National Minimum Wage

Project title and
researchers
An Assessment of
the Introduction of
the Apprentice Rate
John Higton,
Rebecca Klahr,
Cheryl Salmon
(Ipsos MORI), Andy
Hirst and Morgane
Lefaucheux
(Cambridge Policy
Consultants (CPC))
Non-compliance
with the National
Minimum Wage
Suzanne Hall,
Jane Darragh,
Anne Charlton (Ipsos
MORI), WeiHsi Hu,
Aaron Barbour,
and Marien Llanes
(Community Links)
Appendix 2: Low Pay Commission Research
Aims and methodology Key findings and results
This research aimed to assess the impact of the
introduction of the Apprentice Rate. The analysis
combined qualitative and quantitative elements.
It focused on employers but was also informed by
discussions with each UK administration, training
providers and apprentices.
There were five strands to their research:
●● A literature review that built on that undertaken by
the Commission for its 2010 Report.
●● Analysis using apprenticeship datasets from the
four UK countries.
●● Qualitative interviews with national programme
officers in England, Wales, Scotland and Northern
Ireland. These discussions explored the take-up and
completion of apprenticeships.
●● Qualitative research with apprentices. Six focus
groups (two each in England and Scotland, and one
each in Northern Ireland and Wales).
●● Quantitative telephone survey of 500 employers
of apprentices (300 in England, and 100 each in
Scotland and Wales). This was drawn by reference to
employer data from the apprentice database in each
country (the Individualised Learner Record in England
and equivalent in other UK administrations) and,
as necessary, against other business databases to
produce employer contact details. An online survey of
employers in Northern Ireland, contacted via learning
providers (41 completed survey forms).
The research aimed to provide an understanding of
why businesses pay below the NMW and whether the
recession had changed employment practices. It was a
two-stage qualitative project.
First, they conducted a literature review on the impact
of the minimum wage, and explored the drivers for
operating in the informal sector. This ensured the
research built on existing knowledge.
Second, they conducted 18 face-to-face interviews
with employers operating in the informal economy and
deliberately avoiding paying the NMW. Researchers
drew on their experience of recruiting similar audiences
in accessing this sample.
In conjunction with our Secretariat, they designed
a discussion guide for the interviews. This covered
business attitudes to the NMW; triggers to working
informally; and minimum wage enforcement.
Interviews with each employer lasted about 45-60
minutes and were conducted in June and July 2011.
Thorough analysis was undertaken of the evidence
gathered, resulting in a report that comprised case
studies, customer journey maps and recommendations
for change. Where possible, sectors more susceptible to
the informal economy were identified.
Given limitations with the representativeness of the
data, the researchers said the quantitative results
should be read by considering broad themes and general
magnitude in the results. These can be set in context
against the Department for Business, Innovation and
Skills Apprentice Pay Survey (2012), also conducted by
the same researchers in 2011.
According to their employer survey, employers of
apprentices paid a minimum of £5.41 an hour on average
and 5 per cent paid apprentices less than £2.50 an hour
(the Apprentice Rate at the time of the survey).
The main finding was that the introduction of the
Apprentice Rate had a minimal impact on employers’
decisions to offer apprenticeship places. However,
it found that around one in seven employers had
difficulty with one or more of the criteria concerning the
arrangements for the Apprentice Rate. No single issue
dominated, and overall the impact was minimal.
Further, employers expressed limited concerns about
increasing the Apprentice Rate to £2.60 an hour,
although up to around 10 per cent of employers said
their apprentices were paid less than this amount.
An important finding of the research was that a
substantial minority of employers were unaware of
the Apprentice Rate (around a third) even though they
employed apprentices.
Employers thought the introduction of the Apprentice
Rate had increased demand from young people but, in
the focus groups, apprentices suggested that the impact
was broadly neutral.
The study focused on a number of sectors in London and
Nottingham. It found that although the interviewees
viewed the NMW positively, they generally saw the
NMW as more applicable to other employers and
employees. The interviewees felt that their workers
benefited from the (non-payment of the NMW)
arrangements in place.
Awareness of the actual rate of the NMW was low,
although some thought it was higher than it actually
was. Most businesses justified the way they were
operating because that was all they could afford.
Different tactics were employed by the interviewees
to avoid detection. Most thought the chance of getting
caught was slim and that in any event, the benefit of
non-compliance outweighed the risk. They felt that the
lack of any evidence (such as a failure to have detailed
records) meant that HM Revenue & Customs would not
have enough evidence to convict them of any illegality.
Employers claimed that they were either unable to
afford to pay the NMW or that they were unwilling to
pay it. This latter group gave six main reasons for not
paying the NMW:
1. the business needed to be competitive;
2. there were a large number of workers prepared to
work for less than the NMW;
3. paying a flat rate (the NMW) provided no incentive
to the workforce;
4. they only employed illegal workers or those claiming
benefits so they were doing workers a favour;
5. they provided additional benefits (travel, meals etc.);
and
6. these weren’t ‘proper’ jobs (as they were irregular or
part-time).
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