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Only six UK employers prosecuted for paying below minimum wage in six years

Exclusive: ‘Pathetic’ prosecution rate criticised, amid new findings government gave many firms furlough cash despite ‘naming and shaming’ them over minimum wage

Peter Geoghegan Jenna Corderoy
Adam Bychawski Peter Geoghegan Jenna Corderoy
28 July 2021, 9.05am
Just six employers prosecuted for underpaying employees, despite more than 6,500 violations
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John Flemming / Alamy Stock Photo

Just six employers have been prosecuted for paying employees less than the minimum wage in the past six years, despite tax authorities finding more than 6,500 violations.

An openDemocracy investigation also found that dozens of firms that were “named and shamed” by the UK government last year for failing to pay the minimum wage also collected millions in furlough payments.

Pizza Hut, Superdrug and Costco, as well as 136 other companies, were named as ‘rogue employers’ in the government’s most recent list, published in December 2020.

Many of these firms were able to claim millions in furlough payments through the government’s pandemic support scheme. This includes 58 companies that claimed furlough within two months of being ‘named and shamed’.

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Pizza Hut claimed up to £5m under the job retention scheme in December and January, having been publicly criticised for failing to pay some 11,000 workers almost £850,000.

Superdrug, which claimed up to £3m in furlough, underpaid 2,222 workers £15,000 between 2012 and 2017. Food wholesaler Costco claimed £500,000 and failed to pay almost £4,000 to 58 workers over the same period.

The five-star Manchester Lowry Hotel, which claimed up to £500,000 over the two months, was named and shamed for underpaying 99 workers £63,000 between 2011 and 2017. Workers in the hospitality industry and care sector are the most likely to be paid less than the minimum wage.

In total, more than a million workers were cheated out of £100m in wages by their employers between April 2015 and March 2021, according to figures from HM Revenue and Customs (HMRC).

In failing to prosecute employers, the government has given the green light to these despicable practices

But HMRC said that only six firms were prosecuted for failing to pay the minimum wage in that period, following a Freedom of Information request from openDemocracy.

HMRC also said that the low number of prosecutions reflected a focus on taking civil action rather than using the courts to tackle businesses that do not pay the legal minimum wage.

But critics have accused the government of giving rogue employers ‘a green light’ to underpay staff.

“The National Minimum Wage and laws preventing the exploitation of workers aren’t worth the paper they are written on if they’re not effectively enforced,” Andy McDonald, Labour’s shadow employment rights and protections secretary, told openDemocracy.

“In failing to prosecute employers for paying less than the minimum wage, the government has given the green light to these despicable practices,” he added.

openDemocracy’s findings come amid growing concerns about insecure work, particularly in the wake of the pandemic. On Tuesday, Labour said that it would give all workers the same benefits and rights from day one of their jobs, regardless of their employment status, if it wins the next general election.

One of the UK’s largest unions warned that the “pathetic” number of prosecutions for underpaying workers would encourage employers to break the law.

“The government’s do-nothing approach and the failure to prosecute companies guilty of such practices is effectively a green light to unscrupulous employers to continue to exploit workers by underpaying them,” said ​​Unite assistant general secretary Gail Cartmail.

I worked with people who moved into sex work and drug dealing because they didn't have enough money

Jolyon Maugham QC, a barrister and founder of Good Law Project, said failure to pay the minimum wage is “a long-running scandal”. He added: “Government departments think it’s fine for them to ignore Parliament’s will that exploitation of workers be punished with criminal sanction.

“The winners are, of course, the very worst employers who escape meaningful sanction for ripping off the most vulnerable.”

Dave Pike, who worked for Pizza Hut as a delivery driver and kitchen assistant for ten years, said that the company’s violations forced its employees to make “really difficult life choices”.

“I worked with people who moved into sex work and drug dealing, specifically because they didn't have enough money at the end of the month,” said Pike, who organised to form the Pizza Hut Workers Union.

Pike said he felt patronised by directors at Pizza Hut after raising poor conditions at the company: “When the CEO of delivery came to meet with us and try to smooth things over he assumed we were a bunch of students. He told us, ‘I used to have a poster of Che Guevara on my wall’ and said we should go for a beer sometime.”

Pike said that the government’s belief that ‘naming and shaming’ employers would combat wage theft was “fantasy”. “All it does is highlight all the places in which they've failed to do their job,” he added.

A representative for Pizza Hut said its failure to pay minimum wage was due to “a historic uniform policy”. They added: “There was never any intent to underpay our employees, we are advocates of the principles that underpin minimum wage and we are confident that the necessary processes have been fixed to ensure that this will not happen again.”

More than a million workers were cheated out of £100m in wages between April 2015 and March 2021

While HMRC can issue fines of up to 200% of what is owed to employees for minimum wage violations, openDemocracy found that, between 2015 and 2020, the average fine was just under 50% of wage arrears.

Some companies caught breaking the law have been allowed to repay arrears without any penalties, and any fines issued can be halved if they are repaid early.

Only 13% of companies paying less than the minimum wage are caught by HMRC, according to research by the Resolution Foundation (RF). Using government data, RF estimated there were at least 11,000 firms underpaying their workers in 2018-19. The tax authority identified only 1,456 of those employers.

The number of workers paid less than the minimum wage has risen more than fivefold to two million last year, according to figures from the Office for National Statistics. However, HMRC was able to return unpaid wages to only 155,000 workers.

The Office for National Statistics told The Guardian the figures did not necessarily confirm a sharp rise in violations, because of a minimum wage rise in April at the time of its survey and “many employees were furloughed and a pay rise was not reasonable”. The national living wage for over-23s went up to £8.91 an hour, while the levels for younger adults also increased.

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