Investigating a case study of non-payment

Yesterday the Guardian published an excellent article on the Unpaid Britain preliminary findings report. As part of this article they included an illustrative case study of Beach Blanket Babylon (BBB). This company first came to our attention at the beginning of May when the staff started protesting outside the BBB restaurant in Shoreditch, after being collectively owed £10,000 in unpaid wages.  This case was a clear illustration of what the Unpaid Britain report identified as a business strategy where unpaid wages occur repeatedly  “little and often”. The workers reported to us that the amount that they would be paid into their bank account would be random, and never completely match what they were owed.

“maybe you got £100 or £200 as you see from the statement […],when the due date for the new payslip they just send us like a couple of hundred”.

The workers  informed us that this underpayment of wages added up. They claimes that when they asked for their wages management would tell them that they did not have the money and the workers would have to wait, until the next Wednesday or Friday when they were expecting a large party. When that day came they might be paid some of what they were owed but would be told to wait again. When the workers finally demanded all their wages they said they were told to leave and not to come back.

Meanwhile the Guardian article shows that the owner Robert Newmark had received a substantial amount of money from the previous Limited company that ran BBB before it was placed into liquidation. Robert Newmark and his son Bret have both been disqualified as being directors from limited companies for a joint eight and half years. They owe HMRC “£1,021,477 in relation to arrears of VAT, PAYE and National Insurance Contributions”, despite this Robert Newmark caries on being the sole shareholder of the limited company who owns BBB, and pays the staff directly from his non-limited company.

I am sad to reveal that this is not a one off case but is something that we have come across more often with other restaurants. This we feel is a clear business strategy of non-payment and will be drawing on further in our final report that we will be publishing in November. In the meantime have a look at the Guardian article it is an excellent read and a good synopsis of our interim report. I would like to thank Felicity Laurence for her excellent work.

Once the Guardian contacted BBB some money was paid to the workers.

The weighted scales of economic justice: Unpaid Britain interim report

Unpaid Britain – interim report reveals that workers are denied £1.2 billion of wages and £1.5 billion of holiday pay each year

Researchers from Middlesex University London, funded by Trust for London, describe today’s (15/6) interim report, results about unpaid workers in Britain as the “tip of the iceberg”.

The report “The Weighted Scales of Economic Justice”* from the Unpaid Britain project based at Middlesex University estimates that:

  • £1.2 billion of wages are unpaid each year
  • £1.5 billion of holiday pay are unpaid every year
  • one in 12 workers does not receive a payslip (a breach of employment rights)
  • one in 20 workers receive no paid holidays (a breach of employment rights)
  • on 23,000** occasions in a year the impact of unpaid or delayed wages is so severe it leads to workers having no food
  • sectors most likely to not pay wages include sports activities, amusement and recreation, food and beverage services, employment activities – in London arts and entertainment as well as construction are also high offenders.

Lead author, Nick Clark from Middlesex University London said: “It has not been easy to find accurate data on the true scale of failure to pay wages in this country and I fear that this is the tip of the iceberg in terms of painting a realistic picture of unpaid Britain. One of the problems is that there is no official data on non-payment. Not paying wages is a civil rather than a criminal offence which means there are no crime statistics.

“Our interim findings demonstrate that there is a desperate need for improved workers’ protection and better guidance on their rights and how these can be enforced. With an uncertain Brexit around the corner there has never been a more important time to safeguard, protect and enhance workers’ rights.”

The researchers found employers can withhold wages with impunity and there is a widespread culture of repeat offenders. Moreover they found that directors of half of the companies that were dissolved and who had defaulted on wages returned as directors of other companies in due course.

Types of unpaid wages include failure to provide holiday pay, unpaid hours of work and unauthorised deductions. Other types include not paying the last wage (or outstanding holiday pay) or ceasing to pay when insolvency was likely.

The researchers also looked specifically at London. The arts, entertainment and construction are big employers in London and they featured prominently in London Employment Tribunal cases involving unpaid wages. The report shows that London displays both the lowest and highest proportions reporting no paid holidays: 2.5% in Central London, 8.7% in Outer London.

Middlesex University researchers used the following sources to gather data on this subject: Labour Force and Family Resources surveys, lists of National Minimum Wage offenders, Insolvency Service data (secured through Freedom of Information requests) and Employment Tribunal judgements. In addition the Gangmasters Licensing Authority, Barnet Citizens Advice Bureau, Lambeth Law Centre and the Chartered Institute of Payroll Professionals all permitted access to survey or casework data. A series of case studies (mostly from London) were also used to illustrate the stories behind non-paid wages.

The Unpaid Britain project was established at Middlesex University Business School in September 2015 and is co-funded by the Trust for London. The final report is due in November 2017.

Protecting vulnerable workers from exploitation

Here’s a question for you … what does someone who has been illegally trafficked into the UK, is then forced to live in squalor and is paid a pittance for working several hours every day, have in common with a worker who is not receiving holiday pay?

The answer is they are both being exploited for their labour.

Of course, the two scenarios are completely different. The first is clearly a victim of modern slavery, a repugnant practice which is sadly increasing not just here in the UK but across the world, as criminals trade people as a commodity.

The second worker may believe he or she is being treated fairly, they may enjoy their job and it could come with all the rights and benefits you are entitled to working in the UK.

But if they are not being paid what is rightfully theirs, whether that is holiday money or for services rendered, then they are a victim of labour exploitation.

At the Gangmasters and Labour Abuse Authority (GLAA), we are the agency charged with protecting vulnerable workers from labour exploitation across the entire UK labour market.

Modern slavery is the extreme form of exploiting workers but we are determined to root out labour abuse across the whole spectrum.

It took the deaths of 23 cockle pickers in Morecambe Bay in 2004 to focus the nation fully on the extreme costs of severe worker exploitation. The tragedy on that freezing February night brought about new legislation that resulted in the creation of the Gangmasters Licensing Authority.

For more than  decade the GLA sought to prevent the exploitation of vulnerable workers but our powers were limited and our remit restricted to the fresh produce sector – agriculture, horticulture, shellfish gathering and all associated processing and packaging.

Now, in direct response to the challenges and threat posed by modern slavery, we have been given sweeping new powers and a broadened remit to investigate all forms of labour exploitation.

We have specialist officers with police-style powers of arrest to investigate forced labour and human trafficking. In addition to what we examine to ensure compliance with Licensing Standards, we will also be working with partners to look into Labour Market Enforcement to include offences such as failure to pay National Minimum Wage (NMW) and breaches of the Employment Agency Act.

We know these offences are commonplace with some labour providers and it is they who we are targeting as we work with partners to eradicate illegal practices.

Modern slavery is abhorrent; it is described by the Prime Minister as ‘the greatest human rights issue of our time.’

But it is happening right now in businesses up and down the country.

Thousands of people being forced to work for little or no pay, often in appalling conditions and with the threat of violence hanging over them if they step out of line.

Much of it is controlled by organised crime gangs who have links to drug smuggling, guns and violence. They know full well the enormous profits that can be made from using people as a commodity.

It’s lucrative and the risks are low.

It is estimated that there are between 10,000-13,000 slaves in the UK but there may be many more. Slavery and labour exploitation has infiltrated legitimate supply chains from retail, construction, care homes and the hotel and hospitality industry.

Yet, as I said earlier, modern slavery is the extreme end of labour exploitation. At the other end of the scale the GLAA has uncovered a number of ploys used to exploit workers.

One is around the innocuous, yet important practice of clocking in and out. We have found employers who round down the time their employees clock in by a few minutes here and there.

For example, if you clocked in at 9.03am, the business may round this down to 9.15am. Twelve minutes doesn’t sound a lot does it? But with hundreds of workers this soon adds up. One labour provider had to give us a breakdown over a three month period for what this cost and it amounted to more than £10,000 which workers had not been paid that they were due.

Some labour providers blatantly take hours off a time sheet. The worker may not notice or fail to query it because it might only happen occasionally. But again, if this is happening to several people then the amount of money can be substantial.

It also has a knock on effect for holiday pay because that is calculated by looking at the hours someone has worked. Foreign workers are particularly vulnerable to this practice and are unlikely to protest or raise it.

Holiday pay is another issue we see used to exploit workers. Labour providers withhold this money by not paying out when they issue P45s or only reluctantly pay it if the employee requests it.

But many don’t do so, either because they don’t realise they are entitled to holiday pay, they may have moved on to work somewhere else or they simply reluctant to ask.

The GLAA knows of businesses who have a holiday pot where they put money in for each worker’s holiday pay but by the end of the year, when those workers have left or haven’t asked for any leave, the business simply pockets the money.

If you are an employee or worker, you are entitled to paid holiday but must ask for it. But many don’t because they fear losing their job. Make sure you know your rights, this is critical in ensuring you are not exploited

Also, get into the habit of regularly checking your payslips carefully and keep them to show what hours you have been paid for. Keep your own log as this provides evidence should it be needed.

Each of us deserves to be treated fairly at work and that means being paid a fair’s day wage for a fair’s day work.

What would you do if later today you were to discover Health and Safety rules were being flouted on a regular basis inside your company?

Or what if you became aware of a culture of bullying and harassment towards colleagues at your organisation?

What would your response be if you witnessed someone being discriminated against because of their ethnicity, religion or gender?

You’d act.

And you’d do so, not simply because all three of those things are illegal and the law demands it, but because they are morally reprehensible and you have a duty not to look the other way.

So, why do so many people (and organisations) turn a blind eye to modern slavery and labour exploitation?

The GLAA suspects it’s a combination of things; maybe they’re in denial about it happening on their doorstep, are afraid to confront it for fear of their business being caught up in an investigation or, more damningly, they are aware but choose to say nothing because it’s commercially convenient.

Whatever the reason, the simple fact is they are all excuses; and they are excuses that won’t wash in the eyes of the law any longer.

We are confident the GLAA will have a major impact on disrupting and dismantling modern slavery networks that have established themselves within the UK and tackling poor and illegal practices that see thousands of workers exploited by employers every year.

In time, the Modern Slavery Act will become as familiar, and important, to employers as both the Health and Safety at Work Act and the Equality Act in ensuring their businesses fully comply with the law and the welfare of employees is looked after.

But enforcement alone won’t defeat the slavers and traffickers.

The only way we will rid ourselves of this repugnant practice is for it to become socially and morally unacceptable.

And that’s where you come in.

Whether you’re simply a worker in a factory or a labour provider, you have a moral and ethical responsibility to prevent people from being forced to work or from being exploited.

Unsure what to look for? We have produced specific guidance that can help you spot the signs of labour exploitation. Click here to read it.

You can also learn more about the GLAA by visiting our website www.gla.gov.uk or call us free and confidentially on 0800 432 0804 to report any suspicions or knowledge about labour exploitation.

Review on Employment Tribunal fees Unpaid Britain’s response

On 31st January 2017 the government published a review of the introduction of Employment Tribunal fees. In this report they set out some of their findings and their proposal for reforms to fees. Following the publication of this review they have asked for responses as part of the consultation process (which closes on 14th March 2017). We submitted our response on 9th March 2017 using some of our findings. The review and our response can be found bellow, please have a look and let us know what you think. Comments as always would be greatly appreciated.

Unpaid Britain’s response the review on Employment Tribunal fees

 

Cost of living crisis for FT study?

There’s quite a strong relationship between student working and sectors where worker abuse is rife. This goes some way to explaining why students (from working class backgrounds anyway) might be easy prey to employers happy to break the rules.

Critical Education

Not a month passes without strident condemnation of student loans appearing in the mainstream press. You might think that’s welcome and that the costs of undergraduate study are now too high.

I agree with the latter point, but have become concerned about ill-informed criticism, which would leave readers with the impression that Student Loans Company loans are to be avoided and that there exist cheaper, private options for financing study.

If the undergraduate system in England is broken, it’s not because fees are unaffordable, but because costs of living exceed maintenance support to the extent that students have to turn to other debt (overdrafts, credit cards, commercial loans, payday loans etc.) or undertake excessive work in term time.

No government has yet committed to the principle that maintenance loans should cover living expenses, but it’s quite clear that the discrepancy there has become much bigger in the last decade. The…

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Minimum wage offenders in London: distorted perceptions of delinquency

In October 2013, a new “name and shame” regime was introduced for employers who had been identified as breaching National Minimum Wage (NMW) regulations. Since then, the government’s business ministry (now known as BEIS – pronounced as “baize”), has been publishing periodic lists of offenders, the latest of which came out earlier this month.

Unpaid Britain has taken a closer look at the details of the 104 London-based employers so far identified. According to our analysis, these London employers had deprived 16,201 workers of a total of £2,274,000 in minimum wages (an average of about £140 per worker). We have looked at what these cases can reveal about breaches of employment contracts, partly through categorising them by industrial sector, and partly by checking for indicators of company survival.

For the media, who love a human interest story, tales of extreme exploitation of “vulnerable” workers by evil individual employers are bread and butter. To some extent, this is echoed in regulators’ approach, with BEIS listing large numbers of small employers and apparently targeting sectors known to host large numbers of SMEs. However, the scale of an offence can be measured through several different prisms. If we take the number of offending employers from each sector, we will have one idea of which is the most abusive. Measuring the number of workers affected will tell us something else. Finally, the sums of money involved may be the most significant, from both the workers’ and employers’ points of view, and will tell us still something else.

This is where the economies of scale come in. Let us assume for a minute that an employer wants to boost their profits by depressing wages (not too much of a stretch of the imagination), and that for at least some workers this may involve breaches of employment regulation. For these breaches to be sustainable and substantial, they will ideally represent small sums at the individual worker level, but be widespread and continuous. They should also have a low chance of detection and (in the event of discovery) be plausibly deniable as a deliberate strategy.

Taking the evidence presented in the London list of shame, we can test this by presenting the sectoral data in a variety of ways, firstly by counting the guilty employers (see table 1).

Table 1 By number of employers

Other personal services 17
Food & beverage services 15
Retail 11
Education 10
Employment activities 5

Other personal services, which tops this league, contains the hairdressers and nail bars traditionally presented as sites of exploitation, and recently suggested by the CEO of the Gangmasters Licensing Authority as priority areas for the GLA’s new remit (when it takes on an extra A and becomes the Gangmasters and Labour Abuse Authority). However, these are small workplaces, so those 17 employers were found to have underpaid only 25 workers. The largest numbers of underpaid workers were found in a largely different group of sectors, led by the retail industry. Not surprisingly, these sectors also showed the largest total sums identified as outstanding (see tables 2 and 3).

Table 2 By number of workers affected

Retail 13307
Security & investigations 2519
Human health 177
Food & beverage services 82
Other personal services 25

Table 3 By total sum owed

Security & investigations £1,742,655.56
Retail £244,302.49
Food & beverage services £160,199.64
Education £24,229.59
Other personal services £22,308.05

 A handful of cases dominate these last two tables: retailers Debenhams (thought to have underpaid workers by one day per year) and Monsoon (who had required staff to repay the company for clothes they were obliged to wear at work); TSS (Total Security Services) (who claimed to have made “an inadvertent mistake” with a salary sacrifice scheme); and twice-featured San Lorenzo restaurant (who apparently were struggling with family crises). The sectors showing the highest average sum per worker are again different, led by residential care and telecoms, but these represent only two cases per sector, each involving one worker. Food and beverage services features in all the tables, confirming its place in the Index of Employer Delinquency first proposed on this blog. However in this analysis of NMW offences, the sector owes its place there to the double appearance of the upmarket San Lorenzo restaurant, found to have underpaid 30 workers in August 2016, and 29 again in February 2017. The retail sector, although showing the second highest total sum outstanding, showed only an average “take” per worker of only £18.36.

Table 4 By average sum unpaid per worker

Residential care £3170.09
Telecommunications £3004.67
Travel agency, tour operators £2732.09
Other wholesale £2204.97
Food & beverage services £1953.65

These figures suggest that the employer most wanting to operate a sustainable system would do well to take little and often, since that is where the big money can be found. The exception to this seems to have been the case of TSS (Total Security Systems) Ltd of east London, who had both a large number of workers affected, and a relatively high sum per head (£691.80).

TSS claimed that a salary sacrifice scheme was the source of the underpayment, and was aimed to increase workers’ take home pay, but was withdrawn in 2014. Also in 2014, the highest paid director of the company received a salary of £2.6m, suggesting that other means of boosting workers’ pay may have been available. The 2014 accounts also tell us that at the end of October that year, provision was made in the company’s accounts of £1,736,000 for “payroll liabilities”. The sum owed to workers according to the NMW offenders list issued by the government in February 2016 was £1,743,000. I wonder, as they say in Private Eye, if these sums are by any chance related?

One other factor Unpaid Britain has been monitoring is the health of companies who have been pointed out by BEIS. Our work on Employment Tribunal (ET) judgements suggests that many of the companies who are judged to owe their workers wages, become insolvent or are dissolved, possibly to avoid payment. In our sample of London ET cases including “deductions from wages” and lodged in 2012 and 2014, only 36% of private sector employers remained active at the end of 2016.  Research conducted by Ipsos Mori and Community Links in 2012 for the Low Pay Commission found that NMW offending employers were likely to cite affordability as one of the drivers of their failure to pay. Were this to be the case, one might expect a high level of company dissolution amongst employers on the list of NMW offenders. In fact we find that 92% are still active. At this stage, this comparison is somewhat crude, as it does not take account of time lags or other factors, but it suggests that reports of the impending demise of those forced to pay the NMW may have been premature.

The data does not prove the existence of the employer strategy posited earlier in this blog, but it most certainly does not disprove it, and provides some support for it. Later in the year, Unpaid Britain will be drawing together the many strands of our research to describe the factors underlying the non-payment of wages, but in the meantime, as always, we are happy to hear of examples (confidentiality respected).

A note of caution: These cases do not include unpaid holiday pay, or wages owed in excess of the NMW, so the sums owed could be considerably larger than reported by BEIS. Some employers may be identified as London-based but have underpaid employees located across the country, similarly others with workers in London may be based elsewhere. We have sought to locate employers and identify their industrial sector from information provided on BEIS lists, supported by Companies House data and internet searches, but in some cases the workers may have been carrying out work in sectors other than the one identified as their employer’s main business. Finally, the sample of only 104 employers is unlikely to be a representative sample of NMW offenders.

 

TUPE or Not to Be?

Over the past twenty years there has been a rapid increase in the amount of work outsourced to agencies and third party subcontractors within the housekeeping departments in major hotels. Almost every hotel in London will have a sizeable proportion of its housekeepers, room attendants and linen porters employed by a third party. In many cases the entire department will have been outsourced.

Most of these outsourced workers will be migrant workers and because they work back of house and are not customer facing many will have little or no spoken English. They will be paid minimum wage, with supervisors on a slightly higher rate. They will invariably be on zero hour contracts with hours provided each week largely dependent on the day to day room occupancy levels in the hotel in which they are based in.

The contracts awarded to the third-party housekeeping contractors are predominantly based on a business model which requires them to invoice the hotel for the number of rooms cleaned per day, rather than the number of staff employed and the number of hours worked. This is a hangover from previous official guidance which suggested the hotels could use the piece work regulations within the Minimum Wage act to pay workers based on the number of rooms cleaned rather than hours worked. This became quite widespread. However, following numerous representations from Unite the Union to the Low Pay Commission the guidance was withdrawn and legally housekeeping staff must now be paid by the hour. However, major hotel chains have retained the business model and usually award contracts to the lowest bid for cost per room.

These circumstances create a perfect storm of exploitation, underpayment and non-payment for housekeeping staff, with constant pressure on them to increase productivity and the small number of service suppliers who attempt to work ethically being constantly undercut.

Sharp Practice

Some the sharp practices we come across regularly include not paying staff for time spent on hotel premises but unable to start cleaning rooms due to delayed check-outs, holding back the first week’s pay on the grounds that these are training days and illegally getting workers to sign an agreement stating this will be withheld if the worker leaves within the first 3 months, making regular and frequent wage errors, not being paid for all hours work which frustrates staff to the point they simply leave without these ever having been resolved.

Short term relationships

The contracts issued to housekeeping service providers usually have no longer than a 2 year lifespan. This means that the contracts are frequently and regularly changing hands. The transfer process rarely, if ever, work in the favour of the housekeeping staff and consistently leaves them out of pocket.

Consultation

The TUPE transfer regulations require both the outgoing and incoming employer to consult both individually and collectively. However, because the majority of workers have English as a second language, are generally unaware of their rights and rarely if ever have any form of organisation or elected representation in place the consultation is effectively little more than a tick box exercise by both employers and something which the hotel itself would only ever engage in if its own directly employed workers were about to be sub contracted.

The consultation usually consists of one employer saying ‘I’ve lost the contract – but don’t worry everything will stay the same once I’m gone’. And the new employer saying ‘I’ve won the contract – but don’t worry nothing will change once I come in’. This never turns out to be the truth.

Collective consultation via reps elected specifically for the purpose does not happen in the main, or where the employer offers this the staff do not understand what they are being asked to engage in. Where collective consultation is not afforded, workers can claim compensation of up to 13 week’s pay in what’s called a protective award. Unite has successfully pursued protective awards in the housekeeping sector. But usually the failure to collective consult goes unnoticed and we are often approached by workers 4 or 5 month into a new contract when it is then too late to act.

Transferring the Liability

Under the TUPE regulations any outstanding liabilities including, ongoing tribunal claims or awards made and unpaid generally, transfer over to the incoming contractor. In the run up to the transfer date it is common for the outgoing contactor to do all they can to ensure as much as possible of the liability for monies owed to workers becomes the liability of the incoming contactor. This will include not rectifying wage errors or unpaid hours, refusing accrued holidays (particularly if the end of the holiday year is approaching around the time of the transfer), deliberately dragging out any settlement negotiations on legal claims, withholding money for training days etc.

Once the liability transfers over to the new contractor the employees are likely to be faced with an argument from their new employer that none of these liabilities were revealed by the old employer as part of the due diligence process. This usually ends up in further delays, with both the old and new contractor essentially banking on workers reaching the point where they just give up on money rightfully owed to them.

Instigating a head count reduction

The incoming contractor will have put in a lower bid than the outgoing contractor. Margins will be tight, so if they can get fewer workers to clean more rooms they will be able to profit from the invoice by room arrangement.

Laying people off or making them redundant could be time consuming and costly. So the employer usually instigates a series of measures clearly designed to encourage people to leave. This is  linked to staff having such low incomes that any small variation in pay can have huge implications in terms of rent, fares, food costs etc.

So, there will be a payroll issue whereby, immediately after the transfer, a large number of staff find themselves on emergency tax codes, temporarily reducing their take home pay. They will find they are sent home regularly under the guise of low hotel occupancy. Pay errors will increase and hours will be ‘mistakenly’ unpaid.

If things don’t look like getting sorted out quickly workers leave in order to take up low paid work elsewhere just to pay the rent. In our experience 50% or more of staff can leave in the first few weeks following a transfer. This doesn’t only allow the new employer to reduce headcount at no cost it also usually mean that any liabilities for money owed by both the new and old employer get written off by the worker as a bad experience.

Ignorance is bliss (for some)

In theory, the TUPE regulations also protect items not specifically written into a workers’ contacts but considered an implied term through custom and practice. Here again housekeeping workers constantly find their rights undermined by the very nature of their employment.

The outgoing contactor may have had a daily productivity requirement of 16 rooms in an 8 hour shift. The incoming employer increases this to 20 rooms. The workers are losing because they are now cleaning more rooms to earn minimum wage. The incoming employer argues that productivity targets are not contractual, if workers put in a grievance this is endlessly dragged out, workers get frustrated and leave, new workers are recruited on the 20 room arrangement.

There may have been an arrangement with the old employer to pay a sum for extra rooms cleaned, but because the invoice for room arrangement it may only appear on the old pay slips as a payment for extra hours, so another unresolvable argument ensues. The new productivity may impact on the ability of workers to take their customary break – so what was once an unpaid half hour meal break and two unpaid 15 minute break may convert as much as an extra hour of unpaid work. Whenever any of this is raised with the hotel themselves they will invariably play ignorant and lay the blame firmly at the door of the contactors without offering any intervention whatsoever.

Generally workers end up out of pocket.

Conclusion

The TUPE transfer regulations are an important piece of worker protection. As they are based on a European Directive they could easily be under threat post Brexit. However, as with any form of legislation workers find it difficult to enforce these rights where they are not underpinned by collective bargaining and union representation in the workplace. There are 5 major hotel chains who are signatories to the United Nations Global Compact and one which is a foundation member of the Ethical Trading Initiative. They are supposed to respect and encourage the rights of their workers to Freedom of Association and Collective Bargaining.

All of these hotel chains are engaged in outsourcing their housekeeping departments. They are also supposed to ensure sub contacted service providers afford the same respect and encouragement, allowing workers to engage in collective bargaining.

They do in almost every other major city in the world.

They do not in London and the rest of the UK. They collude and engage in union avoidance tactics to maintain a union free environment within hospitality. This in turns creates the climate where the wholly unethical practices described here can fester and grow and where workers regularly do not receive wages and payments rightfully due to them.

Delinquent Employers and in-work benefits: Intended and Unintended Consequences

Many low paid and part-time workers are dependent on welfare benefits to bring their income to a level which meets their essential expenditure. This unfortunate fact goes against the prevailing narrative of work-shy, undeserving poor prevalent in the media and used by government to justify deep cuts to the welfare state. While it might be argued that the state ought not to top up low wages through in-work benefits and through tax credits in particular, it is unavoidable while wage stagnation continues and living costs inexorably rise, and no amount of pontificating about minimum wage levels will solve this problem.

Being in receipt of in-work benefits requires a great deal of application from the claimant, and the worker faces a great deal of pressure to immediately report any changes to their rate of pay and to provide supporting evidence of that. And this is where an obstructive, delinquent or simply disorganised employer can have a seriously deleterious effect on the lives of their workers.

This post describes some of the ways in which employers’ actions, whether motivated by a desire to maximise profit, avoid scrutiny from Her Majesty’s Revenue and Customs (HMRC) or to circumvent National Minimum Wage legislation, can result in a knock-on effect which reduces or stops the worker’s benefit income and puts their quality of life, home and health at risk.

Not supplying payslips

The right to a payslip is enshrined in the Employment Rights Act 1996 but is flouted by many delinquent employers. All in-work benefits require the claimant to provide evidence of their income, and if they cannot, their benefits may be stopped and they may be asked to pay back any benefit previously received. Additionally, while any investigation is being carried out, the claimant’s benefits will be suspended, causing additional hardship and often pushing people into rent arrears and other debts. For example, at Citizens Advice Barnet we recently advised a client who had worked part-time for two employers. One had offered her extra hours, so she accepted and gave up her other job. She reported the change of circumstances to the benefits authorities, as she was obliged to do, but when they requested evidence in the form of payslips, her employer refused to provide them, saying that he had never given anyone payslips and did not intend to start now. Her benefits were suspended and she fell into financial hardship – and the employer continued to refuse to provide evidence of the hours she was working. Latterly he produced hand-written payslips covering a short period, which he sat down and wrote in from of the client, each with a different pen. These contained inaccurate information so were useless as evidence of anything. The employee had to appeal the benefits decisions – and the benefits were ultimately reinstated – but her stress and hardship caused by the employer shirking his statutory duty were damaging and completely unnecessary.

Late payment of wages

Late payment, while it causes cashflow problems, does not usually affect in-work benefits. However, where it can cause real problems is when a person loses their job and makes a claim for Universal Credit (UC). UC is gradually being introduced across England and Wales as a replacement for almost all other benefits – paid as a single monthly payment. The problem that late payment causes arises in quite specific circumstances. If someone claims UC, they are subject to a 4-week ‘assessment period’ during which their income for that period is used to calculate their entitlement. If they leave work having received their final pay and them claim UC, there should be no problem – but when the final payment is wrong, as it often is, and the employer pays the difference later (which will usually include accrued holiday pay, notice pay etc), then that will be counted as income for the assessment period (even though it should have already been received) and the claimant will have to wait a further 4 weeks before they can receive any UC. This illustrates well the complexity of the benefits system and the unintended consequences late payment can have. In effect, this will mean an additional 4 weeks where the claimant is unable to pay their rent or feed their family.

Zero Hours contracts

For a person on a zero hours contract, reconciling that with an ongoing claim for in-work benefits creates enormous complexity and an administrative headache for the worker. In order to avoid potential overpayment of benefit and the resulting allegations of fraud, the employee has to report any change in earning to the benefits authority immediately. However, where there is a zero-hours contract, in some weeks the worker may have 40 hours of work, in other weeks 2 or 3. This means that their benefits payments will fluctuate along with their wages, but the benefits payments – particularly housing benefit which is paid in arrears – lag behind and make budgeting extremely difficult. Most people who are in low paid work will receive some housing benefit to enable them to top up their income to pay their rent, and where the housing benefit is paid directly to the landlord (as it often is), the claimant simply does not know how much to pay themselves to make up the difference. This all contributes to a feeling of helplessness and has the potential to lead to eviction if the landlord gets fed up with receiving fluctuating payments.

Deliberately avoiding liability for statutory payments

This happens most often in cases of female workers on zero hours contracts or contracts which state a low number of hours but where custom and practice means that the worker is actually working far in excess of the contractual position. Where these workers become pregnant, the employer has a duty to pay Statutory Maternity Pay (SMP). However, despite being able to reclaim this from the state, many employers, either because of a perceived administrative burden or from an ideological opposition to pregnant workers, will seek to avoid liability. The method is simple – gradually reduce the number of hours so that by the time the calculation for SMP is made, the earnings are below the qualifying level of £112 per week. This does take some application from the employer, as the calculation averages the gross pay for the 8 weeks before the 15th week before the date the baby is expected, so they really do need to think ahead in order to circumvent their employee’s rights.

These are only a few examples, but in combination with the zealous pursuit of benefits claimants by the Department for Work and Pensions and HMRC (which has been well documented) where any question over entitlement is treated as potential fraud – in alignment with the prevailing media and government narrative – it is yet another instance of low paid workers being exploited, both by their employer and by the administrators of the safety net which is supposed to be there to help them.

Deregulation meets criminalisation: migrant women workers in the low-paid economy

There is endemic exploitation of low paid migrant women workers in some sectors of the economy. According to our experience at the Latin American Women’s Rights Service (LAWRS) this could vary from cases such as Maria who works in hospitality and is supposedly  “paid the national minimum wage per hour” but in reality is paid by the number of rooms she cleans. It being virtually impossible for an average person to clean her target number of rooms in one hour, in reality Maria gets paid well below the national minimum wage.

Amparo sometimes gets paid for extra hours cleaning offices in a posh building in the City but sometimes she doesn’t. However, it took her a long time to work this out.  Beatriz gets paid the London Living Wage in one of her cleaning contracts with an agency, while at the same time being forced to work for payment below the National Minimum Wage on another of her contracts with the same agency. If she refuses, she will lose both contracts.

Laura never gets paid for extra hours and Antonia forces herself to go to work even when she is very ill to ensure that she is paid and not to lose the hours that have been allocated to her.

There are many common experiences for Maria, Amparo, Beatriz, Laura and Antonia and many migrant women workers like them. They all work in low skilled, low paid jobs in cleaning and hospitality. They work though outsourced agencies doing several shifts per week for different contracts and working unsocial hours (from 4 am to 8 am and from 6 pm to midnight) finishing when mainstream workers start and starting when they go home. Some of them don’t know who their employer is (as there is a chain of contractors and sub contractors) and only know their immediate line manager who also speaks Spanish.  Another common trend is that they all live in “in work” poverty and struggle to make ends meet; and they feel they can’t complain because they simply can’t afford to lose their jobs and not be able to feed their children. Colleagues who have complained in the past have been dismissed or simply have not had additional hours of work allocated to them.

Maria, Amparo, Beatriz, Laura and Antonia are migrant women workers from Latin America which according to Towards Visibility is the second fastest growing non-EU migrant group in the UK.  Despite having education (often university degrees), they are working in exploitative, unregulated sectors and in precarious employment. According to the research, half of newly arrived Latin Americans work in contract cleaning, 45% experience labour exploitation and 1 in 5 are not paid for work done. They don’t speak English and have few opportunities to learn it, spending their time between their shift work and caring responsibilities. Day to day struggles, for them, are about survival.

The women at LAWRS reading about their labour rights

The women at LAWRS reading about their labour rights

At LAWRS we see cases like this on an ongoing basis. Some of them involving labour exploitation and others amounting to trafficking for labour exploitation. As our invisible women video portrays many women are placed in vulnerable situations and have few avenues for survival.

The industries where many low paid migrant women work are unregulated with employers able to exploit workers without much redress. Recent policy and legal changes have made things more complicated with the introduction of Employment Tribunal (ET) fees (that low paid migrant workers are completely unable to afford) and with the criminalisation of what the Government calls “illegal work”. In the past, employers were punished, but with an official Government “hostile policy on migration’ and the new Immigration Act 2016, workers with insecure migration status could face a prison sentence and the seizing of wages for working without appropriate documentation.

These new measures have opened new avenues for unscrupulous employers who are able to exploit migrant women workers with impunity.

We have seen cases of sexual abuse at work and other crimes that have gone unreported due to the absence of a “firewall” in between safe reporting and immigration control. Unfortunately immigration control continues to be well above survivor’s rights even in extreme cases of trafficking for sexual or labour exploitation.

Additionally for those workers that have the right to work in the UK, accessing justice is  burdensome and cumbersome. They struggle with language barriers, little knowledge about their rights and difficulties in navigating the system. There are also structural obstacles such as little regulation on outsourcing, prohibitive ET fees and the use of ACAS as a first port of call for workers (for most migrant workers in cleaning navigating the ACAS helpline is already a barrier for accessing justice).

What can be done about this? There is some hope in the extension of the remit of the Gangmasters and Labour Abuse Authority (GLAA) to all labour market sectors. However appropriate funding needs to be allocated to the GLAA (that will have increased powers with no additional funding) to be able to do their job properly. It is also essential to regulate outsourcing and for all contractors to have checks and balances in their cleaning and hospitality contracts. Labour exploitation could be present in your own building without you being aware of it.  ET fees also need to be abolished.

There is also a need for a strict firewall between immigration control and safe reporting of exploitation and crime. Information regarding migrant workers reporting exploitation should not be passed to the Home Office for immigration control purposes. Otherwise, survivors will continue choosing not to report. LAWRS will be launching a campaign called Step up! for Migrant Women to ensure strict firewalls for safe reporting and access to services for migrant women survivors of violence and crime.

It is also essential to document the extent and nature of the problem of unpaid wages and exploitation which is what Unpaid Britain is attempting to do.

For migrant women workers and the organisations supporting them, it is important to encourage unionisation and organising, and to provide proper advice in a language that the workers can understand. It is also essential to document the extent and nature of the problem of unpaid wages which is what Unpaid Britain is attempting to do. If we are serious about tackling non-payment and labour abuse, we need to ensure that migrant workers are not left behind and are able to assert their rights.