Honey, I shrunk the NMW arrears

More on one of our case studies from Richard Dunstan

Labour Pains

As noted previously [Shurely ‘tediously’? Ed] on this blog, Tory ministers have not been slow to crow about their apparent success in fortifying HMRC’s enforcement of the national minimum wage (NMW) in recent years. In April 2016, the then business minister, Nick Boles MP, boasted to the House of Commons that

“we are enforcing the national minimum wage more robustly than any previous Government and will be enforcing it more robustly every year. In 2015-16, Her Majesty’s Revenue and Customs identified more than £10 million of arrears for more than 58,000 workers across the economy—three times the arrears identified in 2014-15 and for twice as many workers. I am delighted to be able to share with hon. Members that we will increase the HMRC enforcement budget to £20 million in 2016-17, which is up from £13 million in 2015-16 and from only £8 million in the last year of the…

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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.



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.

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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Unpaid Britain Project Towards a typology of non-payment

Towards a typology of non-payment summary 

A paper proposing a typology of non-payment of wages has been prepared for discussion at a workshop on 9th May.  This typology (following revision as a result of the workshop) will be used to help us pick case studies for the next stage of our research.

The full paper outlines categories which have been produced by other authors (including state regulators), and discusses factors considered to have potential relevance to for the construction of the typology. It also includes a brief summary of the Unpaid Britain project, followed by a discussion of the existing data on non-payment.

Click for full paper

The proposed typology of non-payment

Taking into account the various discussions and caveats that are outlined in the above working paper, we find there are four key dimensions to unpaid wages:

Consent; Intent; Means & Magnitude

Means (the way the wages have not been paid) and Magnitude (the size of the sum involved relative to normal earnings) are clearly important. They might determine whether restitution by the worker is pursued, the route by which this occurs, whether there is a role for regulators, and the impact of non-payment. But they are descriptive and determined by the circumstances and intent of the employer, and the degree to which workers’ consent may be given.

typology of non-payment

Non-payment might occur when imposed by circumstances (absence of funds, or catastrophic failure of payment system for example), or as a result of error (data recording mistake), or misinterpretation (misinterpretation of minimum wage regulations etc.)

These are distinct from circumstances where there has either been a decision not to pay, or one (even by default) not to rectify systemic problems which result in non-payment. Interviews suggested strongly that plausible deniability was common, but difficult to detect in official and administrative statistics, because it is feasible to rectify any loss in individual cases without disrupting the model or incurring penalties. This differs from the construction industry “knocking” (complete failure to pay outstanding wages) or deliberate insolvency associated with phoenix companies, in that those are detectable, and (in theory at least) subject to penalties and thus less sustainable as a business model. This could also apply to extreme examples such as forced labour or criminal extortion. These are evident non-payments.

Consent is not a relevant consideration when non-payment is imposed by circumstances, or where there is an error or misunderstanding, but is of significance for purposeful non-payment. The proposed typology separates informed consent, which includes some unlawful, but voluntary contracts and agreed delays to payment, from without consent which would include all other categories (such as not receiving entitlements of which the worker was unaware, as well as the more blatant unauthorised deductions of which they were fully aware).

Unpaid Britain Project Towards a typology of non-payment

Unpaid Britain Typology Workshop

Have you ever had wages withheld or unpaid? Or helped someone who has? As a result of late cancellations, the Unpaid Britain project has two spare places going at our workshop on 9th May, and we would like to fill them with people with direct experience of unpaid wages.

The workshop is intended to help us with our research into this phenomenon. Our next phase will be the selection of case studies to look in detail at the causes, experiences and remedies for unpaid wages. However we feel that this cannot be done effectively without developing a typology of non-payment, to help us choose case studies that illustrate each type. We have developed a draft typology but the time has come for it to be scrutinised, and tested to ensure its robustness.  The Typology workshop will consist of 30 experts from a variety of backgrounds ranging from trade union, employment lawyers, academics, citizens advice, conciliation organisations, think tanks, charitable trusts, monitoring organisations and employers, all of whom have an interest in the subject of non-payment.

Held at Middlesex University’s Hendon Campus, the workshop will start at 12:30 with a light lunch reception, continue until 4.30 and end with a drink and a discussion. There will be short contributions from Anna Kyprianou Dean and Pro-vice chancellor of the Middlesex University Business School, Michael Reed, Principal Legal Officer (Employment) at the Free Representation Unit, Oxford University lecturer Jenny Chan (expert in Labour Rights in China), and project leader Nick Clark. However most of the afternoon will consist of discussions in working groups, as they scrutinise, critique and think of cases that fit or do not fit in to the Typology.

We would love to fill the two places now vacant. If you or any one you know has experience or expertise in the field of non-payment and is interested in attending on the 9th of May please contact us by emailing: e.herman@mdx.ac.uk.

The Risk of the Wage-Work Bargain

According to Secretary of State for Business Sajid Javid, “the idea of employers paying a fair day’s wage in return for a fair day’s work has been the basis of our economic system for generations(BIS & Home Office 2016), no doubt expressing a widely held view. Similarly, the contract of employment has been said to channel “the risks of economic security in such a way as to protect the individual worker…” (Deakin & Wilkinson, 2005, p. 109). And while considerable attention has been given by scholars to the circumstances in which the right to be paid for work might be qualified or defeated (such as absence, partial or defective performance, for example), Napier’s (1984) conclusion that the “residual rule continues to be that the actual performance of services is a condition precedent of the payment of wages”, in general, is still held to be true.

And yet millions of workers find that having carried out the work, their wage is not forthcoming, either in its entirety, or at all. It seems that far from being fair and secure, the exchange of labour power for wages may prove to be a risky enterprise.

For example, China Labour Bulletin reported mass protests in China in the run up to the lunar New Year on the 8th of February, caused in the main by “chronic wage arrears”. It revealed that of 1,050 strikes recorded between December and February, 90% were related to wage arrears, and no longer confined predominantly to the construction industry, were spreading across other sectors.

Meanwhile, Human Rights Watch (2015) reported that two years after Rana Plaza disaster in Bangladesh, and despite legislation being put in place many garment workers (alongside other abuses) fail to receive their full wage, or are paid late.

For those tempted to think that this is a phenomenon associated with labour markets in newly industrialised economies, consider the substantial body of scholarship and campaigning over “wage theft” in the United States. A 2008 study of low paid workers in three cities found 26% of them to be paid below the minimum wage, and over three quarters who worked overtime to be paid below the legally required overtime rate. Researchers estimated that the workers lost over $2600 per year to pay violations (Bernhardt et al, 2009). Kim Bobo, meanwhile in her book ‘Wage Theft’ (2011), described the phenomenon occurring across different industries all around the US, featuring abuses such as total non-payment, payments to supervisors and bouncing pay-cheques.

Similar experiences can be found in Britain. The BBC’s Inside Out programme recently reported on security staff employed at the Olympic Games who remained unpaid four years later. It revealed that 11 stewards were owed between £1,000 and £1,800 each, but because of subcontracting arrangements and the dissolution of their employer Britannia Security Services Ltd have been unable to secure their outstanding wages.  While the UK labour market is arguably less regulated than that of the USA (perhaps surprisingly), and so there are fewer rights to violate, the limited official sources of data reveal tens of thousands of cases of non-payment per year.  What the BBC saw as remarkable, may turn out to be commonplace.

Take those who are unpaid when their employer becomes insolvent. Freedom of Information (FOI) requests by Unpaid Britain to the Insolvency Service have determined that about 40,000 workers per year are paid out from the National Insurance Fund for arrears in wages or unpaid holiday pay (frequently for both). At the height of the recession the numbers approached 100,000 per year.

insolvency payment of arrears

Another indicator is claims made to Employment Tribunals (ETs). Figures published by HM Courts and Tribunals Service (HMCTS) show that in 2014/15, 28,000 claims were lodged for “unauthorised deductions from wages” – which generally equates to unpaid wages. There were a further 31,000 under the working time regulations, most of which will relate to unpaid holiday entitlement. While some of these figures (10,000 according to HMCTS) relate to group submissions which may reflect a litigation strategy rather than specific individual cases of non- payment), the data will under-count claims including unpaid wages, by counting each claim only once. So an unfair dismissal claim will be counted under that “jurisdiction” only, even if there are also claims for unpaid wages and holiday pay (this appears quite common according to our preliminary examination of Employment Tribunal judgements). It is almost certain that taking into account claims with more than one issue at dispute, unpaid wages is the issue most frequently raised in ETs.

However, these figures report on the picture after the 2013 introduction of fees for ET claims. This has led to an enormous drop in claims. In the HMCTS London Region, for example, there were 18,700 claims classified as “unauthorised deductions” (also known as Wages Act claims) in 2013 – the year in which fees were introduced. The following year there were only 2,200. Given that the success/failure ratio of claims has not significantly altered since fees were introduced, it is likely that many legitimate claimants have been deterred by fees[1]. Citizens Advice data on enquiries to their bureaux nationwide shows that the number related to problems with payment of wages is on fact rising year on year, with 9,000 cases of unauthorised deductions being dealt with in 2015 (up 84% on the previous year).

Even if these figures for non-payments due to insolvency, and wage and holiday pay claims to ETs accurately represented the extent of unpaid wages, it would suggest a significant problem. The total of about 100,000 puts the offence on the same level as “robbery”, as reported in the Crime Survey for England and Wales, which registered 106,000 cases in 2014. They are likely to represent only a minority of cases, however (as the Unpaid Britain project hopes to reveal) due to legal barriers, low levels of enforcement by regulators, workers’ reluctance to pursue some cases and ignorance of their rights (particularly regarding holiday pay).

Over the course of the next two years, we will be shining a light on this neglected, but fundamental, breach of employment rights.  We would welcome readers’ experience of this – whether it is of employers going bust, unpaid periods of “training”, holiday pay not being paid on leaving a job, or just a few hours work here and there remaining unpaid. On the other hand, there are reports of misunderstandings by workers as to what they should be paid, an what deductions are legitimate, and we want to hear of them too.

[1]Another possibility is that more cases are being resolved through ACAS – a hypothesis that we will address in a later blog.



Bernhardt, A., Milkman, R., Theodore, N., Heckathorn, D.,  Auer, M., DeFilippis, J., González, A. L.,  Narro, V., Perelshteyn, J., Polson, D. & Spiller, M. (2009) Broken Laws, Unprotected Workers  http://www.unprotectedworkers.org/index.php/broken_laws/index

BIS & Home Office (2016) Tackling Exploitation in the Labour Market Government Response, Department for Business Innovation and Skills (January 2016) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/491260/BIS-16-11-government-response-to-tackling-exploitation-in-the-labour-market.pdf

Bobo, K (2011) Wage Theft in America: Why Millions of Americans are not being paid-and what can we do about it, New York: New Press.

Deakin, S. & Wilkinson, F. (2005) The Law of the Labour Market, Oxford Monographs on Labour Law, Oxford University Press

Napier, B. (1984) Aspects of the Wage-Work Bargain Cambridge Law Journal, 43:2 pp 337-348