More than a million paid less than minimum wage on furlough, ONS finds

Despite no legal obligation to do so, experts urge firms to top up job retention scheme pay to support low earners and preserve company reputations

A decision by many employers not to top up furlough pay has contributed to 2,043,000 employees being paid less than the national minimum wage (NMW), according to the Office for National Statistics (ONS).

This number is the highest on record since the NMW came into force in 1999, and is a five-fold rise on the 409,000 workers who were paid less than the NMW in 2019.

Even after excluding those employees furloughed at reduced rates of pay, the ONS found the number of people paid less than the NMW had soared to 752,000 in the space of a year. This also meant more than a million workers received less than the NMW as a result of their employer not topping up the minimum 80 per cent rate they were entitled to while furloughed.

The Low and high pay in the UK: 2020 report stated: “Approximately half of employees who were furloughed under the [coronavirus job retention scheme] did not have pay topped up by employers beyond the 80 per cent provided by the scheme.”

Based on a snapshot of data from April this year, it also found jobs paying the lowest hourly rate were more than five times more likely than other roles to be furloughed with reduced pay.

The figures came just days after the government announced that the furlough scheme, which was due to close at the end of October, would be extended until early December to support a second national lockdown in England, starting tomorrow (5 November).

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Alan Price, chief executive at BrightHR, said it was technically lawful for employees’ salaries to dip below the minimum wage under the job retention scheme. But, he added: “Businesses in a position to top up furlough pay may wish to consider doing so to assist employees who may be suffering financial hardships while furloughed. Such action may help in staff retention and preserving company reputation.”

The ONS report also found the lowest-paid workers were more than 20 times more likely to be furloughed on reduced pay than the highest earners, with 51.7 per cent of those paid less than £8.72 per hour furloughed with a pay cut, compared to just 2.5 per cent of those earning more than £29.67 per hour.

Workers in the accommodation and food sectors were the worst affected, with their weekly pay reduced by 18.1 per cent compared to 2019.

And those employees aged 16 and 17 suffered a drop of 5.7 per cent in their paid hours, while 18 to 21-year-olds saw a 3.4 per cent fall – both significantly higher than the average of 1.5 per cent across all ages.

Nye Cominetti, senior economist at the Resolution Foundation, said the scale at which employees had been paid less than the NMW was a “sobering reminder of just how important our wider social security safety net is – and why it should be strengthened, not cut back next April, as the Covid crisis continues into 2021”.

Cominetti added: “Young people and low-paid workers in customer-facing roles, such as hospitality and leisure, were hit hard during the first lockdown, and are likely to be hit hardest again during the coming lockdown.”

With the furlough scheme now extended until the beginning of December, the government needed to be mindful of how the 80 per cent rule had particularly affected those on the minimum wage, said Kate Shoesmith, deputy chief executive of the Recruitment & Employment Confederation.

“Employers must adhere to the minimum wage rules –  but while they were unable to trade, many businesses have had no choice but to furlough staff and only pay the 80 per cent provided under the scheme... which has hit people on minimum wage particularly hard,” she said.