The director of a fire safety and security firm and his ex-wife, have been jailed for a total of six years and nine months for stealing £815,000 tax,National Insurance and VAT after they were investigated by HM Revenue and Customs (HMRC)….
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.
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.
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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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|
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
|Security & investigations||2519|
|Food & beverage services||82|
|Other personal services||25|
Table 3 By total sum owed
|Security & investigations||£1,742,655.56|
|Food & beverage services||£160,199.64|
|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
|Travel agency, tour operators||£2732.09|
|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.
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.
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.
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.
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.
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.
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.
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.
While people flock to see the latest supernatural creatures in JK Rowling’s Fantastic Beasts and Where to Find Them, real life shape-shifters and disappearing acts receive much less attention. People are being ‘ghosted’ by former employers who owe them wages or redundancy payments, and even more galling, some employers, rising phoenix like from the ashes of the previous companies, later reappear trading under a new name to avoid payment.
Successive reforms of the Employment Tribunal (ET) system have made it increasingly difficult to take up complaints regarding underpayment and the abuse of employment rights, allowing much poor treatment of employees to go unpunished. The weakening of unfair dismissal protection in 2012, and the imposition for the first time of a substantial fee to bring claims in 2013 were justified as discouraging ‘vexatious claims’ said to be costly, time consuming, and creating a fear factor for employers. However, there is little evidence that this was ever a significant problem, and is likely to be particularly rare in underpayment cases which generally involve relatively straightforward decisions for tribunals. Even prior to the current fee structure, there were significant barriers to would-be claimants. A number of studies have found that only a small proportion of people experiencing problems at work do anything formal to resolve them, never mind take legal action.
New research by a team (including the author) at the Universities of Strathclyde and Bristol has given voice to those attempting to resolve work-related grievances via the increasingly complex, legalistic world of ETs. Researchers recruited 158 clients who presented with employment problems at Citizens’ Advice Bureaux (CAB) (access points to those who generally cannot easily afford a lawyer or access trade union services). Researchers followed participants across the course of their disputes, logging their thoughts, hopes, fears, struggles and successes, interviewing them at several points. The sample tended to be low-paid workers in elementary occupations; working in the private sector (with contract cleaning and agency work generally featuring heavily as offenders) and who had never been members of trade unions. The gathered data includes harrowing stories of peoples’ struggles to resolve their employment disputes.
Around a third of participants reported an underpayment issue as one of the problems for which they sought advice. Problems included quite straightforward disputes regarding owed wages or holidays involving hourly paid staff which may have been simple down to a mistake on behalf of the employers (e.g. disputes over how many hours had been worked). More complex disputes included participants enquiring about owed wages or unpaid overtime and then finding themselves dismissed or no longer being provided with any hours of work. CAB advisers saw some underpayment problems so frequently, (sometimes from the same employers) that they looked likely to be deliberate strategies, such as agencies neglecting to pay holiday pay until challenged. Such employers would often pay up as soon as a tribunal claim was lodged, though not before the time and attention of the tribunal system was expended to bring them into line.
Working at the bottom end of the labour market was for some participants not only precarious (in temporary jobs) and lowly paid, but ended up being completely unpaid. Doug, was encouraged by the Job Centre to take a job in construction with a small firm. He worked for several weeks without pay before his employer disappeared. When he returned to the Job Centre to complain and seek advice “they didn’t want to know”. Telling him, “‘that’s between you and the employer it’s nothing to do with us’, basically… I felt they couldn’t care less. ” Doug had thought that “being through the Job Centre” the job “was above board, but obviously it wasn’t.” Doug found his way to the CAB, and submitted an ET claim with their help. Initially the employer denied that Doug had worked for them, before ceasing trading and finally disappearing. Doug gave up chasing the £1000 he was owed.
Doug was effectively ‘ghosted’, by his former employer. People take a job, work for a few weeks (sometimes months) in good faith that their pay will be forthcoming, until their employer (usually a micro firm of less than ten employees), disappears without paying them a penny. When the worker attempts to make enquires, phone calls and emails are no longer answered. The employer, then appears in a new guise, a phenomenon Citizens’ Advice and other campaign groups are referring to as perpetrated by ‘phoenix’ companies, rising from the flames of supposedly insolvent, burned-out companies. In other cases employers claimed insolvency, often meaning that participants were able to make a claim to the government’s Insolvency Fund, although they were not always able to obtain the full amount they were owed.
Around half of participants with underpayment problems attempted to take legal action, and so are slightly more likely than others to take action (the overall figure was closer to a third). There could be several reasons for this: firstly, individuals were usually reliant upon the money owed, 2) the claim, being more straightforward may seem easy to win, 3) claimants have a clearer sense of certainty regarding their ‘right’ to take the employer to tribunal. That said, participants often saw a symbolic quality in making claims for unpaid wages. Cheryl, a nursery assistant, wanted £400 of notice pay back on ‘principle’: “I’d worked it and earned it, so I should have it. Even if it was hundred pound or a thousand pound… I thought I’m not going to let this lie, ‘cause it’s money I deserve to get.’
While the certainty of being clearly ‘in the right’ may generally be stronger among those who feel they are owed wages than those claiming unfair dismissal or discrimination, the underpaid are not necessarily immune from crises of confidence regarding taking legal action. Cheryl, was plagued by doubt and shame at taking legal action. She felt ‘actually quite embarrassed… the only people I told were really close friends and family… I think people often assume there’s something worse to the case when you say, “the tribunal court.” They think, your first employer, ‘that’s a bit much!’’ Problems that should be considered illegal may be conceived as ‘dumb luck’. ETs appear are a highly discouraging prospect to most lay-people. Any relish that might be taken in reaching them usually relates to placing employers who feel they are untouchable in front of ETs.
Of the twenty known outcomes for underpayment cases at ET in the study, ten were successful, seven settled (mostly favourably for participants), and 3 were withdrawn. However, only one of the ten successful awards was received without using formal enforcement procedures, and three of the successful participants never obtained the money owed. Some participants did not feel it was worth ‘throwing good money after bad.’
While the amounts of money owed were the difference between keeping them above the breadline or not, hourly-waged workers barely had the time to attend their own tribunal hearings because of new jobs or job-seeking efforts. For them dreaming-up far-fetched accusations against employers, who may be hard to track down and unwilling or unable to pay in any case would be absurd.
I recently took part in an HMRC “webinar” on the National Minimum Wage, offering help and support to union reps wishing to assist members enforce their rights. During the course of this, participants were told of the importance of checking payslips to see if workers had been properly paid.
This confirms views expressed by some of the advisors interviewed in the early stages of Unpaid Britain, and my own experience assisting workers in the past. The payslip is an important piece of evidence in identifying errors, unpaid wages and unlawful deductions, and its absence is usually a sign that there is something seriously wrong with the employment relationship.
The general right to “written pay advice” dates back to the 1960 Payment of Wages Act, and the requirements have changed little since. Then, gross pay, net pay and any deductions had to be shown, and this remains the case now under Section 8 of the Employment Rights Act 1996. However there is no requirement in law to show how the gross figure has been calculated – by showing the number of hours worked and the hourly rate of pay for example. Unions have argued that this can leave workers with insufficient information to assess whether they have been paid enough. In the latest Low Pay Commission (LPC) report (para 66), the LPC have taken note of these points and recommended (not for the first time) that the government consider requiring that payslips of hourly-paid workers should include the number of hours for which they are being paid.
But the absence of details on a payslip is not the only problem. The absence of a payslip at all seems to be a growing problem – and in London the effect is particularly marked (see chart). Our analysis of data from the official Family Resource Survey, shows that one in four employees in London does not receive a physical payslip, 15% because it is now said to be provided in electronic form, and over 10% because workers report that their employer does not provide one at all.
There are two troubling aspects to this. Firstly the failure to provide a payslip is unlawful, and could (if taken to an Employment Tribunal) result in the award of a penalty. This is explained by Unpaid Britain Advisory Group member Jo Seery of Thompsons Solicitors:
“Where a tribunal finds that un-notified deductions have been made in the 13 week period immediately preceding the… claim being lodged, [they] may order the employer to pay a sum not exceeding the aggregate of the un-notified deductions … So a tribunal could order the sum of tax and NI contributions be paid by the employer where these have been deducted but not notified to the employee.”
As Jo also points out, for those workers whose earnings are below National Insurance or tax thresholds, there is no penalty for a failure to provide. And in my experience, employers will often “discover” the missing payslips and provide them before any ET hearing, thus avoiding any penalty. Where the employer has disappeared, or is insolvent, or resists recovery attempts, the penalty is neither here nor there because even if it is awarded, it will not be paid.
Without payslips, employers may deny that those claiming owed wages were ever employed by them, or were employed by other associated companies. Workers who suspect that NI or tax deductions were not paid to HMRC have little to support them when they attempt to ensure that their contributions record is correct. This may have serious consequences for pension and benefit entitlements, and for migrants seeking to establish residency rights (for which the paperwork requirements are ridiculously stringent).
Workers suspecting contributions are not being paid over by their employer can complain to the tax authorities (HMRC) via their “tax evasion hotline”, or online, or by post although “HMRC won’t reply to confirm they’ve received your letter”. Workers using this method may never find out what steps have been taken to rectify matters, so as an enforcement method, this leaves something to be desired.
Employers are also required by law to maintain records to demonstrate that they are paying at least the National Minimum Wage (NMW), and although workers may have the right to inspect these, so too do NMW inspectors. Failure to maintain such records is a criminal offence, but there do not appear to have been any prosecutions for this.
The shift to electronic payslips presents separate problems. Most employment lawyers seem to agree that this probably fulfils the legal requirement, as long as the opportunity is afforded to workers to access a computer to see their payslips. However, in the real world of aggressive management, many workers will be reluctant to assert this right, even if it is notionally available. Secondly, while it is true that many workers now have smart phones or tablets and can easily access their employers’ system, or open the attachment to an e-mail, or the SMS message (this is apparently used by some employers), not all will be able to do so. And even if they do, does the system permit the worker to save a copy, so that if they leave the employer, they have a record of deductions?
Respondents in Chartered Institute of Payroll Professionals surveys are asked if e-distribution is under consideration by those not already using it, and in the latest survey available (2103/14), 23 out of 62 said it was. From this admittedly rather small sample, it seems likely that there is a continuing trend towards the use of digital payslips, with serious implications for workers who have problems with access to technology, and for the use of payslips as evidence.
There is clearly a case for making the required format of payslips more detailed – providing hours worked, and holidays outstanding, for example – and a case for unions to keep an eye on the design and administration of pay systems, ensuring that workers are aware of the need to check and retain payslips (and that they can easily do so).
But union coverage is partial, particularly in the private sector, so penalties for non-provision need to be dissuasive, and accessible. This means no Employment Tribunal fees! Providing reliable routes for workers to complain of non-provision of payslips, and a system of inspection of payslips could both help to identify other abuses of workers’ rights and be of benefit to the exchequer.
 Of the UK regions, Wales is worst with 14.3% reporting no pay slip and a further 12.7% receiving an electronic version. London showed the second highest proportion. Nationally, 8.6% of workers report receiving no payslip, and 11.6% an electronic one (2014/15 figures).
A worker who has not been paid their wages has the right to bring a claim in an Employment Tribunal (ET) for an unlawful deduction from wages.
But who is a worker?
The law states a worker is someone who personally performs any work or services under a contract of employment or any other contract, provided that the worker is not in business on their own account (i.e is genuinely self-employed).
The legal definition of a worker is important because workers have some employment rights (see Box on Employment Rights) including a right to be paid the national minimum wage and the right to pursue a claim for unlawful deduction from wages in an Employment Tribunal if they have not been paid the wages they are owed including, for example, if they have not been paid holiday pay.
This compares with those who are genuinely self-employed (i.e. in business on their own account), who do not have those same employment rights.
Employers in the new ‘gig economy’ often categorise those working for them as self-employed. For example, taxi drivers, couriers and cleaners are often given contracts or “written terms” stipulating that they are “independent contractors” or are “self-employed”. In other cases, there may be nothing in writing at all other than the fact that the company classifies them as self-employed.
With reports of couriers having pay deducted because they have not made a delivery within the allotted hour or not being paid for the last shift because they did not accept a job in the last minute before their shift ended, those working in this sector are often unclear as to what action they can or cannot take to recover pay that is rightly due to them.
The correct categorisation of the working relationship is all-important in determining whether someone is a worker and therefore is able to take action to recover unpaid wages.
Case law has held that there are two key elements to determining whether someone is a worker. The person must:
- Provide personal service; and
- There must be mutuality of obligations between the parties.
What is personal service?
At one level establishing that someone provides personal service seems relatively easy. Surely, if you are asked to do the work and you do it there is no problem? However, some employers claim that those that work for them have the freedom to get others to do the work for them – during periods of sickness or holidays, for example. This, the employers claim, means that the person can provide a substitute who can do the work for them, so they are not required to carry out personal service. In Autoclenz Ltd v Belcher, the company provided car valeters with a written contract which stipulated that the car valeters were “entitled to engage one or more individuals to carry out the valeting” on their behalf. However, in practice, it is difficult, if not nigh on impossible, to find anyone else to do the work or at least anyone whom the company is willing to accept. If that is the reality then there is every chance they are in fact providing personal service and so satisfy the first step in establishing that they are a worker.
What is mutuality of obligation?
This is the obligation on the employer to provide work and a correlating obligation on the person to accept work when it is offered.
Many of those working in the new “gig economy” are sold the idea of self-employment on the basis that they can decide when they want to work and that they can be their own boss. However, when there is rent to pay, food and clothes to buy the ability to choose not to work is often no choice at all.
The reality is that if work is not accepted when it is offered not only will there be no pay but the person is unlikely to be offered any further work in the future. So, in practice, people rarely refuse work when it is offered.
The profits companies stand to make from the self-employed similarly means that in most cases the company is obliged to offer work to stay in business. An article in the Guardian dated 18 July 2016 on delivery firm, Hermes, revealed that pre-tax profits of £36 billion in the year February 2015 was the product of a workforce of couriers, 84% of whom were self-employed!
The question then is, can a company write into a contract terms which would prevent someone from claiming they are a worker?
Generally a written contract is seen as sacrosanct when determining the working relationship.
In Stevedoring and Haulage Services Limited v Fuller and Ors, (albeit a case which concerned employee status rather than worker status), the contractual terms expressly stated that work would be provided on an ad hoc basis with “no obligation on the part of the company to provide work nor for [you] to accept any work so offered”. The Court said that there was no scope for implying a positive obligation on the parties to offer work and for work to be accepted where to do so would contradict the express terms.
But that was back in 2001. Today the Courts take a dim view of employers relying on contractual terms to deny workers employment rights where the terms do not reflect the reality of the working relationship.
Contracts which do not represent the reality of the situation are now recognised to be sham contracts. A sham contracts as expressed in the case of Consistent Group Limited v Kalwak is a contract where “the reality of the situation is that no one seriously expects that a worker will seek to provide a substitute or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship”.
In many cases for workers in the new “gig economy” the written terms or the written contract will not represent the reality. Anyone unsure of the status of their working relationship and associated employment rights should join and seek the advice of a trade union who can advise on this hugely important issue.
Employment Rights Box
|Statutory Rights||Employee||Worker||Self Employment|
|Fixed Term Employment||Y|
|National Minimum Wage||Y||Y|
|Part time work||Y||Y|
|Right to be Accompanied||Y||Y|
|Unlawful deduction from wages||Y||Y|
|Protection from discrimination because of a protected characteristic||Y||Y||Y|