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No prosecutions for failure to pay minimum wage

There were no prosecutions for failure to pay the National Minimum Wage last year, The Ferret can reveal.

This means that not one single British company has been prosecuted for paying poverty wages since 2013.

In Scotland, there have been no prosecutions for non-payment of the minimum wage over the last five years.

With just weeks to go before the introduction of the UK government’s so-called ‘National Living Wage’, the failure to prosecute major companies paying below below minimum rates, means that the last successful prosecution for non-payment of the National Minimum Wage (NMW) anywhere in Britain was over three years ago, in London, in February 2013.

The failures to prosecute employers who do not pay the NMW were revealed in response to Freedom of Information requests sent to HMRC, the Crown Office , the Procurator Fiscal Service and the Department of Business, Innovation and Skills at Westminster.

Under current legislation employers can be fined up to £20,000 for each worker who is paid below the National Minimum Wage. Employers that break NMW law must also pay the unpaid wages.

There were 1.4 million minimum wage jobs in the UK in 2015, with over 5 per cent paid below or within 5p of the minimum wage, according to figures from the Low Pay Commission.

Between 2009/10 and 2013/14, 4,780 employers were identified as not complying with NMW legislation – yet only three were successfully prosecuted.

The number of inspections for compliance has also fallen, from 3,643 in 2009/10 to 1,455 completed inspections in 2013/14. 

The Ferret’s findings have prompted questions from trade unionists, tax experts and others about whether the UK government has the political will to tackle employers who are short-changing their workers.

Leading tax barrister Jolyon Maugham QC said: “If you were a government that was actually interested in delivering the minimum wage for the low-paid you would expect to see government focusing on some high profile prosecutions to keep everybody interested and to keep everybody honest.”

“Not only do we have substantially no prosecutions but we have very, very little positive action by government to secure that people are paid the minimum wage.”

“We have a failure to prosecute the wealthy, to prosecute employers for failing to meet their statutory obligations to pay the minimum wage. Once again you are driven to ask whether government is more interested in the rhetoric around supporting the low-paid than it is in delivering support for the low paid.”

On April 1, the ‘National Living Wage’ will be introduced, increasing the minimum wage for those over 25 to £7.20 from its current level of £6.70.

HMRC say they only use prosecutions when there’s been ‘deliberate non-compliance or obstructive behaviour’ and on a selective and exemplary basis.  The independent Low Pay Commission has said that they can also be resource intensive, though they contest that the number of prosecutions should be increased ‘for the most serious infringers.’

In England and Wales, the decision on whether to prosecute or not is made by the Crown Prosecution Service (CPS). In Scotland the minimum wage is a reserved issue. Here decisions about prosecution rest with the Crown Office and Procurator Fiscal Service (COPFS).

The STUC expressed concern that HMRC was not prosecuting serious cases of NMW non-payment.

“In March last year the Glasgow based G1 Group was “found to have withheld” wages amounting to £45,124.00 from 2895 workers. This amounted to nearly a third of the total underpayment of the minimum wage for the whole of the UK for the period covered by the HMRC report.

“What is a serious case for the HMRC if G1 Group were not prosecuted?” Ian Tasker assistant secretary of the STUC said.

G1 Group is run by Glasgow-based businessman Stefan King who operates more than 45 venues across Scotland and is reputed to be worth more than £50million. An investigation by HMRC found some staff at G1 premises had to pay for uniforms and/or training, bringing their wages below minimum rates.

The company was subsequently publicly ‘named and shamed’ alongside a number of others who failed to pay minimum wage and issued a statement that its policy had changed.

Different Approaches

Tasker believes that the focus on ‘naming and shaming’ offenders is too limited and that HMRC use its prosecution powers.

“There appears to be different approaches being taken by prosecutors for employers who steal from employees and workers who steal form employers and this is a result of a poor enforcement and prosecution policy, this is from the policy published last year and perhaps indicates why there have been no prosecution.

“The focus is on voluntary compliance, with the worst sanction an employer can face is being named and shamed.

Tax Barrister Jolyon Maugham agreed. “Typically it is a hairdresser in Arbroath and a nail bar in Peckham . There is not really any testing by HMRC of what looks to many legal experts as underpayment of the minimum wage by agencies, for example.”

David Cameron has promised strict enforcement of the new National Minimum Wage when it comes into force next month, including a new HMRC unit to spot offending employers.

At least £5 million of public money is being spent on a public campaign advertising the higher national minimum wage – at a time of continuing cuts to HMRC.

“It is a rhetorical exercise in trumpeting a political achievement without actually any attempt to ensure that the underlying reality matches up,” said Maugham.

Last November, it was announced that 137 local HMRC offices would close as part of plans to save £100m in costs.

Failure to pay the minimum wage particularly affects migrant workers in hospitality, agriculture and social care, said Don Flynn, director of Migrants’ Rights Network.

“There are any number of employers who employ people on a cash in hand daily basis and settle with sums that work out at less than the NMW rate.

“Probably even more common are people who are employed on a piece rate basis on a contract where it is theoretically possible to turn in a volume of work that would hit the NMW level but who are not in fact able to do so.

“A good example is hotel maids who might be required to clean 12 room a day to get a NMW level wage, but who often can’t manage more than 9 or 10.’

A spokesperson for HMRC said: “We always investigate businesses where we believe the National Minimum Wage (NMW) is not being paid. We act on information from a range of sources, including workers, third parties or from our own proactive intelligence work.”

“HMRC will look at every complaint made by a worker through the ACAS Helpline. From April to November 2015, we acted against 557 businesses, clawing back over £8 million for 46,000 workers who had been illegally underpaid.

“If anyone is concerned that they are not receiving the minimum wage, they can contact ACAS, in confidence, on 0300 123 1100. Cases can be dealt with anonymously, with no risk of employees being identified.”

The Crown Office and Procurator Fiscal Service said ‘COPFS are only able to consider taking court proceedings in relation to reports we receive…there have been no charges of this type reported to COPFS in the last five years.’

G1 Group declined to comment.

On Wednesday, March 2 Fair Work, Skills and Training Secretary Roseanna Cunningham is due to meet bosses from Amazon, in Edinburgh, to discuss pay at the multinational’s Scottish sites.

In December, an investigation by The Ferret found that Amazon received almost £1m in Scottish Government grants while some staff were paid just above the minimum wage and had to pay their own bus fares and work 60 hour weeks in the run-up to Christmas.

In detail

The Crown Prosecution Service response

The Crown Office and Procurator Fiscal Service response.

The Department of Business, Innovation and Skills response.

Photo credits: Pound coins | CC | William Warby

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