A report by the Low Pay Commission has found that women make up the majority of workers whose employers fail to pay them the minimum wage. Almost two thirds of underpaid workers are female. The study also found that women are the least likely to complain about being underpaid.

Commenting on the report, chair of the Low Pay Commission Bryan Sanderson said: “The Low Pay Commission has always had a strong interest in compliance with the minimum wage rates it recommends. There is, after all, little point in having a minimum wage if workers do not receive the correct rate.”

“There are two key things that this report brings to light – the issue of paying minimum wage correctly, and the issue of equal pay,” says ELAS employment law consultant Jacob Demeza-Wilkinson.

“It is vitally important that employers pay their employees at least the minimum wage for the work that they do. These rates change annually so it is important to keep an eye on this and know what the current rate is. If an employer doesn’t comply with these requirements, the consequences can be very severe.”

Firstly, there is the obvious consequence that underpaid employees can bring claims to remedy this, and they would be entitled to the deficit, he adds. “If a number of employees are being underpaid this could open the floodgates. Secondly, the sanctions that can be imposed by the HMRC are now as severe as ever.” The penalties and fines that can be imposed have been doubled to 200 per cent of the arrears in pay, up to a maximum of £20,000 per employee.

“This would mean that you could find yourself paying twice if the employees also make claims. Further, and perhaps more importantly, if a company is found to be deliberately underpaying staff then company directors can now be disqualified for 15 years. The HMRC now have more funds to pursue criminal prosecutions if necessary.”

The second point raised in the report, according to Demeza-Wilkinson, is that of equal pay, which is the law requiring men and women who perform the same work to be paid the same.

“This report highlights that there may still be businesses where this is not happening. This is a particularly serious matter as it is set out in the Equality Act, meaning a breach is considered as discrimination.”

It should be noted that there is no upper limit on the compensation which can be awarded for a discrimination claim and, whilst most cases will attract a much smaller amount than the multi-million pound record award, the fine will not be negligible. It is far easier to comply with the laws to begin with, he adds.

“It is deplorable that there are still employers in this day and age that either will not or do not comply with the laws, particularly when these laws are in place to try and ensure equality amongst employees. Given the possible consequences set out above, it seems sensible to comply with the law rather than risking the future of your business for the sake of a couple of pounds an hour.”