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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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

 

 

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.

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

 

Minimum wage offenders in London: distorted perceptions of delinquency

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

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

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

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

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

Table 1 By number of employers

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

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

Table 2 By number of workers affected

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

Table 3 By total sum owed

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

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

Table 4 By average sum unpaid per worker

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

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

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

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

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

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

 

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

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

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

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

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

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

The women at LAWRS reading about their labour rights

The women at LAWRS reading about their labour rights

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

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

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

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

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

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

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

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

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

 

 

 

Ghosting, Phoenix companies and other grim tales of unpaid Britain

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.

 

 

The disappearing payslip

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)[1]. 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.employees-with-no-payslips-correct-real

Unlawful

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”[2].  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.

Digital

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.

Enforcement

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.

[1] 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).

[2]https://www.gov.uk/government/organisations/hm-revenue-customs/contact/reporting-tax-evasion, accessed 23 June 2016

Worker’s Status

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
Dismissal Y
Redundancy Y
Notice Y
Maternity Leave Y
Parental Leave Y
Fixed Term Employment Y
National Minimum Wage Y Y
Protected Disclosure Y Y
Working Time 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

Impact of Employment Tribunal fees on selected employers

We have reported before on our trips to the Employment Tribunal (ET) judgement registry, hidden away in the heart of East Anglia (Bury St Edmunds). We are back there now, and as before concentrating on the cases which are key to our research namely those featuring “unauthorised deductions from wages” (generally known, for historical reasons, as Wages Act claims), and those relating to failure to provide holiday pay.

As we plough through scanning hundreds of judgements, we see some respondent (that is to y, employer) names recurring. This makes us wonder if it would be easy to see how frequently these company names come up as respondents in cases involving claims of unpaid wages. So we chose a few of the larger outsourcing and facilities management companies, based on their tendency to have subsidiaries beginning with the parent’s name. I should say that this method is far from fool proof – not all of the subsidiary names will follow this model, and it of course leaves out parent companies which do not follow this model at all.

So our leaving out some large employers is not intended as a slight – we were simply using the rudimentary search strategy which is available on the database of ET judgements, namely putting the wildcard “*” after the first few characters of the company name. So the five parent companies selected almost but not quite at random, were Capita, ISS, Mitie, Serco & Sodexo. We looked to see how many cases which included “wages act” claims had reached a hearing, by the year in which the claims had been accepted. We looked at each year from 2010 to 2015. In the first year, these five companies accounted for 148 such cases, but by 2015, this had fallen to 41.

Perhaps this is good news for their collective workforces. Perhaps they are just much less disgruntled, and more confident that they have been paid correctly for their labour power. Or then again, perhaps the introduction of ET fees has been of great benefit to these companies, many of them delivering outsourced and privatised public services. Because there does seem to be a dramatic fall after 2013, the year fees were imposed. Have a look at the graph, and see what you think.

ET cases includin WA claims reaching hearing