Study warns of ‘desperate need’ to better protect employees; findings could be ‘the tip of the iceberg’, says researcher

British workers lose almost £3bn each year in unpaid wages and holiday, research has revealed, with recruitment agencies among those most likely to be wrongly paying staff.

The interim report from Middlesex University, which was published earlier this week, identified 23,000 occasions where workers were not paid £2.7bn they were entitled to by their employers. This comprised £1.2bn in wages and £1.5bn in unpaid holiday, and included incidences where the underpayments were so severe employees were unable to afford necessities such as food.

Industries found to be most likely to incorrectly pay their staff were sports activities, amusement and recreation, food and beverage services, and recruitment agencies. London-based arts, entertainment and construction businesses also performed poorly. 

Middlesex University researcher Nick Clark warned the figures could be just “the tip of the iceberg”.

“There is a desperate need for improved workers’ protection and better guidance on their rights and how these can be enforced,” Clark said. “With an uncertain Brexit around the corner there has never been a more important time to safeguard, protect and enhance workers’ rights.” 

The study also found that one in 12 workers were not receiving payslips, and one in 20 received no paid holidays whatsoever – both of which breach the UK’s employment laws.

The research highlights the need for the government to run a high-profile ‘know your rights’ campaign, said Charles Cotton, performance and reward adviser at the CIPD. He added, however, that employers “should be proactive” in paying employees the correct wages by “continually reviewing their pay systems to ensure that they are not just fully compliant with UK law on employment rights, but that they are putting their people first, and ensuring they are protected and feel valued in the organisation”.

“While this is the right thing to do, it will also help retain valuable talent in what is an uncertain labour market,” Cotton added.

Conor D’Arcy, policy analyst at the Resolution Foundation, a think tank, said: “The scale of illegal underpayment of wages is a big living standards concern, particularly as it is concentrated on the bottom end of the labour market. Our employment regime must be updated to fit with the modern world of work and those rules need to be properly enforced.”

Other studies have suggested British workers’ wages are becoming increasingly squeezed. The latest Labour Market Outlook survey from the CIPD and The Adecco Group, published last month, discovered  employers are expecting wages to rise by just 1 per cent in the year ahead – the lowest pay growth expectations have been for three-and-a-half years.

Meanwhile, speakers at an event hosted by the Resolution Foundation earlier this week warned real wages could soon hit their ‘lowest point’ in two centuries. Rising inflation, Brexit negotiations and the fallout from the general election were blamed for contributing to an unprecedented squeeze on the nation’s pay packets. 

And, according to a study by employment lending platform Neyber released last month, almost half (48 per cent) of workers are borrowing money to meet their day-to-day financial needs.

The Unpaid Britain project, which the interim report is part of, was established at Middlesex University Business School in September 2015 and is co-funded by the Trust For London. The final report, based off the researcher’s interim findings, is due to be published in November.

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