The UK government’s policy of ‘naming and shaming’ organisations that break minimum wage rules may be an effective deterrent against non-compliance, however, tougher financial penalties are required if further incentives for underpayment are to be minimised, Employee Benefits reports.
These are the findings of the Resolution Foundation think-tank, it discovered that smaller firms are more likely to lose out because of the effect on their organisations’ reputations of naming and shaming. By contrast, some larger companies - including Primark, Tesco and Boohoo - have seen little impact on share prices or sales following exposure on the government website for breaching minimum wage rules.
The Resolution Foundation’s No shame, no gain? report suggested policymakers should reinforce and raise the profile of HMRC’s existing programme of exposing the firms that break the rules; the think-tank found that only one in five firms had heard of the policy.
According to the Resolution Foundation, more rigorous enforcement is needed to increase the opportunity for non-compliant organisations to be exposed. Though bigger firms hit the headlines when they are named, smaller ones are more likely to be non-compliant, with the think-tank reportedly finding that minimum wage workers in micro-businesses are 37 per cent more likely to be underpaid than those in the largest businesses.
Tougher financial penalties should also be brought in, it added. The report estimated that a firm underpaying the minimum wage would currently need to be fined around 700 per cent of its arrears to effectively counteract the savings it makes. This is more than three times the current maximum HMRC penalty of 200 per cent of arrears.
Resolution Foundation economist Hannah Slaughter said, “Reputation matters for businesses, and the government should raise the profile of its welcome work to name and shame those breaking minimum wage rules.
“However, naming dodgy firms only works when they are caught in the first place, so more widespread enforcement is needed. And fines are currently too low so there is little economic incentive for rule-breaking employers to change their ways.
“As well as raising the profile of the ‘naming and shaming’ regime, the government must introduce tougher financial penalties and more widespread enforcement to ensure that rule-breaking firms are caught and deterred.”
Earlier in the year HMRC’s most recent round of “naming and shaming” saw 191 organisations exposed for breaching minimum wage rules, including major employers such as John Lewis, McColl’s and The Body Shop.
Organisations found to be breaking minimum wage rules are fined and made to pay back what they owe to workers at current minimum wage rates.
Source: Employee Benefits
(Quotes via original reporting)
The UK government’s policy of ‘naming and shaming’ organisations that break minimum wage rules may be an effective deterrent against non-compliance, however, tougher financial penalties are required if further incentives for underpayment are to be minimised, Employee Benefits reports.
These are the findings of the Resolution Foundation think-tank, it discovered that smaller firms are more likely to lose out because of the effect on their organisations’ reputations of naming and shaming. By contrast, some larger companies - including Primark, Tesco and Boohoo - have seen little impact on share prices or sales following exposure on the government website for breaching minimum wage rules.
The Resolution Foundation’s No shame, no gain? report suggested policymakers should reinforce and raise the profile of HMRC’s existing programme of exposing the firms that break the rules; the think-tank found that only one in five firms had heard of the policy.
According to the Resolution Foundation, more rigorous enforcement is needed to increase the opportunity for non-compliant organisations to be exposed. Though bigger firms hit the headlines when they are named, smaller ones are more likely to be non-compliant, with the think-tank reportedly finding that minimum wage workers in micro-businesses are 37 per cent more likely to be underpaid than those in the largest businesses.
Tougher financial penalties should also be brought in, it added. The report estimated that a firm underpaying the minimum wage would currently need to be fined around 700 per cent of its arrears to effectively counteract the savings it makes. This is more than three times the current maximum HMRC penalty of 200 per cent of arrears.
Resolution Foundation economist Hannah Slaughter said, “Reputation matters for businesses, and the government should raise the profile of its welcome work to name and shame those breaking minimum wage rules.
“However, naming dodgy firms only works when they are caught in the first place, so more widespread enforcement is needed. And fines are currently too low so there is little economic incentive for rule-breaking employers to change their ways.
“As well as raising the profile of the ‘naming and shaming’ regime, the government must introduce tougher financial penalties and more widespread enforcement to ensure that rule-breaking firms are caught and deterred.”
Earlier in the year HMRC’s most recent round of “naming and shaming” saw 191 organisations exposed for breaching minimum wage rules, including major employers such as John Lewis, McColl’s and The Body Shop.
Organisations found to be breaking minimum wage rules are fined and made to pay back what they owe to workers at current minimum wage rates.
Source: Employee Benefits
(Quotes via original reporting)