Press release

Employers underpaying workers risk losing 80% of their business

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Employers must pay their workers correctly or risk serious damage to their reputation and staff productivity, research reveals.

  • 8 out of 10 people “would not use the services of a business if they found it paid less than National Minimum Wage”, while 90% called those employers a “disgrace”
  • businesses that pay the right rates see more productive staff; 8 in every 10 people admit to “not working as hard” if they are underpaid
  • employers who do not comply with the National Minimum rate changes that came into effect on 1 October 2013 or fail to spot differences in their workers are at particular risk of a financial penalty and being publicly named

Advice is available to employers and workers from the free and confidential Pay and Work Rights Helpline and on the National Minimum Wage Guide.

New research from the Department for Business, Innovation and Skills (BIS) reveals that businesses who pay less than the National Minimum Wage risk huge damage to their business through loss of reputation, low productivity and high staff turnover. The survey findings come as government begins to ramp up its scheme to ‘name and shame’ employers who don’t comply with the law and pay their workers at least the National Minimum Wage.

Findings from the research show:

  • 8 out of 10 people “would not use the services of a business if they found it paid less than National Minimum Wage”
  • almost the same amount (79%) would encourage family and friends to do the same, while 9 out of 10 people called employers who pay less a “disgrace”
  • underpaying staff was also found to breed resentment, low productivity and high employee turnover. Eight out of 10 workers would “not work as hard” if they knew they were underpaid, not surprising when 90% said they would actively resent their employer. The vast majority (85%) would seek other work.

Employment Relations Minister Jo Swinson said:

Most employers are responsible and pay their staff properly. Government is cracking down on those few rogue companies who are not doing the right thing and breaking the law by underpaying their staff. Employers should be well aware of the different rates for the National Minimum Wage depending on the circumstances of their workers. Ignorance is no excuse. If employers are unsure, they should call the Pay and Work Rights Helpline on 0800 917 2368 or visit GOV.UK for free advice and information.

Employers who fail to pay workers the right amount will face a financial penalty, be publicly named and shamed and may even be prosecuted. Today’s research also shows the impact on staff productivity and a business’ reputation of underpaying workers. Businesses can’t ignore this issue and stick their head in the sand.

The National Minimum Wage rates changed on 1 October 2013:

  • the adult rate increased by 12p to £6.31 an hour
  • the rate for 18 to 20 year olds increased by 5p to £5.03 an hour
  • the rate for 16 to 17 year olds increased by 4p to £3.72 an hour
  • the apprentice rate increased by 3p to £2.68 an hour
  • the accommodation offset increased to £4.91

Employers are encouraged to notice the details; age, accommodation, travel time and uniform hire can all effect how much workers must legally be paid. The National Minimum Wage naming scheme now makes it easier for government to name and shame employers who fail to comply with the law.

Employers can protect their business by calling the Pay and Work Rights Helpline on 0800 917 2368 or visiting GOV.UK for more information about the National Minimum Wage.

Ken Deary, Managing Director of national care home provider Right At Home UK said:

If you run a business, there is a lot to get your head around. Payroll in particular can be confusing. Despite that, ensuring that your employees are being paid correctly should be at the top of your priority list. Everyone deserves the National Minimum Wage as a minimum and if you aren’t paying it you are breaking the law. BIS enforces this law and if caught, you will face fines and public naming, which can hit your bottom line hard and even sink a small business.

On the flip side, employers who pay correctly enjoy better local and industry reputation and more motivated, hardworking staff. At Right at Home we are working hard to ensure our ‎policies keep pace with changes in legislation and that we fully comply with the National Minimum Wage. Our staff are our biggest asset and complying with National Minimum Wage is essential to where we are today and our future growth.

For more information contact Angela.Balakrishnan@bis.gsi.gov.uk or 0207 215 5363.

Notes to editors

  1. Populus interviewed 2,014 adults in Great Britain online between 2 and 3 October 2013. Results have been weighted to be representative of all GB adults. Populus is a member of the British Polling Council and abides by its rules. For more information see the Populus website.

  2. Links to National Minimum Wage (NMW) naming scheme and new NMW rates press notices can be found on the GOV.UK site.

  3. The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.