HMRC has levied record fines of almost £2 million against 236 UK organisations that failed to pay their staff the National Living Wage and National Minimum Wage over the past year.

Totalling £1.97m, the fines have stemmed from the taxman’s latest round of naming and shaming firms that have not met those basic wage requirements [1] – an exercise that has also identified a record £1.44m in back pay for the workers concerned. HMRC identified five, main trigger factors for this year’s shortfalls, noting that organisations have:

  • taken deductions from wages for costs such as uniforms;
  • underpaid apprentices;
  • failed to pay travel time;
  • misused the accommodation offset, and
  • used the wrong time periods for calculating pay.

Now in its fifth year, the scheme has so far identified some £10.8m in back pay for around 90,000 workers, with more than 1,900 employers fined a total of £8.4m since its inception.

Business minister Andrew Griffiths said: “Our priority is making sure workers know their rights and are getting the pay they worked hard for. Employers who don’t do the right thing face fines as well as being hit with the bill for back pay.”

He added: “The UK’s lowest-paid workers have had the fastest wage growth in 20 years, thanks to the introduction of the National Living Wage, and today’s list serves as a reminder to all employers to check they are getting their workers’ pay right.”

Low Pay Commission Chairman Bryan Sanderson said: “It is crucial that employers understand their responsibilities and workers know their rights around the minimum wage. It is therefore encouraging to see that HMRC has recovered unpaid wages for the largest number of workers yet in this round of naming and shaming. I’m confident that the government will continue to pursue underpayment of the minimum wage vigorously.”

Given the huge scale of the fines and back pay, it is clearly in the interests of organisations to do better. So what does all this say about leadership within firms that are failing to hit the mark?

The Institute of Leadership & Management's head of research, policy and standards Kate Cooper says: “There are a few things going on here. Firstly, it’s entirely plausible that one factor behind this may be a low awareness of legislation. Some leaders may not be sufficiently clued up on minimum-wage laws in particular, or employment law in a more general sense. So we should accept that a level of genuine ignorance is contributing to this picture.

“But secondly, having said that, employers have a duty of care. It’s very much an ethical position – and aside from that level of genuine ignorance, we can infer that leaders are making cheese-paring decisions that are failing to value the people they are employing. If members of their family were employed under such stringent conditions of payment, would they think that it was fair? When we frame the issue in those personal terms, what we’re really talking about is empathy. Do leaders really appreciate the impact that being on the minimum wage – which has been determined not to be a living wage – has upon people’s ability to manage? What’s life like for those individuals?

“Thirdly, if that leads those leaders to form an argument along the lines of, ‘Well, we can’t afford to pay our staff any more than that,’ then we’re essentially in a Carillion situation: we’re pricing jobs unrealistically. If employers can’t afford to pay a reasonable rate for the services they’re providing, then there’s a flaw in their consideration of the Four Ps, which are Product, Price, Place and Promotion. [2] In the case of those leaders, the Price element of their strategy is simply wrong. Therefore, the business itself isn’t working.”

Cooper summarises: “So, there are two levels to this: the micro level, at which the impact upon the employee is severe, and the macro level, at which the business model is inherently flawed. Leaders must understand that any unreasonable decisions they come to while forming their business models carry a human cost.”

For further thoughts on integrity, check out these learning resources from the Institute

Source ref: [1] [2]

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