Unscrupulous employers across Britain are changing work contracts and slashing overtime, bonuses and staff perks for the lowest paid to mitigate the costs of the National Living Wage (NLW), which is introduced tomorrow (April 1).
Overtime and bonus cut
Large companies, including B&Q, Wilkos and Tesco, have already cut overtime payments and employee benefits, leaving many workers facing the prospect of being out of pocket despite the new £7.20 an hour minimum wage.
According to the managing director of ManpowerGroup Solutions, James Hick, who has been working closely with companies looking to pass the costs of the NLW onto their staff by reducing individuals’ overall take home pay, the “vast majority” of large employers want to change their wage structures.
Hicks told the Financial Times that employers are “levelling off” weekend overtime and other entitlements and inserting more flexible terms, such as “banked hours”, into staff contracts so that hours can be changed without the need to pay overtime.
A recent survey from XpertHR also found that 15 percent of businesses were axing bonuses and extra work to completely mitigate the costs of the NLW, while 11 percent of companies were slashing employee benefits to achieve the same thing.
The Low Pay Commission (LPC) have warned the government that employers may also start designating staff as apprentices or making them self-employed to dodge costs. If people are designated as apprentices they can legally be paid as little as £3.30 an hour, whilst the self employed lose out on a range of basic employment rights.
Pay floor gap
In addition, the LPC have raised concerns that workers aged between 21 and 24 will be paid 50p less an hour than those aged 25 and older with the introduction of the NLW tomorrow, causing “fairness, legal and employment relations risks”.
In an open letter to David Cameron and Business Secretary Sajid Javid, LPC chairman, David Norgrove, wrote: “We received considerable evidence highlighting the fairness, legal and employment relations risks of a lower minimum wage for workers aged between 21 and 24 than for workers aged 25 and over.
“A significant gap in the pay floor could lead to substitution of younger workers for older, and disadvantage those near the age boundary between rates.”
For those working in the care and hospitality sectors, exploitative yet legal practises that allow businesses to pay below the minimum wage – such as piece rates for hotel cleaners and unpaid travel time for social care workers – will continue despite the rise in the minimum wage.
Nor will the NLW benefit the more than 250,000 people estimated to be paid less than the minimum wage, many victims of illegal business practises. In fact, a recent Freedom of Information request by The Ferret media outlet revealed, since 2013 not one British company has been prosecuted for failing to pay the minimum wage.
Whilst welcoming an increase in the minimum hourly rate, Unite assistant general secretary, Steve Turner, condemned the widespread exploitation and unfair pay schemes the measures are being used to mask.
Proper living wage call
He said: “The average wage is still worth more than £2,000 less than it was before the recession. The lowest earners have had the biggest falls in living standards from government cuts to public services and benefits. And the sectors and occupations that dominate low pay are also the ones scarred by insecure, precarious work and the most exploitative practices, with zero and short hours contracts increasing.
“It is typical of this government that it introduces a measure to increase the national minimum wage further for some – not all – and then stands back and allows employers to drive overall earnings down, so people don’t receive what they thought they had been promised.”
Turner added: “And of course this happens at the same time as the government continues to push ahead with increasing the legal shackles on trade unions – the vehicles that empower people, including the lowest paid, to organise and stop their employers’ exploitative practices.”
Unite is calling for a proper “living wage” of £9.40 an hour in London and £8.25 an hour throughout the rest of Britain, as well an end to age differential wages, so that people’s incomes reflect the true cost of living in the UK.