Employers using ‘scandalous’ methods to avoid paying national living wage

Lowest-paid workers thousands of pounds worse off, says Dispatches; HR consultancy warns employers targeting over-25s for lay-offs

Organisations are slashing benefits on an industrial scale to get around paying staff the national living wage (NLW), while others are ignoring the legal requirement altogether, according to aChannel 4 investigation.

An episode of the Dispatches documentary, aired on Monday, showed that many larger employers have chosen to rationalise their pay structures in an effort to mitigate the costs of “the highest minimum wage ever in real terms”, including reducing overtime rates, cutting existing benefits and withdrawing hours.

Staff at Pennine Foods – where 400 employees went on strike in May – claimed the company’s decision to cut overtime hours meant weekend workers at a Sheffield factory could end up between £5,000 and £5,500 worse off per year. Retailer B&Q’s decision to give all staff – regardless of age – a minimum wage of £7.66 per hour at the same time as cutting other ‘premium payments’, including bank holiday and Sunday rates, meant worker pay packets could decrease by £735 a year, it was claimed.

Commentators on the programme also suggested that those over the age of 25 were deliberately being targeted for redundancy pools and were being actively discriminated against in the recruitment process, which confirms concerns People Management first reported in May.

Alan Price, chief executive of HR consultancy Croner HR, said calls to his company “spiked” in the first few weeks of April, with employers specifically asking: ‘How can we make those over 25 redundant, how can we look at those over 25 and if they have what we call short service – under two years’ – can we let them go tomorrow?’

He also said Croner had seen around a 5 per cent increase in the number of calls regarding redundancy in the months of May and June. “It might just be anecdotal but we don’t normally at this time of year see a spike in redundancy calls… but the only real change in business models pre-Brexit was the NLW so you can more or less time it exactly to the beginning of April, when it was implemented,” he told People Management.

Research quoted in the programme suggested that 24 per cent of hospitality employers were cutting staff numbers as a result of the implementation of the NLW.

Speaking on the programme, Norman Pickavance, former HR director of Morrisons and a commentator on pay issues, said: “I think the fact that, in this day and age, some employers are using the introduction of the NLW, which was really designed to help raise living standards in the UK, as an opportunity to cut other benefits so that their overall cost base doesn’t increase is really scandalous.”

Many organisations, including retailer Tesco, said the recent changes to their pay and rewards systems have “nothing to do” with the implementation of the NLW, but are an attempt to reduce the overall reliance on overtime working and ensure employees doing the same job are paid the same amount.

In an employee handbook distributed to Tesco staff, it said the hourly rate for the lowest-paid staff would increase by 3.1 per cent. However, more than half of this would be funded by what Tesco referred to as “reinvestment from existing payroll” – essentially, cutting other salaries.

Price said many of his larger clients were becoming much more “acute” in the way they present their cost-cutting methods, after backlash from the press and government.

“Larger retail clients, for example, won’t necessarily refer to the NLW but they will say their ‘margins are reduced,’ which they can’t pass on to the supply chain,” he said. “They are very careful about how they look at Ts&Cs, but it is clear that organisations are looking at changing pay structures, benefits and rewards as a result of the minimum pay hike.”

When an undercover reporter for the programme revealed that a range of cafes and restaurants across the south east of England were deliberately flouting the legal requirement by offering just £5-6 per hour, and some as low as £4.32, Siobhain McDonagh, MP for Mitcham and Morden, said: “The need for enforcement has become even greater and I know that [HMRC] has said it has increased staff [to tackle the issue], but we really need to see how it’s working on the ground.”

Story via – http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/07/05/employers-using-scandalous-methods-to-avoid-paying-national-living-wage.aspx

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