The Institute of Economic Affairs (IEA) has warned that a higher minimum wage for zero-hours workers could create "resentment amongst fixed-hour workers”.

In its report, the IEA also called for an overhaul of UK’s minimum wage rate structure, by adjusting to one or two rates for all workers aged 18 and over.

It has also urged for a rejection of the Taylor Review of Modern Working Practices’ proposal for a higher rate of pay for workers on zero-hours contracts.

The report said that a higher rate for zero-hours workers is likely to create resentment amongst fixed-hour workers, many of whom work the same (or fewer) hours.

“It would perversely discourage zero-hours workers from taking fixed-hours contracts,’ IEA stated.

Furthermore, the report added that requiring a higher hourly rate would make employers less likely to offer zero-hours contracts, which the report warned would close off opportunities for a number of workers who benefit from the flexibility of non-fixed contracts.

“The UK currently has five different age-related minimum hourly wage rates – more than almost any other country – and, if adopted, the Taylor Review suggestions would bring this up to nine,” the IEA stated. “This structure is over-complicated and increasingly politicised; the rules are difficult to understand and apply, leading to compliance problems and an increased use of resources devoted to enforcement.”

The IEA said many cases of underpayment result from small businesses "with no prior experience or legal expertise - not understanding the complicated rules".

It added that changes such as the national living wage have "added increased administrative burdens" and that the system needs updating.

Len Shackleton, editorial research fellow at the IEA, commented, "The labour market has changed greatly in the last 20 years and the structure of the minimum wage system needs to change to reflect this. Rules should be simplified and clarified so that both employers and employees fully understand entitlements."

The IEA report also included recommendations to simplify the structure by having two rates for workers over 18 and changing the way underpayment is enforced. Furthermore, it recommended scrapping the lowest minimum wage rate.

“Simplifying the minimum wage structure would help meet the government’s objective of having all under 18s in education or training,” the IEA stated.

A Department for Business, Energy and Industrial Strategy spokesman said: "The Government takes advice on minimum wage rates from the independent Low Pay Commission (LPC), which balances the needs of workers and businesses. That is why as part of our Good Work Plan we have asked the LPC to assess the impact of introducing a higher minimum wage for workers on zero-hour contracts, and we will consider their findings when they are published in October."