Researchers have found that bosses are cheating British workers out of at least £1.5 billion a year in holiday pay to which they are legally entitled.
One in 20 workers report not being given statutory holiday pay, while one in 12 workers do not receive a payslip as required by law.
And a further £1.2 billion of wages owed for hours worked are unpaid each year, according to a research group at Middlesex University business school in their report Unpaid Britain.
Employers failing to pay basic wages are a widespread problem, but the weakness of enforcement means they can generally do so with impunity.
“We’ve focused on the so-called gig economy and zero-hours contracts, but the much more pervasive practices of employers who simply pocket workers’ wages have continued largely unremarked,” Nick Clark, lead researcher, said.
The researchers used statistics from sources including employment tribunals, the Insolvency Service, the Labour Force Survey, the Acas conciliation service, and data from Citizens Advice to estimate the scale of deliberately unpaid work in the UK. They also calculated an “index of employer delinquency” to identify the sectors where workers’ wages were most likely not to be paid in full. The worst five were: recreation and amusement activities; food and drink service; personal services such as hairdressing, nail bars, and dry cleaning; temporary agency working; and the hotel trade.
The Unpaid Britain group suggested that two types of cheating were prevalent. Where workers have variable hours and no payslips, employers are able to make a significant financial gain by cheating them a little and often, and it is hard for workers to keep track of hours worked or to prove what they are owed.
A separate pattern involved bosses deferring pay on the grounds that their business was struggling and then repeatedly going into administration before workers had been paid. The researchers found many phoenix businesses being wound up with debts owed to workers and HM Revenue and Customs, but then reappearing with the same or related directors and premises under a different name.
Citizens Advice experienced a doubling of cases of “wages theft” between 2014 and 2017, with about 9,000 workers asking for help in recovering deliberately unpaid wages, and 75,000 having problems with pay and entitlements in the last year.
The right to paid holiday in the UK – now 28 days a year for full time workers – was introduced as part of the European working time directive. For those with variable hours it is the equivalent of 12.07% of their average pay, but workers are often not made aware they are entitled to it or are only paid it if they challenge employers. There is no penalty on employers for failing to pay.
The report also highlighted the barriers, such as tribunal and court fees, cuts in legal aid, and protection offered to employers by limited liability, that all too often prevent workers recovering unpaid wages.
The number of individual workers taking employers to a tribunal has fallen by 67% since the government introduced fees in 2013. Even when workers win at a tribunal, they may still have to pay the costs of court enforcement orders and bailiffs where employers fail to pay up.