Spotlight on holiday entitlement and NMW breaches

New research published on Monday has found that:

• Around 1 in 20 workers do not receive their legal holiday entitlement
• Almost 1 in 10 workers do not receive a (now legally required) payslip
• Last year 200,000 workers were not paid the national minimum wage (NMW)

Not the usual suspects?

This means that a significant proportion of the UK’s workforce are not receiving their basic workplace rights. However, what is interesting from the research is that it seems that the usual suspects – the big players in the gig economy – are not to blame.

The workers most likely to miss out on legal holiday entitlement and payslips are those in the hotel and restaurant sectors as well as small firms (less than 25 staff). The research also found that almost half of those receiving no holiday entitlement were on zero hours contracts.

Although clearly, with such high numbers, many organisations are intentionally looking to avoid their legal obligations to their workforce, in my experience a significant proportion of the breaches are likely to be down to businesses just getting things wrong – because these issues can be complicated and they don’t have enough time, resources or awareness of legal developments.  

For example, working out holiday entitlement for people on zero hours contracts is complicated (even for lawyers!) and this is a common problem for businesses in sectors that legitimately utilise zero hours contracts, such as food, hospitality, cleaning, health and social care.

In addition, it can be very difficult to know if someone is in fact a ‘worker’ or ‘employee’ and therefore entitled to holiday (see the evolving case law on employment/worker status for evidence of this).

The NMW can also have its difficulties, for example well intentioned salary sacrifice schemes that benefit workers but can take their pay below the NMW (retailer Iceland is currently facing a £21M bill for such a scheme).

Focus on enforcement

Whilst these issues can be a complicated and time consuming for businesses, ultimately it is more costly and disruptive to the business to get them wrong.

Firstly, there are severe consequences for breaches. Workers can claim for unpaid holiday pay going back up to 2 years, whilst breaches of the NMW can include criminal convictions and public naming and shaming by the government, as well as paying arrears of pay and fines of up to £20,000 per underpaid worker.

Second, it is increasingly likely that action will be taken when breaches do occur. Workplace rights are a common topic in the media, which is spreading awareness. Tribunal claims against organisations have seen a huge increase since fees were scrapped (100,000 claims issued last year), and the government has proposals to introduce a single body to enforce labour market rights.

In 13 years of advising businesses, I’ve yet to work with one that wants to deliberately deprive its workforce of their rights. I believe that most businesses want to give their staff their full legal entitlements. I think that this research can be used as a timely nudge to check that this is in fact the case.