enforcement theory ______________________________________________________ 21 Our enforcement strategy __________________________________________________ 23

    Chapter 5. Promoting compliance and raising awareness ________________________ 26 HMRC ‘Promote’ Activity __________________________________________________ 27

    Chapter 6. Identifying underpayment _________________________________________ 30 Online complaints form ____________________________________________________ 30 The ACAS helpline _______________________________________________________ 31 Customer responsiveness _________________________________________________ 34

    Chapter 7. Enforcement of the Minimum Wage in 2018/19 ________________________ 35 Enforcement across 2018/19 _______________________________________________ 35 Targeted and complaint-led enforcement ______________________________________ 41 Tackling serious non-compliance ____________________________________________ 46 Self-correction, assisted self-correction and voluntary declaration ___________________ 47 Nudge activity ___________________________________________________________ 48

    Chapter 8. Penalties, prosecution and naming _________________________________ 50 Civil penalties ___________________________________________________________ 50 Criminal prosecutions _____________________________________________________ 51 Minimum Wage Naming Scheme ____________________________________________ 52

  • 4

    Chapter 9. Enforcement in 2019/20 ___________________________________________ 55 Budget and priority areas __________________________________________________ 55 Evaluating Minimum Wage enforcement ______________________________________ 55 Monitoring information ____________________________________________________ 56 Awareness and understanding of enforcement _________________________________ 57

    References ______________________________________________________________ 59

  • National Minimum Wage: government evidence on compliance and enforcement 2018/19

    5

    This report provides an overview of Minimum Wage enforcement activity during 2018/19…

    HMRC enforce the Minimum Wage, and use a number of levers to encourage compliance. They follow a ‘Promote, Prevent and Respond’ strategy and use a variety of techniques

    to promote compliance…

    1.4 million texts to “at risk” workers

    44,600 webinar attendees, and 2,700 directed

    towards e-learning

    125,000 unique email openings, following a mass email campaign

    about internships

    264,000 employers and workers directly

    facilitated to seek further information

    … supplemented by a £1.1 million BEIS media campaign and employer guidance, resulting in one million visits to the campaign website, and 9/10 workers being aware of the NLW.

    2018/19 was another record breaking year for Minimum Wage enforcement…

    £24.4 million identified in arrears, for over 220,000 workers…

    …with a record amount of penalties (over 1,000) issued, totalling over £17 million

    Targeted enforcement activity continued to increase, accounting for over half (55%) of the cases closed

    HMRC issued seven Labour Market Undertakings, and their Serious Non Compliance teams completed 199 joint visits, more than in 2017/18 (127)

    Over the course of 2019/20, our priority is to build upon this success, and expand the work of HMRC to better support low paid workers. We plan to further our evaluative work to better understand whether the current enforcement approach is appropriately focused; whether it deters future non-compliance; and whether it encourages long-term, meaningful, behaviour change.

  • National Minimum Wage: government evidence on compliance and enforcement 2018/19

    6

    Chapter 1. Executive summary 1.1 The National Living Wage (NLW) and National Minimum Wage (NMW)1

    1 Referred to collectively in this report as the Minimum Wage.

    provide essential protection for the lowest paid workers and ensure that they are fairly rewarded for their contribution to the economy.

    1.2 The NLW was introduced in April 2016 for workers over the age of 25 and represented a significant increase to the wages of the lowest paid – around 1.8 million workers are estimated to have benefitted from the most recent uprating in April 2019, where the NLW rate was increased from £7.83 to £8.21 per hour.

    1.3 All employers, irrespective of their size or sector, are responsible for paying the correct Minimum Wage. Government is clear that anyone entitled to the Minimum Wage should receive it and is committed to pursuing employers who do not pay it. Identifying workers who are underpaid the Minimum Wage and pursuing enforcement sanctions against employers who do not pay it is, therefore, critical.

    1.4 This report provides an overview of Minimum Wage enforcement activity during 2018/19, following a similar report published in 2018 covering activity during 2017/182

    2 Department for Business, Energy and Industrial Strategy (2018)

    . Evidence presented in this report covers: estimated non-compliance with the minimum wage, statistical estimates of low paid jobs, awareness of the Minimum Wage, HMRC’s enforcement operations and enforcement statistics.

    1.5 In this report, we also respond to recommendations made by the Low Pay Commission (LPC) in their April 2019 report3

    3 Low Pay Commission (2019)

    . The government accepts all of their recommendations.

    Estimating the scale of Minimum Wage non-compliance

    1.6 We monitor non-compliance with the Minimum Wage to understand how underpayment has changed over time. Measuring non-compliance is inherently difficult, and there is no single official estimate. We therefore use a range of data and information to inform our understanding.

    1.7 One of the most important sources of information on non-compliance is the ONS’ Annual Survey of Hours and Earnings (ASHE), most recently published in 2019. An estimated 424,000 jobs were paid below the applicable Minimum Wage rate, equivalent to 1.5% of all jobs held by employees4

    4 ASHE is used to estimate the number of employee jobs paid below the applicable Minimum Wage rate in April 2018. Estimates of non-compliance are adjusted to account for pay periods which predate or span the 1 April 2018.

    . This is a 17,000 decrease from the 2018 ASHE, where 1.6% of all jobs held by employees were paid below the Minimum Wage.

  • National Minimum Wage: government evidence on compliance and enforcement 2018/19

    7

    1.8 There are a number of reasons why this is may not be a fully accurate estimate of non- compliance in the wider economy (discussed further in Chapter 3), and we continue to work to improve estimates of minimum wage non-compliance. We discuss this work in more detail in Chapter 3 and Chapter 9.

    Enforcing the Minimum Wage

    1.9 Her Majesty’s Revenue and Customs (HMRC) enforce Minimum Wage and use a number of levers to encourage compliance, informing employers of their responsibilities and raising awareness amongst workers of their rights. HMRC achieves a deterrent effect by using a range of interventions to maximise the visibility and coverage of the enforcement programme. HMRC use their understanding of employers and of risk to ensure they use the right methods to address different

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