Low Pay Commission: April 2020 National Minimum Wage rates
This is the first time we have responded to one of their annual consultations, but this year, we thought there were some areas of questioning that we could usefully comment on, including the minimum wage post 2020 and on enforcement and compliance issues.
In our response to the LPC’s questions on the future trajectory of the national living wage (NLW), we urge caution. We tell the LPC that we have specific concerns around the ‘false self-employment’ of low-paid workers. Historically, employer’s NIC has tended to be the driving force behind false self-employment; however, we think that avoidance of work protections, including the minimum wage, may now be playing a part.
We also recommend to the LPC that any future increases in the minimum wage should be considered in the context of their interactions with tax, National Insurance and other systems, such as universal credit and tax credits. Problems like high marginal effective deductions rates and the lack of thoughtful and coordinated policy making between government departments such as BEIS, HMRC and DWP could potentially be tackled if the LPC adopted a statutory responsibility to examine how other systems interact with the minimum wage.
To the question of HMRC’s enforcement effectiveness, we suggest that workers would ultimately benefit more if HMRC concentrated on arguably more complex cases involving ‘worker’ status (‘workers’ as well as employees are entitled to the minimum wage) and false self-employment.
In terms of what more could be done to support compliance, we highlight the fact that tax and minimum wage rules interact and diverge somewhat on key issues, may be causing employers confusion. The bottom line is that more should be done to support employers who want to be compliant – particularly with regards to information and guidance provision, as this would free up resources to deal with engagers at the other (deliberately non-compliant) end of the spectrum.
The consultation documents can be found on GOV.UK.
Our submission can be found here: April 2020 National Minimum Wage rates - LITRG response