Lowest-paid 'facing long wait for wages arrears'

Significant numbers of some of the UK's poorest-paid workers are facing lengthy waits for wages they are legally entitled to, a report has found.

The National Audit Office (NAO) has probed the way in which employers' non-compliance with the National Minimum Wage has been dealt with.

It found that HM Revenue and Customs (HMRC), the enforcement body for the National Minimum Wage, has generally cut the length of time taken to investigate reports of workers being under-paid.

But many of those making complaints have still have to wait over 240 days (around eight months) to get their cases resolved.

Between April 1 2015 and March 31 2016, HMRC closed 469 cases (amounting to 17% of all cases closed in in that period) which had gone on for more than 240 days. Arrears at the end of December 2015 averaged £164 per worker.

The National Minimum Wage is the minimum pay per hour that workers are entitled to by law.

It aims to protect as many low-paid workers as possible without reducing jobs or damaging the economy. The National Living Wage came into force on April 1, 2016, for workers aged 25 and over. The National Minimum Wage continues to apply for those aged between 21 and 24 years old.

The adult National Minimum Wage is £6.70 per hour, while the new National Living Wage is set initially at £7.20.

The NAO said since the Government started enforcing the National Minimum Wage in April 1999, HMRC has identified £68 million in arrears for more than 313,000 workers.

In 2015-16, HMRC identified £10.3 million in arrears for just over 58,000 workers, compared with £3.3 million in arrears for just over 26,000 workers in 2014-15.

The NAO found that in general, HMRC has significantly reduced the average time taken to investigate complaints. In 2013-14, the average case took 170 days to close, but by 2014-15 this had halved to 82 days.

There is also particular concern around employers failing to meet their minimum wage duties in the social care sector, the report found.

The Low Pay Commission previously reported that up to 10.6% of care workers may not be being paid the National Minimum Wage.

Meg Hillier, chair of the Committee of Public Accounts, said: "Ultimately, the National Minimum Wage and the National Living Wage will only be effective if they are properly enforced and if employers are prevented from coming up with workarounds to exploit workers.

"The NAO report shows HMRC has shown encouraging progress in resolving cases of non-compliance with the National Minimum Wage faster.

"However, I am concerned that over 15% of worker complaints to HMRC are still taking over 240 days to complete, leaving a significant number of workers waiting for wages they are legally owed. These are some of the poorest paid workers in the UK and this needs to improve."

The Office for National Statistics (ONS) has estimated there were 209,000 jobs with pay less than the National Minimum Wage held by employees aged 16 and over in April 2015, which constituted 0.8% of UK employee jobs.

The NAO said there is no accurate overall measure of non-compliance with the National Minimum Wage regulations and it has therefore been difficult to assess how effective HMRC's enforcement has been over time.

Both the Department for Business, Innovation and Skills (BIS) and HMRC have strengthened their sanctions for non-compliant employers.

Since 2014, BIS has "named and shamed" those employers who do not comply with the rules, and so far 490 employers who failed to pay the National Minimum Wage have been named.

Between 2009-10 and 2015-16, HMRC has imposed penalties of nearly £5.6 million on non-compliant employers.

Amyas Morse, head of the NAO, said: "With the implementation of the National Living Wage, it is even more important that the Government ensures its compliance programme reflects the changing risks within the labour market, and maintains its progress in ensuring all employers pay the minimum wage.

"The Government also needs to reduce the time it takes to investigate complaints and resolve cases."

A Government spokesman said: "Last year HMRC delivered unprecedented pay arrears for more than 58,000 workers - in excess of double the number of workers compared with 2014-15.

"To build on this success, we have increased the enforcement budget for the National Minimum and Living Wage to £20 million for 2016-17, up from £13.2 million in 2015-16.

"We are absolutely clear that all working people entitled to the National Living Wage or the National Minimum Wage should receive them. This timely report shows how stronger sanctions and increased investment in minimum wage enforcement over recent years are paying off."