There are fears an inflation-busting rise in April will tempt more bosses to break the law

Thousands of bosses who pay workers less than the minimum wage are getting away with breaking the law, with only one in eight caught by government inspectors, research shows.

There has been a sharp rise in the number of low-paid workers cheated of wages. An estimated 11,000 firms failed to pay the minimum wage in 2018-19, according to analysis of official figures by the Resolution Foundation thinktank. However, HM Revenue and Customs inspectors identified only 1,456 of the lawbreakers and there are fears an inflation-busting rise in the minimum rate in April may tempt more employers to break the rules.

About one in five workers aged over 24 was paid below the legal minimum in 2016, but that rose to one in four last year with about 365,000 people missing out.

People working for small firms such as hair salons and carwashes are most vulnerable to being underpaid, described by unions as “wage theft”, but it is estimated that around 140,000 workers for companies with more than 249 employees were also underpaid in April 2018. Bristol City Football Club, Wyvale Garden Centres, Costa Coffee and Odeon cinemas were among those caught failing to pay workers enough in 2018.

Lindsay Judge, a senior policy analyst at the Resolution Foundation, said there had been “a worrying rise in minimum wage underpayment”.

“As the government plans to increase the legal wage floor, it is essential to strengthen the incentives for firms to comply,” she said. “The government can act today by encouraging HMRC to take a tougher line with minimum wage offenders, and being given the power to levy larger financial penalties.”

The minimum hourly wage for workers aged over 24 will rise 6.2% to £8.72 per hour in April.

Currently, rule-breakers are allowed to simply repay the wage arrears and fines issued by HMRC can be discounted for early repayment – meaning the average penalty in 2017-18 was only worth about 90% of the wage arrears owed. The availability of self-correction in effect means that in many cases employers can underpay wages with no financial consequences even if they are caught.

A government scheme naming and shaming employers caught paying under the minimum wage was suspended in December 2018 amid concern from firms some were being shamed on technical rather than deliberate breaches. No firms have been named in 18 months.

“The number of workers covered by the minimum wage is set to double,” said the TUC’s general secretary, Frances O’Grady. “Resources for enforcement must be scaled up to match the growing size of the task. Otherwise it will become easier for bosses to cheat staff out of pay without getting caught.”

A government spokesperson said: “HMRC will not hesitate to take action to ensure that workers receive what they are legally entitled to,.” It added that in 2018-19 it completed more than 3,000 investigations, identifying £24m in arrears for more than 220,000 workers.

The government has also committed to plans for a new single labour market enforcement body, which it says could strengthen protections for workers and ensure a level playing field for business.

The minimum wage has been rising steadily since it was introduced 19 years ago and until 2016 compliance was thought to be rising. But since the introduction of the £7.20 national living wage for workers aged over 24 in 2016, more employers have been underpaying workers.

• This article was amended on 9 January 2020. The original suggested employment tribunals issued fines that are discounted for early payment. In fact, HMRC issues the fines – which are not always discounted for early repayment. The amended article also makes clear that the government has now committed to a new single labour market enforcement body.