Penny pinching: enforcement (or not) of the minimum wage

“A penny saved is a penny earned.”

So said the 18th century clever clogs, Benjamin Franklin. Allegedly. Maybe.

OK, it seems he probably didn’t say it. But, if he did, we could justly consider Franklin to be an astonishingly far-sighted commentator on enforcement of the national minimum wage in 21st century Britain. Because, for some of the country’s biggest and most profitable employers, cutting corners on compliance with the national minimum wage is a business model that pays – penny upon penny upon penny.

Last week, the Department for Business, Energy and Industrial Strategy (BEIS) named & shamed another tranche of employers found by HMRC to have breached the minimum wage – the 14th round of naming & shaming since the scheme was rebooted in 2013. In this round, 179 employers were named for collectively owing £1,096,246 to 9,123 workers.

As ever, press and media attention focused on the handful of household names among the 179, including the restaurant chains Wagamama, which was found to owe £133,212 to 2,630 workers, and TGI Fridays, which owed £59,348 to 2,302 workers. Yet, as ever, most of the 179 were (relatively) small-fry: 146 (82%) owed less than £5,000, 110 owed less than £2,000, 105 (59%) had underpaid fewer than five workers, and 56 had underpaid only one worker. Just five employers (including Wagamama, TGI Friday and Marriott Hotels) accounted for 34% of the arrears owed, and for 60% of the 9,123 underpaid workers. The median arrears owed was just £1,356, and the median number of underpaid workers was three.

But my eye was drawn to the statement by BEIS minister Andrew Griffiths:

There are no excuses for short-changing workers. This is an absolute red line for this government and employers who cross it will get caught – not only are they forced to pay back every penny but they are also fined up to 200% of [the] wages owed.

Because, as Mr Griffiths knows very well, that is simply not true. Indeed, the naughty little minister manages to squeeze not one but two porky pies into his statement of just 46 words. Which is pretty impressive, even for a government minister.

Firstly – as noted on this blog a few weeks ago – not “every penny” of the £1,096,246 of arrears ‘identified’ by HMRC in this round of naming & shaming will end up in the pockets of the workers from whom it was thieved. Because we know that, each and every year, a significant – but unknown – proportion of the arrears ‘identified’ by HMRC are not paid back. And BEIS is seemingly so unbothered by this troublesome fact that it can’t even say how money much does reach the workers in question, or how many workers receive all the unpaid wages thieved from them by their short-changing employer.

Secondly – as also noted, somewhat tediously, on this blog – the worst offenders, in terms of total arrears owed and workers underpaid, are not fined for some or even most of the wages owed. Because much of the arrears ‘identified’ by HMRC enforcement are in fact identified not by HMRC but by employers themselves, under a self-correction mechanism quietly introduced by BEIS and HMRC in 2015. And, not only are those employers not named and shamed by BEIS for those self-corrected arrears, but no financial penalties are imposed in respect those self-corrected arrears. Which means the employers in question have enjoyed an interest-free loan equal to those arrears, which they may or may not repay in full. And a lot of pennies saved is a lot of pennies earned.

So, in January, Mr Griffiths confirmed – in his Answer to a Parliamentary Question by Caroline Lucas MP – that, of the 1,049 employers named by BEIS in the August 2016, February 2017, August 2017 and December 2017 naming rounds, for collectively owing £5.2 million to 47,336 workers, 169 were instructed by HMRC to self-correct additional arrears, for which they were not named, totaling £4.1 million and owed to 71,766 workers. And, far from the 169 employers being ‘fined up to 200%’ of those self-corrected arrears, no financial penalties at all were imposed in relation to that £4.1 million. Which is a fuck of a lot of pennies saved. Or earned. Up to 820 million pennies, in fact.

Furthermore, in recent weeks, a series of Parliamentary Questions tabled by Jo Swinson MP have revealed that:

In short, the 169 self-correcting employers include the very worst offenders.

All of which somewhat undermines the transparency and credibility of the naming & shaming scheme. Not to mention the credibility of Mr Griffiths.

Anyway, I know some of you like a graph. So, here’s a relevant graph.


Posted in Workers' rights | Tagged , , | Leave a comment

ET claims: the new normal

So, with today’s publication by the Ministry of Injustice of the latest set of quarterly tribunal statistics, giving us five full months’ worth of ET claim/case statistics since the Supreme Court did the High Court’s job for it and ruled ET fees unlawful, we now know that just under 3,000 new cases per month is the new normal. In other words – as countless law firms will no doubt be informing their employer clients in highly excitable emails today – the new normal is just about 100% higher than the old normal.

Which looks and sounds pretty dire. Stop hiring, employers!!! Those new employees will only take you to the Tribunal.

Except that, the new normal is only 100% higher than the old normal because, thanks to ET fees, the old normal was a pretty small number. That’s the way statistics work. As we can see from the following chart, a 100% increase in a pretty small number does not compensate for a 65% fall from a much bigger number. (I know you’ll be struggling to follow this, if you’re a High Court or Court of Appeal judge, but … well, just book yourself on a training course).

Yes, the number of ET cases is up 100% since July 2017. But it is still quite a bit lower than it would be, had ET fees and mandatory Acas early conciliation not been introduced in July 2013 and May 2014 respectively. And most of the difference is explained by the (positive) impact of that Acas early conciliation. It will be interesting to see if this remains the case over the coming months.

So, let’s not get too over excited (I’m looking at you, Peninsula Business Services). On average, even after that 100% increase, each of the UK’s 1.3 million employers now faces an ET claim just once every 37 years. But then the UK’s managers are a bit rubbish.

And maybe what we should be concentrating on is the inability of the much denuded ET system to cope with a sudden 100% increase in the number of cases. Because, let’s face it, Tory ministers are more likely to reach for a new fees regime than they are to green light an increase in judicial and administrative resources.

Posted in Justice, Workers' rights | Tagged , , , | 1 Comment

Cochlear implants: as told by Wonky Junior

Today is international #CochlearImplantDay. If you’ve not heard of cochlear implants, they are an amazing technology that enables an increasing number of profoundly deaf children and adults to ‘hear’ sound, and so learn to communicate primarily by speech (often supplemented by lip-reading and, in some cases, use of sign language). The technology and medical science involved is really quite extraordinary.

My son Sam, now 18, has been a cochlear implant user since he was two, having been left profoundly deaf by severe pneumococcal meningitis in infancy. And, along with other families, we have been asked to use today to demonstrate the difference that cochlear implants have made to Sam’s life. So, over the last few weekends, Sam and I have had a chat about it. And here is a summary of what Sam said, with some photos from the last 16 years of Sam’s cochlear-implanted life.

Sam says that the best thing about having cochlear implants (and so being able to use his admittedly less than perfect speech as his primary means of communication) is that he can enjoy interacting with pretty much anyone he meets (well, as long as they speak English, and are not Jacob Rees-Mogg, David Davis or Nigel Farage). Sam is a fluent user of sign language (BSL), but that’s not much help if the person he’s trying to talk to does not sign. And only 0.02 of the UK population do sign. So this, for example, is Sam with a (non-signing) pirate he befriended in Turkey in 2013.

And this is Sam with five-times Olympic champion (Sir) Steve Redgrave, with whom Sam had a nice little chat after we bumped into him at Henley regatta in 2010. As you do. Steve had recently fractured his wrist (and cheekbone) while trying to cycle 3,000 miles across the USA for charity. So, Steve and Sam swapped hospital stories. As you do.

The next best thing about having cochlear implants, says Sam, is being able to enjoy music. Which in turn means dancing. Like his Dad, Sam has become something of a dance floor legend, with his move-perfect performance of all three minutes and 40 seconds of PSY’s Gangnam Style in particular attracting huge crowds of admirers. This is Sam throwing some shapes at Alton Towers (me and The Specials came later).

And this is Sam about to enjoy Katy B and Duran Duran with his sister Neisha and (hearing) mates Lucy and Kate, at the Common People festival in Oxford, in 2016.

Another thing that Sam says he likes about having implants is ‘hearing the roar of the crowd’ at sporting events. So, for example, Sam loves laughing at all the Harlequins fans moaning about how useless the Harlequins players are as we watch them lose, again.

And here is Sam enjoying the roar and the love of the crowd as he approaches the finishing line in the British 10K in 2016. (Yes, that’s me behind Sam, trying to grab some of that love myself, before I succumb to heart failure. That year, we crossed the line together. Last year, Sam beat me by five minutes. This year … well, I’m just gonna train harder.)

On 15 July this year, Sam’s younger sister Neisha will be joining us as we run the 10K to raise money for the Cochlear Implanted Children’s Support Group (CICS), from which we have received so much support and guidance over the years. And we would be delighted if you could sponsor us by visiting our fundraising page.

No doubt Sam would be having a great life without access to sound, as a user of sign language only – he has some great friends who communicate primarily by sign. But Sam and I are deeply grateful to the NHS – and all the brilliant surgeons, doctors, audiologists, speech & language therapists, and teachers of the deaf along the way – for giving Sam the opportunity to enjoy the world in ways that would otherwise not have been available to him. So, we are definitely going to celebrate #CochlearImplantDay. With a beer, maybe. Probably.


Posted in Disability | Tagged , , , | 1 Comment

Honey, I shrunk the NMW arrears

As noted previously [Shurely ‘tediously’? Ed] on this blog, Tory ministers have not been slow to crow about their apparent success in fortifying HMRC’s enforcement of the national minimum wage (NMW) in recent years. In April 2016, the then business minister, Nick Boles MP, boasted to the House of Commons that

“we are enforcing the national minimum wage more robustly than any previous Government and will be enforcing it more robustly every year. In 2015-16, Her Majesty’s Revenue and Customs identified more than £10 million of arrears for more than 58,000 workers across the economy—three times the arrears identified in 2014-15 and for twice as many workers. I am delighted to be able to share with hon. Members that we will increase the HMRC enforcement budget to £20 million in 2016-17, which is up from £13 million in 2015-16 and from only £8 million in the last year of the Labour Government.”

And, in December last year, when announcing the latest round of naming & shaming of employers found by HMRC to have breached the NMW, then business minister Margot James stated:

“There is no excuse for not paying staff the wages they’re entitled to and the government will come down hard on businesses that break the rules. That’s why today we are naming hundreds of employers who have been short changing their workers; and to ensure there are consequences for their wallets as well as their reputation, we’ve levied [sic] millions in back pay and fines. Since 2013, the [naming & shaming] scheme has identified [sic] £8 million in back pay for 58,000 workers, with 1,500 employers fined a total of £5 million. This year the government will spend a record £25.3 million on minimum wage enforcement.”

However, there is increasing evidence that “levied millions in back pay” and “identified £8 million in back pay for 58,000 workers” does not mean that those 58,000 workers have actually received the £8 million owed to them by their thieving employers. Indeed, the evidence suggests that a significant proportion of that £8 million has never reached the pockets of the workers in question.

In late November, the report by Nick Clark and Eva Herman of Middlesex University Business School, Unpaid Britain: wage default in the British labour market, highlighted the case of security firm TSS Ltd, which in February 2016 was named & shamed by BEIS for owing no less than £1.742 million to 2,519 workers – still the largest sum of arrears owed by any of the 1,539 employers named & shamed to date, and representing 22% of that £8 million boasted of by Margot James. By examining the firm’s annual accounts lodged with Companies House, Nick and Eva found that, in the 2014 and 2105 accounts, the firm had made provision for £1.736m of “payroll liabilities”.

However, in the 2016 accounts, the firm had written off £1,039,292 of that £1.736m, on the basis that, due to the length of time since the workers in question have left the company, “management do not believe that these amounts remain payable”. In short, it would appear that at least 60% of the £1.742m for which TSS was named & shamed by BEIS in 2016 never reached the pockets of the workers from whom it was unlawfully withheld, and has instead continued to line the pockets of TSS Ltd’s directors and shareholders. And, if that is the case, then at least 12.5% of the £8m boasted of by Margot James has never reached the pockets of the workers from whom it was thieved.

This rather disturbing finding prompted a written Parliamentary Question to BEIS by Caroline Lucas MP, asking “how much of the £1.74 million of minimum wage arrears owed by TSS Security Ltd and identified in the BEIS press release of 5 February 2016 has been paid to the workers in question”. To which the Answer (on 11 January 2018) was: “HMRC do not divulge information relating to an individual or company for reasons of confidentiality”. Which is a little odd, given that, in February 2016, BEIS and HMRC were happy if not delighted to divulge that TSS Ltd owed £1.742m of NMW arrears to 2,519 workers. Perhaps, as David Davis might say, that was then, this is now.

However, the Treasury’s Answer of 11 January went on to state: “Where arrears are identified HMRC complete assurance checks to ensure employers have repaid the arrears owed to workers. If employers do not repay arrears to workers HMRC will pursue civil recovery of arrears through the courts.” Which begged the questions: how many employers HMRC initiated civil action against in pursuit of unpaid minimum wage arrears in each year since 2010; and what is the total sum of unpaid minimum wage arrears recovered through such civil action?

Cue further Parliamentary Questions by Caroline Lucas MP, and we learnt last week that, since 2010, HMRC has initiated civil court action for non-payment of identified NMW arrears against no fewer than 532 employers. However, HMR is unable to say how much was recovered in total by this legal action, or – somewhat incredibly – even how many of the 532 civil court claims resulted in the recovery of unpaid NMW arrears. Perhaps the National Audit Office should ask, next time they are in HMRC.

To put that figure of 532 in context, it is equivalent to one in three of the 1,539 employers that BEIS has named & shamed since 2013, and represents one in 12 of all 6,351 employers that HMRC has found to have breached the NMW since 2010. In 2015/16, HMRC initiated civil court action for unpaid arrears against 108 – one in nine – of the 958 employers that it had found to owe NMW arrears to workers.

Which perhaps explains why BEIS press releases and submissions to the Low Pay Commission always refer only to the sum of NMW arrears “identified” by HMRC enforcement, never to the sum of arrears actually recovered for the workers in question.

I can imagine ministers and senior officials feeling rather smug at having got away with this sleight of hand for so long. But maybe they should instead be thinking about whether they need to be doing more to ensure that the ‘levying of millions in back pay’ actually does have consequences for the wallets of the law-breaking employers in question.

Source: Table 4 of NLW and NMW: Government evidence to the Low Pay Commission, BEIS, July 2017; and Minimum Wage: Arrears, Answer to Written Question 122436, House of Commons, 19 January 2018.
Posted in Workers' rights | Tagged , | 2 Comments

Mind the (Gender Pay) Gap

While I don’t suppose it will protect me from accusations of ‘mansplaining’, I am going to preface this blog with two pre-emptive statements. Firstly, I am wholly committed to eliminating sex discrimination in the workplace, unequal pay, and the gender pay gap. And I have devoted a fair bit of my working life to that end, not least by making the case for public policy that facilitates and supports more shared parenting and eldercare, and that ensures effective access to justice via the employment tribunal system for workers subjected to discrimination or other unlawful treatment at work.

Secondly, I burn no candle for the ‘lifestyle’ retailer Oliver Bonas. I do shop there fairly often, mostly to buy jewellery as gifts for female friends and lovers*. So yeah, I like some of their stuff. But until last week I knew little more about the company than the location of two or three of its stores.

However, I am one of those doomsayers who have long expressed doubts as to whether the particular gender pay gap reporting regime which came into force in April 2017 – under which organisations with 250 or more employees have to publish gender pay gap data by 4 April this year (or 30 March this year for public sector employers), and annually thereafter – will do much if anything to change employer behaviour in a way that will reduce the overall gender pay gap (GPG).

This is partly because, as I noted in 2014, when policy wonking for Working Families, “discriminatory pay by employers is just one of several factors behind the gender pay gap, and is quite possibly one of the least influential, overall (which is no consolation if you are one of the all too many women subject to such discrimination).” Occupational segregation, and the substantial impact on women’s earnings of taking time out of the labour market to have and care for children, are arguably more influential factors. But it’s also because, as employment lawyer and blogger Darren Newman noted earlier this month, the Tory/Liberal Democrat Coalition-devised GPG reporting regime:

“requires absolutely no meaningful transparency about who gets paid what or how employers reward employees.  Instead we get some very selective statistics, shorn of all context and telling us next to nothing of any use.

And that is assuming that the figures being reported are even accurate. The Financial Times has done some really good work picking apart some of the more suspiciously improbable entries on the Government website. Just wait until there are more than 9,000 entries – how on earth will you be able to tell whose figures are accurate and whose aren’t?”

Given our doubts about the value of the data required by what we regard as a deeply flawed GPG reporting regime, some of us doomsayers have also worried aloud about the scope for misuse and misrepresentation of that data. Because, of course, unlike unequal pay, having a gender pay gap is not unlawful. And for good reason: at the level of an individual employer, as opposed to the economy as a whole, the existence of a gender pay gap is not necessarily sinister or indicative of poor practice, let alone of unequal pay.

So, much like President Jed Bartlet, I was shocked but not surprised when, the weekend before last, the Labour MP and tireless campaigner for gender equality, Jess Phillips – of whom I happen to be a big fan – used Twitter to call on women to boycott the retail chain Oliver Bonas, simply because of the company’s mean GPG of 9.6%, and median GPG of 1.4%, as listed on the Government’s gender pay gap reporting database and reported by the media.












Oliver Bonas’s mean GPG figure of 9.6% is in fact somewhat lower than both the national average (a mean GPG of 18.1% for all employees) and those of more than half of the 630 employers who have submitted the required gender pay report to date. As noted in the BBC report pictured by Jess in her tweet, for example, the Co-Operative Bank has reported a mean GPG of 30.3%, and a median GPG of 22.6%, but as far as I can tell Jess hasn’t called on women to switch to another bank.

Indeed, among the 630 employers, there are 132 with a mean GPG of more than 20%, and 38 with a mean GPG of more than 30% – including Virgin Money, the Office for Nuclear Regulation, and Price Waterhouse Cooper (PwC), one of the eight employers held up as examples of good practice on publishing gender pay information in the Government’s July 2015 consultation that led to the new regime.

And, if Jess thinks women should be “voting with their feet” in respect of a 9.6% mean GPG, then presumably women should also be avoiding the Home Office (10.1%), the Crown Prosecution Service (10.6%), Cambridgeshire Police (10.9%), the RNIB (11.8%), West Yorkshire Fire & Rescue Services (12.0%), John Lewis (13.9%), the National Gallery (14.4%), and the Health & Safety Executive (22.9%).

But in any case it is really not clear to me how boycotting a Living Wage employer with a workforce that is 83.6% female (and a part-time workforce that is 90.9% female) is supposed to benefit women, especially those who wish to work part-time in order to balance work with childcare and/or eldercare.

Nor is it entirely clear to me what Jess and others, including the former Coalition minister Jo Swinson, expect senior managers at Oliver Bonas to do that they aren’t already doing (or trying to do) – on Twitter, Jo said the company has “more to do, obviously” and that “obeying equal pay law is not sufficient”. That’s quite a statement. As the company notes in the gender pay gap report published on its website, it’s senior leadership team is 76% female, and

“As a lifestyle retailer, we predominantly attract female applicants resulting in our part time employee population being 90.9% female. [One] contributing factor to our [GPG] is that 72.3% of our Website Fulfilment and Warehouse teams are males who work full-time. We have worked hard over the last few years to encourage more male managers and team members to join our business.

Similarly, we have worked to increase the number of females working in our Warehouse and Web Fulfilment teams and continue to make good progress in these areas. We are planning on continuing to focus on creating a workforce across all areas of our business for 2018.”

In the circumstances, it seems harsh if not grossly unfair to pick on – and call for a consumer boycott of – a company that, given the nature of its business and customer base, seems to be working reasonably hard to avoid having an arguably near-inevitable gender pay gap. As Maya Forstater, visiting fellow at the Centre for Global Development, noted in response to Jess’s call for women to boycott the retailer Phase Eight, along with Oliver Bonas, Phase Eight is a “boutique-style women’s fashion retailer with high customer service – few staff in each store, bringing alternative sizes into changing room, giving opinion on outfits etc. – how many men want the job?” And there is absolutely nothing in the gender pay gap data to suggest that there is any unequal pay at Oliver Bonas (or, on the face of it, at Phase Eight, but I am resisting commenting on that company as I have not delved into their data or GPG report).

More to the point, perhaps, how – or why – does Jo Swinson, the driving force behind the new GPG reporting regime (and of whom I am a massive fan), conclude that Oliver Bonas has “more to do, obviously [sic]”? The clear implication of this statement is that any significant deviation from a mean GPG of 0% is somehow ‘wrong’, and that corrective action must be taken until that deviation is eliminated.

But does that also apply to the 90 organisations that have reported a negative mean GPG (i.e. in favour of their female employees)? Does the Equality & Human Rights Commission, which reports a mean GPG of minus 7.5%, have more to do? Or is that not so obvious? And what about the 50 organisations that report a mean GPG of between -1.0% and 1.0%? Do we give them all a gold star? Because among them I count at least four social care providers, and four cleaning companies. Oh, and the UK armed forces.

In short, transparency is all well and good, but not if it generates misinformed or groundless criticism of employers (and lets ‘bad’ employers off the hook). Because that can only lead to perverse incentives and a real risk of counter-productive outcomes in the years ahead. As Darren Newman noted in his tweeted response to Jess’s boycott call, “if a council contracts out its cleaners to Capita, its [gender] pay gap will fall”. And a private sector business unfairly threatened with a consumer boycott might well be tempted to do the same with a predominantly female/part-time/relatively low paid section of its workforce.

By the same token, ostensibly good gender pay gap figures don’t necessarily mean that all is fine and dandy in that organisation when it comes to gender diversity. A few days after Jess’s call for women to boycott Oliver Bonas and Phase Eight, prime minister Theresa May’s shambolic reshuffle of cabinet and other ministers was the subject of much critical analysis, with headlines such as “May’s reshuffle shows diversity and equality are not priorities” (Financial Times) and “Was Theresa May’s reshuffle really good for women?” (Stylist).

Yet, according to my number crunching – in line with the Government’s guidance to employers on how to calculate their GPG figures, and using the ministerial salaries published by the Government – following the recent reshuffle the Government as a whole (i.e. all 121 cabinet, middle-ranking and junior ministers, in both the Commons and the Lords) has a mean GPG of 5.0%, and a median GPG of 0%.

Furthermore, that 5.0% figure is slightly inflated by the fact that ministers in the Lords receive a lower total salary than their counterparts in the Commons, as their higher ministerial salaries do not fully compensate for them not receiving an MP’s salary of £76,011 (Lords ministers are not entitled to claim Lords Attendance Allowance). Among the 96 ministers who are an MP, there is a mean GPG of 4.9%, and a median GPG of 0%.

And, if we exclude the unpaid government post of Second Church Estates Commissioner (held by Dame Caroline Spelman MP), the mean GPG among Commons ministers falls to a fairly ‘impressive’ 4.0% (relative to, say, Oliver Bonas). Of the 630 organisations in the Government’s GPG reporting database, 447 have a mean GPG greater than 4.0% (and let’s not forget that many of those with a lower or even negative mean GPG only do so because they employ very few women).

Similarly, among the 22 full cabinet ministers (i.e. excluding the six middle-ranking ministers who attend the Cabinet), there is a mean GPG of 4.0%, and a median GPG of 0%. And, if we exclude Baroness Evans, the leader of the Lords (and the only Lords minister in the Cabinet), there is a mean GPG of minus 1.1% (that is, in favour of the women), and a median GPG of 0%.

But does this mean Theresa May has cracked gender diversity among the ranks of government ministers? No, it doesn’t. Of the 121 ministers, 82 (68%) are male, and just 39 are female. And, of the 96 ministers in the Commons, 66 (69%) are male, and 30 are female. Only six (27%) of the 22 full cabinet ministers are female.

To my mind, the new GPG reporting regime hasn’t got off to a terribly great start. And I fear things can only get worse.

* Sadly, there are in fact no female lovers. I made that bit up.

Posted in Equality, Workers' rights | Tagged , , | Leave a comment

NMW enforcement: 500% of nothing is still nothing

On 28 December, as I was travelling to Wet Wales for New Year, Sarah O’Connor of the Financial Times – surely the best employment correspondent of recent years, who has now moved on to a wider investigative brief – reported the view that Sir David Metcalf, the Director of Labour Market Enforcement, has been expressing publicly for some time now: that the financial penalties imposed on employers for breaching the national minimum wage should be substantially higher.

“There’s a trade-off here, in that if you’ve got plenty of resources [to inspect employers] you don’t need high penalties, and if you haven’t got the resources then you’ve got to have a stronger penalty [as a deterrent],” said Sir David. “My own view is we’re low on both.”

As the Low Pay Commission notes in its September 2017 report, Non-compliance and enforcement of the National Minimum Wage, the financial penalties “are a key part of the enforcement scheme, making sure that underpaying employers are suitably rebuked, and acting as a deterrent to other employers”. And, since 2010, the penalties have been increased several times.

The current penalty rate is 200% of the total arrears owed to workers, up to a maximum of £20,000 per worker, but that rate only applies to underpayments made since 1 April 2016. For underpayments made between 7 March 2014 and 1 April 2016, the penalty rate is 100%, and for underpayments made prior to 7 March 2014 it is 50%. And the total penalty is then reduced by 50% for prompt payment (within 14 days).

Sir David told the Financial Times that, while he would call for more resources for the enforcement bodies in his forthcoming enforcement strategy, especially for the Employment Agencies Standards Inspectorate (EASI), he believes minister are unlikely to want to “pump vastly more money” into the enforcement regime as a whole. As a result, the financial penalties need to be higher.

“That’s the point about the trade off: If you have not got the resources then you need heavier penalties. For the life of me, I can’t see that double the wage arrears, given the probability of inspection is once in 500 years, is anywhere near enough”, Sir David said. “Five times” the wage arrears might be a better figure, he suggested.

And this was followed by a statement by Sarah that “the total amount of [financial penalties] in 2016-17 was £3.9m, much less than the £10.9m of wage arrears that were identified by HMRC.”

However, there is one simple reason for that glaring discrepancy, not noted by either Sir David or Sarah: no penalties at all were imposed in relation to £6.0m (55%) of the £10.9m. Because, as noted repeatedly [Shurely ‘boringly’? Ed] on this blog, that £6.0m was in fact identified by employers, not HMRC, under the self-correction mechanism quietly introduced by HMRC in 2015 – and self-corrected arrears attract no penalty. In other words, penalties were only imposed in relation to £4.9m of the £10.9m. And the total amount of penalties was £3.9m, rather than £4.9m or even £9.8m, because most of the underpayments were made prior to 1 April 2016, so attracted a penalty rate of 100%, or even just 50%, rather than the current rate of 200%.

In the case of Argos, for example, we know from press reports in February 2017 that the arrears for which the company was named & shamed by BEIS in August relate to underpayments that “date back to 2014”, when the penalty rate was 100% (or just 50%, for underpayments made before 7 March that year). Those February 2017 press reports further noted that financial penalties of “nearly £1.5m” had been imposed on Argos (reduced to “£800,000” because the company “paid up within 14 days”), and in August the company was named & shamed for having underpaid 12,176 workers a total of £1.46m.

Interestingly – to this wonk, at least – those February 2017 press reports also stated that Argos was having to pay a total of £2.4m of minimum wage arrears, not £1.46m, to “more than 37,000 current and former shop workers”, made up of “12,000 current employees and more than 25,000 former staff”. In other words, it looks as if Argos was found by HMRC to owe £1.46m to £12,176 current workers, for which the company was named & shamed by BEIS and hit with £1.46m of financial penalties, but also self-corrected (or, at least, self-identified) a further £0.9m of arrears owed to some 25,000 former workers.

We don’t know for certain, because the self-correction mechanism is shrouded in secrecy and BEIS has repeatedly refused to identify any of the 169 employers that we know – from the Answers to four parliamentary questions tabled by Caroline Lucas MP in relation to the last four rounds of naming & shaming – self-corrected (or, at least, self-identified) arrears totalling some £4.1 million, owed to 71,766 workers.

As noted previously [I’ve warned you about this. Ed], most if not all of those 169 employers are relatively large employers. And, by definition, they are the worst offenders. But they are not paying the full penalty rate (whether that be 200%, 100%, or 50%) on all of the underpayments that they have made to their workers.

So, push for higher financial penalties if you want, Sir David. But please do consider also whether it is fair that the biggest, baddest baddies get to pay no penalties at all on a proportion of the underpayments they have made to their workers, and then get to further reduce the penalty by 50% simply by paying promptly.

In the meantime, here’s a nice photo of an Andy Goldsworthy-style pebble tower I made on a beach in Wet Wales.


Posted in Workers' rights | Tagged , , | Leave a comment

Minimum wage, minimum shame?

On 8 December, the Department for Business, Energy & Industrial Strategy (BEIS) named & shamed another 260 employers for non-compliance with the national minimum wage. Inevitably, press and media coverage of this round of naming & shaming – the 13th since the scheme was rebooted in 2013 – focused on the list being topped by the household-name retailers Primark and Sports Direct.

Primark had somehow managed to underpay 9,735 of its workers a total of almost £232,000 (an average of £24 per worker), but this sum was dwarfed by the combined total of £946,612 that Sports Direct and two employment agencies supplying workers to the controversial retailer’s Shirebrook warehouse had failed to pay to a combined total of 4,362 workers (an average of £217 per worker).

That combined total of £0.95m is the third largest sum of arrears owed by any of the 1,539 employers named & shamed by BEIS to date, and accounts for 54% of the £1.76 million collectively owed by the 260 employers named in this round. But it is still someway short of the £1.74m owed by the London-based security firm TSS Ltd, named & shamed by BEIS in February 2016 and featured as a case study of ‘wage theft’ in the recent Middlesex University Business School research report Unpaid Britain: Wage default in the British labour market.

Indeed, as in previous rounds, the great majority of the 260 appear to be small fry: all but 13 owed less than £10,000 of arrears, 225 (86%) owed less than £5,000, and 137 (53%) owed less than £1,000. Only 36 had underpaid ten or more workers, 199 (76%) had underpaid fewer than five workers, and 120 (46%) had underpaid only one worker. Of the 40 hairdressing businesses, 32 owed less than £2,000, and 26 had underpaid only one or two workers. Similarly, of the 58 hospitality businesses, 43 owed less than £2,000, and 37 had underpaid only one or two workers.

To put this round of naming & shaming in context, the Low Pay Commission noted, in its September 2017 report Non-compliance and enforcement of the National Minimum Wage, that 784 (61 per cent) of the 1,279 employers named & shamed by BEIS as of August 2017 had underpaid just one worker. Only six of the 1,279 employers had underpaid more than 1,000 workers.

However, as with the three previous rounds of naming & shaming – in August 2017, February 2017 and August 2016 – what the BEIS press release failed to say is that 39 of the 260 employers also paid further arrears totalling £1,011,190 to 21,495 workers, under the so-called self-correction mechanism quietly introduced by BEIS/HMRC in 2015. Once again, this information was only elicited by a written Parliamentary Question by Caroline Lucas MP (aka my boss).

That £1.01 million is almost twice the £0.58 million of arrears owed by the 256 named & shamed employers other than Primark, Sports Direct and the two employment agencies supplying workers to Sports Direct. And it’s more than six times the £0.15 million collectively owed by the 120 employers who had underpaid only one worker. But no financial penalties have been levied on that £1.01 million of arrears, and none of the 39 have been named & shamed for their share of it. Indeed, the identity of the 39 remains a secret.

In the last four rounds of naming & shaming, a total of 1,049 employers were named by BEIS for collectively owing some £5.2 million to 47,336 workers. And, according to the Answers given to the parliamentary questions tabled by Caroline Lucas, 169 (16%) of those 1,049 employers paid additional, self-correction arrears (for which they were not named & shamed) totalling some £4.1 million, to 71,766 workers. Which suggests that those who paid self-correction arrears include the very worst offenders.

As noted previously on this blog, such self-correction arrears now account for the bulk of the arrears recovered for workers, directly or indirectly, by HMRC enforcement of the minimum wage. But is it fair that the very worst offenders are thus able to minimise both their ‘shame’ and the sum of penalties imposed? Do the public not deserve to know the full extent of an employer’s disregard of the law? And, given the scale of the non-compliance involved, why are none of the self-correcting employers facing criminal charges?

To date, ministers have got away without having to provide answers to these questions. But with each new round of naming & shaming, the pressure to provide answers – and to review the naming & shaming scheme – is going to grow. For, as the Low Pay Commission noted in its September 2017 report on enforcement, the naming & shaming scheme is “helping to raise the profile of enforcement activity and awareness of workers’ rights”.

Perhaps it would do so even more if the public, and employers, were told the full truth.

Posted in Workers' rights | Tagged , , , , | 1 Comment