ourEconomy: Investigation

How Britain’s online retailers are profiting from wage theft

Warehouse workers have been described as our 'forgotten key workers'. But many are routinely paid less than they are contractually owed.

Victoria Noble
30 September 2020, 6.49pm
Fabio De Paola/PA Wire/PA Images

While many workers have been furloughed during the pandemic, warehouse staff have been working harder than ever. Demand for online shopping has led to ever-expanding warehouse operations, with Amazon recently announcing that it is increasing its UK workforce by a third with 10,000 new warehouse employees. But a growth in demand hasn’t been reflected in improved working conditions.

Rowan Chalmers worked as a warehouse operative for fashion retailer Pretty Little Thing. He was employed and paid by the agency PMP Recruitment.

Pretty Little Thing is owned by the Boohoo Group and known for its celebrity partnerships with Kourtney Kardashian and girl band Little Mix. But behind the scenes, Chalmers had not been paid – he was owed for two shifts and holiday pay. He informed management at the warehouse and the agency but nothing was done. To make things worse, his temporary contract came to an end.

“They cancelled my contract and took my money as well,” he told openDemocracy. “It was around Christmas time and I had bills to come out and I was relying on that money to pay for things, so it left me in debt.”

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“For some people that work there that’s the income to look after their families, pay their bills. They don’t even give you notice, they say: ‘That’s it, no more work for you.’ They don’t care.”

Chalmers eventually took his claim to an employment tribunal.

“PMP didn’t turn up to court - they didn’t even acknowledge [the case],” he said.

Chalmers won his claim for unlawful deduction of wages. The judge ordered the agency to pay up but, a year later, Chalmers is still waiting for his money.

“I think it’s disgusting. They’re ‘professionals’,” he said. “I did the hours, the time, the shifts and I didn’t get paid for it. There were also other people in the same position.”

This is the third time that Chalmers says he has not been paid by an agency while doing warehouse and factory work. He is currently unemployed.

“Agencies just see employees as disposable,” he said. “You should just pay up and be honest.”

Agencies employ nearly 10% of workers in the warehouse and storage sector. PMP Recruitment supplies workers for some of the biggest warehouses in the country, including Asos and Amazon. Chalmers’ story of missing wages isn’t unique – its Facebook page is full of complaints from workers who say they are owed money.

Screenshot 2020-09-30 at 19.32.10.png

A spokesperson from PMP Recruitment said: “We have no record of receiving a complaint from Mr Chalmers or any correspondence from the Employment Tribunal in relation to his claims for non-payment of wages and holiday pay. Following this coming to our attention, we will certainly be investigating the matter further.”

“In 2019, PMP Recruitment paid over 1.5 million workers and we demand the highest standards from our teams to ensure we pay our workers right first time every time, however, there will be times when payroll queries and errors do occur, which we seek to resolve in the next available pay period.”

Pretty Little Thing was contacted but declined to comment.

£3 billion in missing wages

A report by Unpaid Britain found that at least two million workers are losing £3 billion to wage theft each year.

Nick Clark, research fellow at Middlesex University and principal investigator on Unpaid Britain, defines it as “a failure to pay a worker all that they are contractually owed for the labour power or the time that they have provided to an employer”.

Wage theft comes in different forms and is not always easy for an employee to spot. It could be unpaid wages or failure to pay holiday, as with Rowan Chalmers. Sometimes workers are charged for uniforms or necessary equipment. Workers may not be paid for necessary travel between appointments. It can even involve planned methods by employers to avoid paying wages, such as dissolving a company that owes money and then starting up a new one.

These tactics can dramatically boost profits.

“If you’ve got a large workforce, if you only steal 20 minutes a day from every worker, over a year it adds up to a substantial amount of money,” said Clark. “You don’t have to steal a huge amount off a few people, you’re stealing a small amount off thousands on a regular basis. That’s where the millions are made.”

“Sometimes it’s not conscious, but sometimes I think it’s quite deliberate and results from company policy,” he added.

Unlike failure to pay minimum wage, which is regulated by HMRC, wage theft can be difficult to tackle because the methods vary and the employment tribunal system is struggling to cope.

Employees can claim ‘unlawful deductions from wages’ at tribunal but there are huge delays in cases being heard. The average tribunal case takes 20 months to complete. A backlog of cases from lockdown is likely to dramatically worsen waiting times.

Even if an employee wins a case, enforcing that judgment is incredibly difficult. Like Chalmers, workers don’t receive a penny in a third of successful claims, because employers ignore the judge’s ruling and avoid paying up.

Part of the reason why this is so easy is because company directors have no personal liability if their limited company loses the case. In certain instances the government can prosecute but HMRC hasn’t prosecuted any cases for minimum wage underpayment in the last three years.

“The number of times that people are actually prosecuted is miniscule,” said Clark. “Even if they were [prosecuted], of course it still wouldn’t get the worker their wage.”

Warehouse wage theft

The warehouse sector is overrun with examples of wage theft. Sports Direct workers received £1 million in back pay after it was found that many workers received less than the hourly minimum rate, due to unpaid time queuing for security checks and deductions for lateness and missed targets. B&Q was forced to withdraw job adverts for its Swindon warehouse which asked applicants to attend unpaid training and pay for a drugs test. Only last month, employment experts suggested that Sports Direct may be breaching minimum wage again because workers are unable to leave the warehouse during unpaid breaks, meaning they might not count as breaks at all.

Tony Clare is deputy divisional officer of Usdaw union, which represents workers at Boohoo, Pretty Little Thing’s parent company, and JD Sports. He views many warehouses’ approach to wages as “a culture of getting away with as little as you can.”

This attitude has been caused by the growth of online discount retailers which produce disposable products close to cost price. They offer cheaper products by cutting costs in distribution, including wages.

“All the companies that we’re looking at – JD Sports, Boohoo, Sports Direct – they’ve grown massively in the last 10, 15 years, and they’ve cultivated a business model of low wages, bare minimum terms and conditions and harsh working conditions,” Clare said.

He explained that this new hollowed-out business model has meant that more established, unionised companies often follow suit to compete. Government research found that workers transferring from ‘traditional’ warehouses to newer establishments saw their pay cut by up to half.

The country’s biggest warehouses are located in areas of high unemployment and low wages, such as Amazon’s facility in Dunfermline and Asos’ warehouse in Grimethorpe. Furthermore, 25% of staff are non-UK EU nationals. This means that workers don’t have alternative employment opportunities and often have low awareness of their rights.

“The fundamental problem is that these are very successful, highly profitable companies but their success and profitability is not reflected to the staff in good jobs that keep people at a decent standard of living,” said Clare. “I think we need to have a different business model that doesn’t rely on, frankly, exploitation.”

Clare calls warehouse workers “the forgotten key workers”, forced to work in “crowded and busy” environments during the pandemic without thought given to their employment rights and health.

“As the coronavirus pandemic has illustrated, people surviving on that basic subsistence income are vulnerable. They’re vulnerable economically, their health is vulnerable, their mental health is vulnerable,” he said.

What’s clear is that the pandemic will provide opportunity for employers to exploit these workers even more.

“I think the recession that’s coming as a result of Covid is going to strengthen the imbalance of power against the employees,” said Nick Clark. “That’s simply going to encourage the unscrupulous employer.”

“More unpaid work, less security. Wage theft will probably get worse.”

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