Accounts & Bookkeeping

Enforcing the Minimum Wage

The minimum wage in the UK is currently set at £6.31. This is the lowest amount that employers are expected to pay their employees per hour and is set by the Chancellor of the Exchequer (currently George Osborne) every year, on advice from the Low Pay Commission. It is apparently rigorously enforced by HMRC.
How many employers have heard of the Living Wage though? The Living Wage is £7.65 and is based on the amount an individual needs to earn to cover the basic costs of living. It is calculated by the Centre for Research in Social Policy at Loughborough University and the GLA and is promoted by the Living Wage Foundation.
So if the Living Wage is apparently the minimum that a person needs to earn to have a basic standard of living, why is the minimum wage some £1.34 less? Indeed, despite last year’s rise, it could be considered that the minimum wage is actually falling because of the rate of inflation. Prices are still rising faster than wages, squeezing the Everyman even harder.
There are some 1.35 million businesses in the UK who have more than one employee. Just 277 pay their employees the Living Wage. The Living Wage is merely considered to be a benchmark for employers and is not legally enforceable. Therefore, a very limited number of employers have adopted it. However, the Living Wage Foundation believes that absenteeism drops and quality of work rises when employees implement the Living Wage, which makes more business sense for employers. It is publically backed by London Mayor Boris Johnson, the Prime Minister and the Leader of the Opposition.
So if the Living Wage is that popular, why the difference between that and the minimum wage? By supporting the Living Wage, the leaders of the main political parties of England must agree that the minimum wage is doing little to alleviate poverty in the country. But are we at least safe to assume that HMRC strongly police employers and ensure that the minimum wage at least is paid to every employee? Well, no.
Since the minimum wage was introduced in England in 1999, there have been just eight successful prosecutions of employers for non-payment. And there have been no prosecutions at all since 2011. All of which begs the question, if HMRC are toothless to chase errant employers when the minimum wage is £6.31, would they be any more successful with the increase in deviant employers if they were told to adhere to the Living Wage instead?

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