Unpaid Britain: wage default in the British labour market

Employers withholding billions of pounds from workers in Britain

At least 2 million workers in Britain are losing over £3 billion in unpaid holiday pay and wages a year say Middlesex University London researchers in the final Unpaid Britain report* released today (30/11) and funded by Trust for London.

The report, Unpaid Britain: wage default in the British labour market, will be launched at an event in Conway Hall, London from 9am to 1pm on Thursday, 30 November. Key speakers include representatives from Unite, the CBI and Trust for London.

According to the report not paying wages, withholding holiday pay or workers “losing” a couple of hours’ money a week are some of the methods employers are using in a deliberate strategy to boost their profits.

The research team, led by Nick Clark from Middlesex University, analysed employment tribunal judgement data, Labour Force and Family Resource surveys, case studies and interviews to reveal a Britain where millions of workers are systematically losing out on wages while employers rarely face penalties. Furthermore consequences for non-payment are so weak that they do not present a sufficient deterrent to employers with many continuing to reoffend.

Employers use a number of regular and systematic tactics to withhold money from workers, including:

  • Failing to pay accrued holiday pay on workers’ departure.
  • Workers regularly “losing” an hour or two per week in pay.
  • Employers disappearing while owing wages (known as “knocking” in the construction industry).
  • Employers dissolving a company which owes wages in order to start up afresh with a new company (“phoenixing”).
  • Dispute over the interpretation of contracts, for example the payment of travelling time for care workers.
  • Building up arrears in pay keeping workers in place when they might otherwise move on to other jobs, so the practice is effectively labour hoarding.
  • Charging workers for uniforms or other necessary items in order to be able to perform their duties.

Commenting on the report lead author, Nick Clark, said: “The Unpaid Britain project has taken over two years to complete and has revealed an ugly side to employee/employer relations in this country – a nation where the idea of a fair day’s wage for a fair day’s work is only an aspiration for so many workers.

“Well-known brands and employers routinely use underhand and unfair methods to withhold payment. One fashion retailer used to make staff repay the company for clothes they were obliged to wear at work. The fact that such practices are widespread can only mean that withholding wages in some form is a deliberate business model for many employers.  Interestingly employers who don’t pay national minimum wages often blame affordability and yet 90% of London employers on the list of national minimum wage offenders, far from resorting to insolvency, remain active.

“This final Unpaid Britain report provides evidence of wage default on an industrial scale. Current means of redress fail our key test in that workers often do not receive what they are owed, while employers can offend repeatedly. Both effective enforcement and stronger unions are needed to give confidence to workers that they do not have to accept this.”

Unpaid wages in the London labour market coincided with the increase of in-work poverty in the Capital. According to the latest London Poverty Profile, 58% of Londoners in poverty are actually in a working household, a proportion which is described as “an all-time high”. For workers in these circumstances, even small reductions in what is paid to them can have catastrophic consequences.

Commenting on Unpaid London, Bharat Mehta CBE, Chief Executive at the Trust for London, said:

“The fact that some employers are withholding wages is totally scandalous because quite simply, it is wrong, and because many of the employees who are missing out are low-paid and already struggling.

“The number of people who are in-work and in poverty is at an all-time high. Millions of people are working hard but still cannot make ends meet. An important part of the solution is making sure that workers are at least getting paid for the work that they do. That should be the minimum anyone in this country can expect. We need stronger action from HMRC and government on this issue.”

Key recommendations from the report include:

  • Making HMRC responsible for paying workers identified NMW arrears, and then collecting them from the employer.
  • Developing systems for informing student workers of their rights, and assisting them in their enforcement.
  • Requiring employers to deposit a financial bond or take out insurance to guarantee workers’ wages.
  • Introducing deterrent penalties for employers’ failure to provide paid holidays or payslips.
  • Stronger sanctions against directors considered to have deliberately failed to pay
  • Empower unions to take up cases on behalf of groups of workers (for example challenging sham self-employed contracts).

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

-Ends-

Contacts:

Nick Clark: n.clark@mdx.ac.uk, 020 8411 4015, 07932 590282

Franca Tranza: Senior Media Officer (Research), f.tranza@mdx.ac.uk, 0208 411 4316 (out-of-hours diverted to mobile).

Navprit Rai: nrai@trustforlondon.org.uk or 07912 177 179

Notes to editors:

*Click here to access the full report and here to read the Executive Summary.

About Middlesex University London

For nearly 140 years Middlesex University (London) and its predecessor institutions have been home to innovators and change-makers. We are a progressive London university that puts our students first and provides expert teaching informed by inspiring research and practice.

We boast a diverse, multinational and multicultural community of 19,400 students and 1,900 staff from 140 different countries based at our modern north London campus. We also have campuses in Dubai, Mauritius and Malta, bringing our total number of students to 37,000. Middlesex University London generates more than £280 million a year for the Barnet economy, supporting some 3,800 local jobs.

We work with employers to make sure that what our students learn is what employers need, and we strive to transform the lives of our students so that they have an excellent experience while they are with us, and a solid foundation for inspiring careers when they leave us.

For more information go to www.mdx.ac.uk.

About Trust for London:

Trust for London is an independent charitable foundation. We aim to tackle poverty and inequality in London and we do this by: funding voluntary and charity groups – each year we make grants totalling around £7.5 million and at any one time we are supporting up to 400 organisations; funding independent research; and providing knowledge and expertise on London’s social issues to policymakers and journalists.

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Results from the future of therapy survey

Our colleague at Middlesex University Elizabeth Cotton published the results of a national survey of working conditions in mental health services, last week.

She noted that “The survey involved 1500 respondents, including 68 in depth interviews of frontline workers in mental health. The results are devastating. The website includes a range of data and anonymised quotes from mental health workers, as well as an eBook that looks at the future trends. The survey reveals a profound downgrading of services as well as a reliance on unwaged work and precarious employment conditions now widespread across the UK. The research outlines an impending crisis in the UK’s capacity to deliver quality mental health services.”

The results for the survey and its infographics can be accessed on www.thefutureoftherapy.org

Unpaid Britain Report launch

On 30th November we will be publishing our final report and we will be launching it at Conway Hall on that day, from 9am to 1pm. We will be discussing our understanding of how and why unpaid wages come about, and some preliminary recommendations for what could be done to tackle the issue. This is an open invitation to anyone who would like to attend. If you are interested in attending please register using Eventbrite as places are going quickly!

Programme

Time  

 

09:00-09:30 Registration & Breakfast
09:30 Welcome & introduction Chair: Jo Seery (Thompsons Solicitors)

Stephen Syrett (Business School Director of Research, Middlesex University)

09:45 Outline of findings Nick Clark and Eva Herman (Unpaid Britain project)
10:10 Responses Bharat Mehta (Chief Executive, Trust for London )
Diana Holland (Asst General Secretary, Unite the Union)
Matthew Perceval (Head Employment Policy, CBI)
10:25-10:30 Personal testimony Hospitality worker
10:30 Questions, discussion
10:45 Break
11:00 The future of enforcement Sir David Metcalf (Director of Labour Market Enforcement)
11:10 Access to justice Prof. Nicole Busby/Ele Kirk (Strathclyde University)
11:20 Questions, discussion
11:30 Report recommendations Nick Clark
11:40-12:25 Discussion of recommendations in working groups All participants
12:25 Closing remarks Jo Seery, Thompsons Solicitors
12:30-1pm Lunch

 

Speakers:

Sir David Metcalf was appointed the UK’s First Director of Labour Market Enforcement in January 2017. He is Emeritus Professor, Centre for Economic Performance at the LSE. Previously he was a founder member of the Low Pay Commission (1997-2007) and the first chair of the Migration Advisory Committee (2007-2016).

Bharat Mehta CBE is Chief Executive of Trust for London. Prior to taking up this post he was Chief Executive of the National Schizophrenia Fellowship (NSF, renamed RETHINK). He has also worked for the Medical Research Council; the National Council for Voluntary Organisations; and the Social Services Department of the London Borough of Waltham Forest. He is a board member of a number of organisations including: Home Group, one of the largest registered social landlords in the country; London Funders; and the Social Justice and Human Rights Centre Ltd. He has also served on numerous government and civil society commissions and advisory groups.

Stephen Syrett is Professor of Local Economic Development and Director of Research at Middlesex University Business School. He specialises in issues of urban and regional economic development, governance and policy and the study of ethnic minority, home-based and social enterprises and the regeneration of deprived areas. He has published widely on these topics including a number of books and many journal articles and reports. He has worked extensively with national, regional and local government bodies in the UK and internationally, as well as with a wide range of voluntary and community sector and private sector organisations.

Nicole Busby is Professor of Labour Law at the University of Strathclyde. She teaches and researches in the areas of equality and employment law, European social rights and access to justice in the employment tribunal and has published widely. She is currently a member of the Scotland Committee of the Equality and Human Rights Commission.

Eleanor Kirk is Ailsa McKay Post-doctoral fellow at Glasgow Caledonian University.  Eleanor’s research interests encompass the nature of work, employment relations, access to justice and social equality. Her current work focuses on employment rights enforcement, precarious work and ‘bogus’ self-employment. Additionally, Eleanor is a research associate at Ulster University Law School where she is working on the project: “Litigants in Person in Northern Ireland.” https://www.ulster.ac.uk/faculties/social-sciences/schools/law/research/litigants-in-person

Matthew Percival has been representing the CBI’s 190,000 member companies on employment issues since 2011 and is the Head of the CBI’s Employment Policy team, leading on issues ranging from employment law, pay and pensions, to immigration and diversity.

Diana Holland OBE is the Assistant General Secretary of Unite the Union and the current treasurer of the Labour Party. At Unite she is responsible for transport, food and equalities. She is also a long-standing member of the TUC Women’s Committee and serving as Vice-President of the Global Trade Union Confederation. She was awarded an OBE in 2001 for services to Equal Opportunities in Employment.

Address for event:

Conway Hall

 25 Red Lion Square,

London

WC1R 4RL

 To attend please register with Eventbrite any question email Eva Herman:  e.herman@mdx.ac.uk

 

 

Unlawful pay deductions aren’t the only problem – there are problematic lawful ones as well

We all get ill from time to time. Sometimes we just need one or two days off work to recover from a cold. Other times things are more serious and we need rather longer periods away from work. What we have in common is a need for financial security during such periods of absence.

One of the most significant employment-related improvements that occurred during the post-war period was the expansion of occupational sick pay schemes that provided staff with income during periods of sickness absence. Indeed, statistics suggest that by the end of the 1980s around 90% of employers offered at least some of their staff access to sick pay. Since then, however, the evidence suggests that this percentage has declined significantly.  The latest available figures indicate that less than half of employers (and a much small proportion of private sector ones) now operate such schemes. Or to put it another way, indicate that most employers (perfectly lawfully) deduct a significant proportion of pay from sick, absent staff.

Against this backcloth, available figures further suggest that around 30% of employees, as well as those many, many workers working casually and in various forms of false self-employment, do not have access to sick pay. These are potentially entitled instead to Statutory Sick Pay (SSP). This is only the case though if they are paid at least the National Insurance threshold of £113 a week. Furthermore, if this threshold is passed, employees only receive £89.35 a week from the fourth day of absence up to a maximum of 28 weeks. For somebody who normally work 35 hours on the adult National Minimum Wage, this means that they will only have around a third of their normal income replaced while on SSP. It also means that non-employees have no entitlement and hence can effectively lose all their pay.

The recent Taylor review of modern working practices, in its (surely) ironically entitled report Good Work, recommended that the Government reform SSP to make it payable to all ‘workers’, regardless of their income from their first day of absence. Amazingly, however, this expansion of coverage was recommended alongside the further proposal that the entitlement to receive it for up to six months be ‘accrued on length of service’.  Equally amazingly, and notwithstanding the review’s claimed focus on providing fair and decent work for all, nothing was said about the loss of pay likely to be experienced by many of those receiving SSP. Nor was anything said about the current gross disparities that exist in current sick pay arrangements which mean that some employees receive no pay when absent, while others receive six months on full pay and a further six months on half-pay. Silences which suggests that very strange notions of fairness and decency were being applied.

Arrangements to provide income to sick workers vary widely across developed economies. In some countries, employers are responsible for its provision. In others, payments form part of the social security system. In yet others, a combination of these two approaches are in place. What is clear, however, is that the arrangements in the UK are among the least generous in the developed world. For example, in one study only New Zealand and the United States were found to possess less generous ones[i].

It is then clearly far from impossible for a modern advanced economy to treat ill, absent workers with more decency and respect than is the case in the UK. Obviously, there is much scope for debate about how the present situation in the country could be improved. A valuable starting point though would be to accord greater recognition to its grossly unfair and unsatisfactory nature. After all, it is surely simply wrong that over half of employers can lawfully deduct pay from staff on the grounds that they are unable to attend work due to illness

 

[i] Heymann, J., Hye, R., Schmitt, J and Earle, A. 2010. ‘Ensuring a healthy and productive workforce: comparing the generosity of paid sick day and sick leave policies in 22 countries’, International Journal of Health Services, 40(1), 1-22

 

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