Apparel Sourcing Intelligence - Worldwide

Computer programs and flash PR won’t eliminate wage abuses by themselves

Is the British government’s “name and shame” campaign High Street retailers concentrating too much on headline-grabbing mistakes?

“Minimum wage abuses will not go unpunished” announced Britain’s Business Minister Margot James on February 15. “That is why we have named and shamed more than 350 employers who failed to pay the legal minimum.”

Possibly. But the decision by Ms James’ department to let a prime-time TV programme denounce department store Debenhams as “one of the biggest offenders” on wage abuse seems to show more interest in cheap publicity and tax-raising than in seriously attacking criminal underpayment.

Her ministry – the Department for Business, Energy & Industrial Strategy (BEIS) – was allowed in 2013 to release annual lists claiming to reveal the country’s biggest underpayers.

This year, the release was timed so a BBC TV show could claim it was “exclusively revealing” that Debenhams topped the list. For underpaying 11,858 UK shop staff a total of £135,000 – or £11 a year each.

Debenhams got portrayed on TV as the week’s hate figure. And it had to repay the missing £11 to each underpaid worker, plus an additional 50% penalty to Her Majesty’s Department of Revenue and Customs (HMRC).

This year’s “naming and shaming” exercise netted the government around £800,000 in penalties: a tiny drop in Britain’s £514 billion of tax revenue, but a useful source of extra revenue for HMRC.

Is a system failure an “abuse”?

HMRC audits on major taxpayers use ingenious, Big Data-style, deep analysis, which can throw up disturbing, though often trivial, anomalies. Debenhams’ computer system assumed 52 working weeks, whereas there are 52.1 weeks in a typical 365-day year. So staff on minimum wage received 0.2% less than they ought.

In businesses with large payrolls – like Debenhams or any other chain retailer– such miscalculations, multiplied by the tens of thousands on the books, easily turn into a cash sum that sounds huge to most of us.  Publishing the list makes catchy annual headlines and usually costs HMRC almost nothing to administer.  Especially if the alleged culprit co-operates – as Debenhams and Peacocks did this year, and H&M did two years ago

Debenhams topped the BEIS 2017 Shame League because its misdeeds added up to more cash than anyone else’s. Or did they?

  • The biggest known case of large-scale minimum wage abuse in the UK is the £1 million or so an undercover press investigation found sportwear retailer Sports Direct to have underpaid UK warehouse workers between 2012 and 2015.
  • A TV documentary two weeks before this year’s BEIS list claimed Leicester garment makers Fashion Square had been paying less than half the minimum wage. If the claims are accurate, Fashion Square’s workers lost about as much in two hours as those Debenhams workers lost in a whole year.
  • The Fashion Square story reproduced almost exactly a similar investigation into conditions at other Leicester garment factories two years earlier.

Yet the BEIS annual lists still haven’t revealed a single example of wage abuse in Leicester’s garment industry, and Sports Direct have never featured in one either. Far from tracking large-scale, wilful, abuse, the UK government’s Shame League highlights minor errors by companies that are big, honest – and newsworthy.

The methodology behind the lists assumes generally accurate records. That’s not always realistic. For example:

  • When an employer simply lies, keeps false records and pressures staff to back the lies up, as seems to have happened in Leicester.
  • When responsibility is split. Sports Direct staff were getting paid less than the legal minimum because its procedures forced staff, technically employed by a subcontractor, to work longer hours than the subcontractors were paying them for.

The truth’s rarely easy to pin down

In such cases, uncovering the real facts is tough: not just because people are lying, but because workers are often too frightened to tell the truth or because one company keeps blaming another.

When there’s a “no he did it” circle of mutual accusations, or workers reluctant to testify, a responsible government can’t go round publishing allegations that may not stand up in court.  It can take years to establish the real truth – and for those years, wage abuses certainly will go unpunished.

Dealing with wage abuses isn’t easy, and since they can be serious crimes or involve serious penalties, they don’t lend themselves to quick resolutions or flash PR. Sports Direct is facing at least a million pounds in penalties: finalising its treatment can’t easily be timetabled around a TV programme’s schedule.

One of the reasons the UK government loves its list system is that the companies it catches out usually admit responsibility almost immediately. This kind of blacklisting certainly has a cheap, fast  and effective role in any government’s armoury of weapons against wage abuse.

But attacking exploitative firms also needs whistle-blowers, activists, labour  unions, undercover journalists, investigating officials and the legal resources to produce detailed evidence that will convince a jury. That’s a costly and time-consuming business.

The problems shown at Leicester and Sports Direct crop up throughout the developed world. In New York and California, for example, investigations into exploitative garment factories often throw up horrendous stories – but local authorities just don’t have the resources to tackle more than a tiny proportion of alleged cases.

It’s naïve and dishonest to pretend that those abuses can be eliminated by computer programs. Even more unrealistic to believe eliminating them is an easy way for a government to make money.