One in 10 employees do not receive a payslip

Around one in 20 workers report not receiving any holiday entitlement, and almost 10% do not receive a payslip, according to the Resolution Foundation

The think tank, which is about to begin a three-year study of labour market enforcement, is calling on the government to adopt a more strategic approach to enforcing employment rules. HMRC identified a record 200,000 cases of workers not receiving the national minimum wage last year. 

At least a quarter of those earning within 5p of the minimum wage are paid less than the legal minimum, Resolution Foundation research found. The preliminary research also showed around one in 20 workers report receive no paid holiday entitlement, despite being legally entitled to at least 28 days a year (pro-rated accordingly for part-time workers), while almost one in 10 workers do not receive a legally required payslip, making it hard for them to calculate whether they are receiving the right level of pay, pension and holiday entitlement and check for PAYE deductions.

The analysis shows that the likelihood of a worker being subject to labour market violations is closely connected to their personal characteristics, their type of employment contract, the firm they work for, and the industry they work in.

Workers aged under 25 and over 65 are the most likely not to receive a payslip. Around one in six workers aged 65 plus report they have no paid holiday entitlement, more than any other age group, while workers aged 25 and under are almost twice as likely to be underpaid the minimum wage as any other age group.

'Despite repeated warnings, and numerous high-profile examples, it would appear that many employers are still struggling to come to terms with the complex rules around national minimum wage (NMW) and holiday pay,' said Peninsula associate director of advisory Kate Palmer.

'There can often be a failure from employers to understand exactly when an individual who changes between each boundary, eg, a 20 year old who turns 21, will be entitled to an enhanced rate of pay. Employers should always ensure that changes to minimum pay rates are implemented accordingly. These efforts will be significant in avoiding HMRC’s NMW naming and shaming list, which could have a detrimental impact on an employer’s reputation.'

Workers in the hotel and restaurants sector are the most likely to miss out on minimum legal workplace entitlements. Around one in seven workers in the sector report receiving no holiday entitlement, three times the rate across the rest of the economy, while around one in seven do not receive a pay slip (a rate 50% higher than the rest of the labour market).

The analysis also found that workers in small businesses (employing fewer than 25 employees) are most likely to miss out on payslips and holiday leave, as are workers on zero-hours and temporary contracts.

'The rules around holiday entitlement and pay can be challenging to interpret for smaller businesses too, especially when it comes to staff who work irregular hours. However, employers must work to issue staff with the correct holiday entitlement and pay regardless of their size, as tribunals have shown little compassion to small employers in cases such as this,' Palmer added.

'Payslips are a fundamental aspect of the working relationship that employers must fulfil correctly. Although initially only available to employees, since 6 April 2019 the right to receive a payslip has been extended to include all workers, including zero hours’, casual and agency workers. Failing to provide payslips will leave employers open to claims of unnotified deductions, which could result in a compensation payment up to the aggregate amount of any lawful deductions made during the 13 weeks immediately prior to the tribunal application.'

Enforcement action

The think tank argues that while the UK largely relies on individuals to hold non-compliant firms to account via employment tribunals, enforcement will remain weak. Those workers who are most likely to require redress are the least likely to engage with the tribunal system, it said. 

Young people are disproportionately likely to be subject to unlawful working practises, but make far fewer applications than any other age group. In contrast, managers are the least likely to be subject to labour market violations but are among the most likely to make tribunal claims.

Lindsay Judge, senior economic analyst at the Resolution Foundation, said:  ‘The government’s proposal to create a new single enforcement agency should leave it better placed to tackle these labour market violations than the multiple bodies currently operating, as long as it’s properly empowered and resourced.

‘Our analysis suggests that while violations take place across the labour market, the government should also prioritise investigations into sectors like hotels and restaurants, along with firms who make large use of atypical employment contracts, as that’s where abuse is most prevalent.’

Resolution Foundation study, From Rights to Reality

Pat Sweet

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