From the TUC

Minimum Wage – how we can catch the cheating employers.

17 Jan 2017, by in Working Life

More than 250,000 UK workers are paid less than the legal minimum wage – let’s put this right.

At a conservative estimate, minimum wage underpayment affects 250,000 people, but we fear that the true figure could be higher. For instance, we have heard that the forthcoming official Apprentice Pay Survey is likely to show that nearly one in five apprentices are underpaid. We need to put this right.

The ONS Low Pay report estimates that 362,000 employees are paid less than the minimum wage, but this is not a good measure of minimum wage underpayment. The ONS figures are drawn from PAYE data, but include all the employees who are exempt from the minimum wage, such as those undertaking work as a requirement of a degree course. They also take no account of the accommodation offset. Most worryingly, by definition this figure excludes any scam that does not show up in the PAYE returns. This is a very serious concern, as neither of the two most common employer scams are counted.

Common minimum wage scams

There are a bundle of scams based on misrepresenting a worker’s status. Bogus self-employment, unpaid interns and so-called “volunteers” who are actually workers, are not counted by ONS, as none of those affected will be in the PAYE system.

The other common scam is to under-record hours. Workers affected by this practice can include: shop-workers who have to come in early to open the store; social care workers not paid for travel time between home care visits; and workers who have to spend time stuck in security checks when leaving warehouses (like Sports Direct) or face forced unpaid overtime.

Deliberate cheats in textile manufacturing are known to contract and pay workers for 40 hours per week but demand that they actually work 50 hours per week. In such a case, the books will look as though they are in order but workers are losing 10 hours minimum wage pay per week. This kind of sharp practice will not show up in the ONS figures at all. We only know that this happens because HMRC have followed up worker’s complaints by sitting outside and timing staff in and out of these factories.

The National Minimum Wage has, quite rightly, been a key policy for successive governments. The budget for enforcement is growing and the penalties are getting stiffer. Government is making an effort to enforce the minimum wage, with £13.1 million recovered for 60,000 low paid workers last year and £1 million in fixed penalties levied on employers by HMRC. Its good news that workers are actively being helped, but our estimate of at least a  quarter of a million underpaid suggest that recovering money for 60,000 means that the enforcement agency is only catching about a quarter of the cheats. Clearly more needs to be done, including securing more high-profile prosecutions.

Underpayment is tragedy for low paid workers and their families. It also hurts business, as good employers are undercut and fewer customers have money to spend. Clearly we need to stop minimum wage cheating as a matter of urgency. Trade unionists and concerned citizens have a role to play in rooting out the minimum wage cheats.

How can we help enforce the minimum wage?

I’m sure that you share my goal that everybody who is entitled to the National Minimum Wage should actually receive it. We all want workers who are losing out in the minimum wage to get the money that they are due.

We can all play our part in helping to enforce the minimum wage and we have a moral duty to do our best to help low paid workers.

The National Minimum Wage Calculator on the TUC’s website is a useful tool that allows you to check whether the minimum wage is paid.

The routes for dealing with underpayment:

  • The first step is to talk to a union rep, if there is one. They can sort out most minimum wage problems simply by raising the issue with employers. Genuine mistakes do occur, for example, the minimum wage has a number of age-based rates for workers under 24 and some employers simply forget birthdays. This kind of problem can usually be rectified by telling the employer what is wrong (providing that they are approachable). In some cases, trade unions will pursue stubborn employers to an Employment Tribunal or the courts, especially if the case would establish a useful precedent.
  • More commonly, trade unions, individual complainants or their advisors will utilise HMRC’s National Minimum Wage Enforcement Unit, initially making contact through the ACAS Helpline.
  • HMRC enforce the minimum wage for the government and have the right to impose a Civil Penalty of up to £20,000 per worker on underpaying employers without having to go to court. Note that they have very strict confidentiality rules and will not reveal the name of the complainant to the employer without the worker’s permission
  •  In a case where a named worker complains, HMRC can feed back to them on progress. If the complainant appoints somebody to act as their “agent” (typically a trade union rep, advice worker or relative), then HMRC include the agent in the feedback.
  • HMRC will also take complaints from third parties. This often happens in cases where no worker is willing to be named, even in a completely confidential complaint. The other source of third party complaints are instances when somebody has information about underpayment in completely separate workplace. Such complaints are either made in order to try to help the underpaid workers or simply to stop a bad employer from undercutting the good ones. This is worth doing, because all credible complaints are investigated by HMRC. However, HMRC cannot provide feedback to a third party complainant who has no direct connection to the employer suspected of cheating, which is a shortcoming.

We should not rest easy until there is no hiding place for cheating employers.

2 Responses to Minimum Wage – how we can catch the cheating employers.

  1. Lyn Eynon
    Jan 18th 2017, 11:21 am

    Thanks for this. There is another way in which employers are avoiding paying the minimum wage, which is the so-called ‘gig’ economy. Some of this is indeed bogus self-employment (e.g. Uber) but the problem goes beyond that when workers are performing tasks for a series of different employers but paid at rates for the task that work out at less than the minimum rate for the effort required. It’s not easy for unions to tackle this but we should at least recognise it, as most of it is internet driven so likely to increase.

  2. Paul Sellers

    Paul Sellers
    Jan 18th 2017, 11:55 am

    A fair point. A case involving multiple employers and relatively small amounts of underpayment from each may appear to difficult to the worker involved. Or they may fear that employers will give them no more work, even though it is against the law for an employer to penalise a worker for claiming the NMW.

    However, the legal position for the gig economy is the same as for more traditional patterns of the employment. If the person in question is a “worker” (not genuinely self-employed and running their own business), and they do not fall into one of the limited number of exemptions from the NMW then they must be paid the relevant minimum wage rate.

    My advice would be that they should talk to a union, or to the ACAS helpline. They should also keep records of how long they worked and how much they were paid, since it is possible to claim several years afterwards – and, unusually in UK law, the legal burden of proof to show that the NMW has been paid lies with the employer.