Looking for unpaid wages, finding Delinquent Employers

July 2016, Nick Clark

Sometimes, when a researcher asks for comments on a piece of work, they are really asking for validation. I’m not saying I was when I proposed a typology for unpaid wages to a workshop that Unpaid Britain organised in May. But if I had been, I would have been disappointed.

We brought together a pretty expert group of practitioners and academics. Then we asked them to try and categorise real life cases of unpaid wages by whether or not they were deliberate, and whether workers might have given some form of consent. The response could be summarised as “yes, very interesting, but you can’t make it work”. Instead, we were directed back to the specifics of employers’ strategies in different economic sectors. And if this did not endorse my proposed typology, it certainly validated the use of the participative workshop.

The research team have spent the intervening months considering how this might be achieved. The result is a method for identifying the sectors most likely to exhibit non-payment. To do this, we had to confront the lack of data specifically measuring non-payment. Key Informant interviews, workshop participants, our Project Advisory Group, and our examination of Employment Tribunal judgements all suggested that unpaid wages may present in several forms simultaneously, as well as being accompanied by other abuses of workers’ rights.

So, using two sets of official statistics we have tried to find data which might indicate the abuse of workers’ rights. From the Labour Force Survey (LFS) we chose reported unpaid overtime, which may reflect a general level of pressure in the workplace, but also breaches of at least some workers’ contractual entitlements. We also selected reporting of zero hours contracts (ZHCs). While these are not automatically unlawful, by not committing the employer to provide a certain minimum level of payment per pay period they blur other entitlements such as that to holiday pay, and the variability of hours renders under-recording (and therefore underpaying) of hours more feasible. The LFS may undercount this – overall, only 1.8% of those in employment reported having a ZHC, but this ranged from 0% in mining support services, up to 9.2% in security and investigation activities. Finally we looked at paid holidays – about 5% of respondents in employment report that they have no entitlement to paid holidays, and this is not evenly distributed across sectors (it goes from 0% in manufacture of electrical equipment up to 18.4% in sports, amusements and recreation). We can be certain that workers not receiving any paid holidays have had their rights breached.

A second survey, the Family Resources Survey (FRS), includes two sets of data which could be indicative of abusive practices. One relates to the provision of payslips, which is a legal requirement under the 1996 Employment Rights Act. 8% report that their employer does not provide a payslip, ranging from 0% in extraction of crude petroleum and natural gas up to 21.3% in domestic households. The other is self-employment. Operating on the assumption that work falsely classified as self-employment by employers wishing to reduce labour costs (as opposed to genuine self-employment) is likely to be low paid, the FRS permits the identification of the extent of low-paid self-employment by sector, indicating the likely presence of “bogus” self-employment.

These five indicators can shed some light onto the variety of practices which might be deployed to separate the worker from what they have rightfully earned. What they cannot do is give us a definite count of abuse, so we opted for a series of inter- sectoral comparisons, allowing us to identify those sectors most likely to display forms of abuse, and therefore the non-payment of wages.

Excluding sectors with too few cases, we scored each sector from 1-10 for each factor, with 10 representing the most abusive. Then we added them together to arrive at an overall “Index of Employer Delinquency”. The top (or perhaps bottom) ten for London[1] are shown below.

Top Sectors in London Index of Employer Delinquency

1 Creative, arts and entertainment activities

2 Food and beverage service activities

3 Other personal service activities

4 Sports activities and amusement and recreation activities

5 Libraries, archives, museums and other cultural activities

6 Other professional, scientific and technical activities

7 Education

8 Advertising and market research

9 Repair of computers and personal and household goods

10 Security and investigation activities

In one sense the overall outcome is probably unsurprising for those who are familiar with employment practices in Britain today. The Index shows service sectors predominating amongst those showing the highest tendency to abuse employment rights.

Pride of place, if that term can be applied in this context went to “Creative, arts and entertainment activities”, where substantial low paid self-employment exists alongside frequent failure to provide paid holidays (these two categories are unlikely to occur in the same individual cases, since the holiday question is posed only to those identifying themselves as employees).

Next, and perhaps most significantly in numerical terms, is “Food and beverage service activities” – restaurants, cafes and bars in other words. Here we see the use of ZHCs assume greater significance than low paid self-employment. Then we have “other personal services” (such as hairdressing and nail salon) and another cultural area – sports and entertainments, followed closely by museums and libraries, which has been the scene of several long-running industrial disputes over attacks on conditions and cuts in services (for example at the National Gallery and Barnet libraries).

The case studies for our next phase of research will be selected from this list, and we will be looking for a balance between large and small employers, and for types of worker (by gender, migration status and age). Suggestions are always welcome.

A more detailed description of and justification for our index can be found on the full paper here: Unpaid Britain project – developing a selection grid for case studies.

[1] Agriculture and mining and quarrying, which both score relatively highly in national data are not significant in the London labour market, and have been left off the list for the purposes of this project.