Leicester and the Low Pay Commission

Today the Low Pay Commission (LPC) published a report on non-compliance and enforcement of the minimum wage in Leicester’s textiles manufacturers. The stated purpose of this 40 page report was “to understand what has changed in Leicester since the high watermark of scrutiny in 2020.” The Leicester Mercury (July 25) has already published a good summary of some of the serious concerns raised in the report quoting Bryan Sanderson, the chair of the LPC, as saying:

“The evidence we heard from workers in Leicester was striking. Despite some positive recent progress, job insecurity, a poisonous workplace culture and low expectations leave workers trapped in poor-quality jobs and vulnerable to exploitation. These same factors mean they are unlikely to report abuses, which undermines efforts to enforce workers’ rights.

“The case of Leicester is not unique. Across the UK, workers in precarious positions face the same obstacles, with the same consequences for enforcement. The problem demands comprehensive action, including to give these workers greater security over their hours and incomes.”

However, a point made in the Financial Times (July 25) that was not made in the Mercury article added that the report “also pointed to a clear disconnect between officials’ view that non-compliance in the sector was no worse than in others, when other credible, knowledgeable witnesses believed it to be ‘widespread and flagrant’.”

Here follows some of the standout quotes from the official report:

“Non-compliance – in any setting – is rarely as simple as an employer just paying an hourly rate below the minimum wage. Reporting into Leicester over the years, and our own conversations, have highlighted a range of abuses. The most common practice reported is underpayment of the minimum wage via misstatement of hours of work. Workers told us about situations where they are paid for a stated number of hours at the minimum wage, but in reality work longer than is officially recorded. This has the effect of reducing workers’ average hourly pay below the minimum wage. Hours above the stated number may be paid cash-in-hand, if at all. Some workers are made complicit because they claim benefits on the basis of their recorded hours, rather than their actual hours

“In an effort to control this practice, retailers and supply chain auditors increasingly insist on biometric machines for workers to clock in and clock out. We heard, however, that these too can be circumvented, for example via a second, hidden machine or a separate paper record. One auditor told us they had done two visits in recent months where they had identified additional clock card machines in another part of the building from the brand new biometric system.”

“Workers in Leicester explained their reluctance to report underpayment. At the heart of this are fear and low expectations. Workers are afraid of losing their hours and incomes, worried about moving jobs and often grateful just to have employment. There is a deep distrust of enforcement bodies and a lack of faith that complaining will make any difference, other than to put their livelihoods at risk. Workers question how they would prove underpayment when it’s just “your word against theirs” and talk of being “coached” by bosses in what to say if an enforcement officer speaks to them. Language and cultural barriers also play a role, as does uncertainty over where to make a report.”

“Recent years have seen a greater level of cooperation and dialogue between different actors. In part, this has come via the Apparel and General Merchandise Public Private Protocol (AGMPPP). This forum brings together retailers, unions, enforcement bodies and the local authority (but not manufacturers) to discuss and progress issues around non-compliance. Begun in 2019, the AGMPPP was given greater impetus by media attention in 2020 and the initiation of Operation Tacit, growing and taking on more brands, NGOs and trade unions. It continues to facilitate joint work on purchasing protocols, and has created a space for unions and brands to agree how they might work together, with measures including access to workers and a protocol for dealing with reports of non-compliance. The most tangible outcome of this work to date has been investment in a team of dedicated community workers offering advice and support to textiles workers, the Fashion Workers Advice Bureau Leicester (FAB-L). The work of this team offers hope for closer engagement with the local community, a long-running problem we discuss in the next chapter. We heard, however, that momentum behind the AGMPPP had slowed in recent months. And the absence of a voice from manufacturers themselves is a significant weakness.”

“We heard multiple accounts from workers of intimidation and harassment within workplaces. The workers we met were scared of directly complaining about working conditions to their supervisors: ‘no one complains; if they did, the boss would say “there’s the door, use it”’. One worker told us that supervisors openly compared how many garments people could produce or their quality and bullied those who could not work as well. Workers were singled out for verbal abuse in front of other staff to deliberately humiliate and shame them. Supervisors were often family members of factory owners and therefore acted with impunity. There was a culture of fear among workers, who assumed their boss would find out if they complained and they would be fired. One worker explained that, if enforcement bodies visited the factory, their boss would act on any suspicions about who had made the complaint and fire the person immediately. Another worker thought it was inevitable bosses would know who had made a call to the authorities, because any such call would probably have followed a bullying incident. We were told that ‘employers have instilled fear in their workers’.

“Workers felt grateful just to have work and were not confident they could find it elsewhere. We heard multiple accounts of workers being told their P45 could be withheld or ‘marked’ in such a way that they would never work again if they were thought to be causing trouble. Supply chain auditors with experience of collecting worker testimony told us ‘the fear of retribution is … very real among these workers, to the point where they will sit and shake in meetings or hold your hand as they’re talking to you’. One worker told us they had experienced factory owners and managers coaching workers on how to respond to questions from enforcement bodies.”

“We regularly hear complaints from employers in all low-paying sectors that HMRC focus on ‘technical’ breaches of rules rather than ‘serious’ non-compliance. This claim is hard to evaluate: the category of a ‘technical’ breach does not exist in the regulations; NMW rules, even technical ones, are generally in place to protect workers; and it is clear that HMRC have committed significant time and resource to serious breaches of the rules. In Leicester, independent auditors offered a variation of this criticism, arguing that HMRC, by looking for ‘technical’ rule breaches in factories they visited, were effectively missing the wood for the trees.

“The auditors feared HMRC inspectors missed obvious indicators of non-compliance – for example, when all workers were below National Insurance thresholds. One auditor told us that they had carried out around a dozen investigations in the past 18 months which had followed HMRC investigations. The auditor alleged that HMRC had identified small infringements, they had missed red flags suggesting more wide-reaching non-compliance; for example, seeing that only 3-4 per cent of workers on the pay roll were reaching PAYE or NI contributions, which the auditor viewed as sufficient to suggest working hours were being falsified. HMRC rejected this assertion, and told us they do take this information into account. In part, this may reflect a discrepancy between the different standards of proof required between audit processes and official enforcement.”

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