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.

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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.

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.