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Significant underpayments to apprentices as HMRC ‘names and shames’ errant employers

6 Jul 2018 By Emily Burt

Businesses fined record £1.97m for falling short on minimum wages, but experts call for more details on common errors

Underpayments to apprentices and unlawful deductions from wages were among the most common reasons given for employers failing to pay minimum wages, according to a newly released round-up from HMRC that ‘names and shames’ a large number of businesses across the UK. 

Almost 240 employers that underpaid the national living wage and national minimum wage were named by the government, with £1.44m in back pay identified covering more than 22,400 workers. A record £1.97m in fines was issued by HMRC for offences that in some cases dated back to 2011.

Speaking to People Management, CIPD head of reward and policy Charles Cotton said there were multiple reasons for employers falling short on minimum wage payments, including recent changes to the apprenticeships system brought about by the introduction of the apprenticeship levy.  

“With the government’s target of increasing the number of apprentices in the UK, this could become an area where people fall short on minimum wage payments. The question is why,” he said. 

“It could be down to employers failing to increase rates in the second year of the apprenticeship, because HR and payroll are failing to capture the new data, or another reason. In other instances, rules around workplace travel have also changed, so it could be that employers haven’t been keeping up to speed.” 

Beyond illegal deductions from wages for work costs such as uniforms, many of the named employers were also found to have failed to pay for travel time, misused the accommodation offset or used the wrong time periods when calculating pay. 

The single biggest underpayer named was retailer Card Factory, which failed to pay a total of £430,097.87 to more than 10,000 workers. Other notable names on the list included Odeon and UCI Cinemas Group – which failed to pay £4,438.92 to 237 workers – and Costa Coffee, which underpaid 41 workers by £3,116.85. 

Funding for minimum wage enforcement has more than doubled since 2015, with the government set to spend £26.3m on the measure in 2018-19. However, Cotton said HMRC could go further in keeping employers informed about common payroll mistakes. 

“It would be helpful to receive more feedback from HMRC alongside these lists, giving not only the top reasons for undercutting wages but outlining the common mistakes made by companies that have been fined, whether it’s not gathering enough data or failing to update their payrolls regularly,” he said. 

“Ignorance is no defence but, if people are not kept informed, the first they will hear of it is when they are fined by HMRC.” 

Bryan Sanderson, chairman of the Low Pay Commission, said it was “crucial” for employers to understand their responsibilities regarding the minimum wage, adding: “That is why active enforcement and effective communication from the government is so important.

“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.”

In a significant finding earlier this week, a director of recruitment company Euro Contracts Services was disqualified by the secretary of state for failing to pay 246 manual seasonal workers on British farms the national minimum wage between August 2010 and January 2011, equating to more than £110,000. 

TUC general secretary Frances O’Grady warned that instances of underpayment were continuing to happen “on an industrial scale”, saying: “We know that tens of thousands more workers are still being underpaid, so the government must keep the pressure on." 

Business minister Andrew Griffiths added that the government’s priority was making sure workers know their rights. “Employers that don’t do the right thing face fines as well as being hit with the bill for back pay,” he said. 

“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.”

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