The blame game: employers named and shamed for failing to pay National Minimum Wage
After a brief intermission over the past two years, the government has named and shamed 139 companies who have been fined for breaching National Minimum Wage (NMW) rules. This is the first naming and shaming of companies since 2018 following reforms to the process by BEIS to ensure only the ‘worst offenders were targeted’ (1). You can find out more about this here.
As the government outlines in their press release, upholding workers rights is of course a key priority. Whilst the majority of companies do uphold the rules, the naming and shaming process is intended to send a message to all employers that the government will intervene to ensure workers are paid properly (1). Along with being named and shamed, offending companies also face penalties for breaching the rules up to 200% of the arrears, capped at £10,000 per worker (2).
The latest list of named and shamed companies are accountable for failing to pay £6.7 million to over 95,000 workers and include businesses of all sizes from SMEs to large multinationals and household names (1).
Of course, Business Minister, Paul Scully, is correct that ‘It is never acceptable for any employer to short-change their workers, but it is especially disappointing to see huge household names who absolutely should know better on this list’ (2).
But are they all to blame? Yes, we all believe in fairness and justice where it’s due, particularly for flagrant abuse of the rules, but the rules can be confusing. Following changes to the NMW regulations in April 2020, salary sacrifice breaches aren’t now penalised or published subject to certain conditions, but are still unlawful, and in any event may well be a reason for inclusion in this list as these are the 2016-2018 offences. And that’s part of the problem, there is no context to the list – is it a flagrant failure to pay the correct hourly rate or down to HMRC’s forensic desire to try to find non-compliance at every turn? For example, HMRC asserts that it’s unlawful for an employee to agree to a deduction from net pay, such as to a Christmas savings club, on the basis that this is ‘for the benefit of the employer’ and therefore breaches regulation 12 – even if the funds are ring fenced (3).
Equally, both ministers and the media have been quick to blame ‘household names’, making sweeping references to Pizza Hut, Tesco and Superdrug etc. As these are the 2016-2108 offences and can be considered over a 6 year prior period some of these issues took place up to 10 years ago, such as Superdrug’s uniform policy, Tesco’s record keeping failure or occurred within a franchise set up like Pizza Hut. Moreover, when Tesco realised the error they took a ‘proactive, transparent and cooperative approach’, self-reporting the problem to HMRC and quickly reimbursing employees – with the original loss of earnings being £10 or below for workers in the majority of cases (2). Superdrug have also stated how they responded to the matter by ‘swiftly reimbursing those involved’ and quickly changing the problematic policy (2). It’s therefore wrong to tarnish all on the list with the same brush through the use of pejorative headlines such as ‘rogue employers’. This may suit those in charge of government communications who feel it sends out a strong message about compliance, but surely that should not be at the expense of the reputation of those who have self-reported? doesn’t it mitigate against others acting quickly to remedy an unwitting error?
Despite three years worth of reforms, perhaps it would have been more effective to establish clear, practical rules in the first place by consulting those who actually have to enforce them. At the time of the new regulations being introduced last April, virtually no discussions took place with key external stakeholders (3). And as I said in a previous blog post, why shouldn’t low-paid workers be able to access salary sacrifice schemes and deductions from net pay that are on offer to more highly paid employees? If they have been coerced into agreeing to either of these reductions or deductions, that’s where the regulations should step in to remedy this and when their employers should be named and shamed (3).