The number of workers on low pay is increasing and more are finding that employers are not honouring the minimum wage laws.

In 1999, only one-in-fifty employees were being paid the minimum wage.

Yet in 2017, the Low Pay Commission estimated that some 1.9 million jobs paid at or below the National Minimum Wage (NMW). This is likely to rise to 3.4 million by 2020.

Currently around 362,000 jobs earned less than the NMW. The picture worsens when it is noted that a 20% of UK’s population earns less than the living wage.

Those most likely to be low paid include women, the young, part-time and temporary employees, those in lower-skilled occupations, and those employed in the hospitality, retail and care sectors. Of course, men are not immune.

The number of men in low-paid part-time work has increased fourfold over the past 20 years.

The National Minimum Wage is barely enough to survive on. For the over 25s, the rate is £7.83 an hour and lower for those below the age of 25. This is equivalent to about £15,000 a year and many people have to take on more than one job just to make ends meet. Many will rely on food banks to see the next day.

Even though the NMW is so low, many employers still fail to pay it.

This week, Her Majesty’s Revenue and Customs (HMRC) reported that between 2017 and 2018 it identified £15.6 million in pay owed to more than 200,000 of the UK’s lowest paid workers – up from £10.9 million last year. In 2017, the HMRC launched its online complaints service and has seen complaints soar by 132%. Restaurants, bars, hotels and hairdressing salons are some of the biggest culprits.

Last year’s abolition of the £1,200 employment tribunal fee has probably encouraged many employees to report underpayment. And possible also hardened their resolve to seek legal address, which in turn probably persuaded employers to pay-up. Employers can be fined up to double the wages owed to workers, up to a maximum of £20,000 per worker.

The non-payment statistics are a shocking indictment of entrepreneurial culture in the UK. Whilst some small businesses may claim to be confused about the law, others have less plausible excuses. Some of the biggest businesses paying millions to their bosses have been major offenders.

Earlier this year 180 employers were named and shamed for failing to pay the minimum wage to over 9,000 workers. This included Wagamama for failing to pay £133,212 to 2,630 workers, and Marriott Hotels failing to pay £71,722 to 279 workers. Last December, the HMRC named 260 employers who failed to pay the minimum wage to 16,000 workers. These included The Best Connection Group Limited, which failed to pay £469,273 to 2558 workers, and Primark Stores, which failed to pay £231,973 to 9735 workers. The August 2017 ‘list of shame’ included Argos, for failing to pay £1,461,881 to 12,176 workers. The company also paid a fine for £800,000 for underpaying 37,000 staff by an average of £64 each. In February 2017, the list of offending employers included Debenhams which failed to pay £134,894 to 11,858 workers, and Pembrokeshire Care which failed to pay £55,056 to 154 workers.

One can only ponder about the quality of the Human Resource Departments at large companies which lack focus on meeting statutory obligations. It is certain that none of the named and shamed companies forgot to pay the comparatively large salary and bonuses to their executives. The non-payment of the minimum wage boosts corporate profits and also performance related executive pay. Fines for failure to pay the minimum wage are low and there are no personal consequences for the board of directors. Prosecutions, if any, are rare. This does not encourage good employment practices.

A stronger enforcement regime can cure executive dementia.

Denial of NMW should be a criminal offence as it condemns employees and their families to a life of misery and hardship.

Annual report of all companies should explicitly state that no employee has received remuneration which is less than the National Minimum Wage or the Living Wage. This would force company boards to specifically focus on whether they have met their statutory duty. In the event of a wilful violation, a fine equivalent to the remuneration of the entire board should be levied and at least 50% of that should come from the pockets of directors.

Personal liability would help to focus minds and ensure that employee rights are not violated. Serial offenders should face the prospect of prison sentences.

Prem Sikka is Professor of Accounting at University of Sheffield and Emeritus Professor of Accounting at University of Essex. He tweets here.

Comments are closed.