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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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.