Ensuring staff are paid correctly is a fundamental responsibility for any organisation. But it seems thousands of the lowest-earning workers are missing out on money they are owed as a result of employer error.
According to Government figures, shortfalls in national minimum wage payments hit a record £10.9m last year, affecting close to 100,000 employees.
The figure emerged in a response to a question posed to Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, following the publication of a report by the Joseph Rowntree Foundation in September last year on the causes of and solutions to poverty in the UK.
There are a number of potential reasons for wage under-payment of minimum wage:
– An unscrupulous employer trying to exploit staff;
– A lack of understanding of an organisation’s legal obligations;
– Uncertainty when an employee becomes eligible for a different rate of pay.
The issue doesn’t only affect small or medium businesses. Recently, unintentional underpayments in staff pay packets have affected major retailers too. At John Lewis, a staff-friendly policy of aggregated wages to provide regular monthly income resulted in the company having to provision £36m for underpayments over a six-year period.
Meanwhile, Argos and Tesco have made similar payroll mistakes. Tesco is having to compensate 14,000 staff – at a cost of £10m – who had made salary contributions to pensions, childcare and other schemes which resulted in their pay falling below the National Living Wage level.
According to a study by Middlesex University, British workers lose almost £3bn each year in unpaid wages and holiday, with recruitment agencies among those most likely to be wrongly paying staff.
The Government says it has introduced tougher penalties for non-compliance of national minimum wage. Underpayments occurring since April 2016 have been subject to a penalty of 200 per cent of the value of the arrears, capped at £20,000 per worker. Financial resources available for enforcement are also being increased – from £20m in 2016-17 to £25.3m in 2017-18.
The national minimum wage currently stands at £7.50 per hour for workers over 25.
How can our employment law lawyers help?
If you own or run a business, it’s vital you understand your legal responsibilities and obligations. Failure to do so could see you facing a severe punishment.
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