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Last Updated:  Wednesday, 19 March, 2003, 10:30 GMT
Low pay crooks dodge the law
By Brian Wheeler
BBC News Online business reporter

Contract cleaners are under pressure
The 30p rise in the minimum wage to 4.50 an hour should put a few more pounds in the pockets of the UK's lowest paid.

The vast majority of employers will pay up without too much complaint.

But the government has been urged to stop giving firms that flout minimum wage legislation an easy ride.

For a growing band of unscrupulous operators, the minimum wage has become just another piece of red tape to wriggle out of.

And the unions claim too many of them are getting away with it.

Hundreds of companies have been caught underpaying their staff since the legal minimum was introduced in 1999.

But so far none have been prosecuted, a situation described as "incredible" by the GMB union.


The Inland Revenue, which was given the job of policing the minimum wage on behalf of the Department of Trade and Industry (DTI), says it prefers subtle arm-twisting to expensive court action.

"We prefer to work with employers and get it sorted out.

"We find that approach works better than moving through to prosecution," a spokeswoman tells BBC News Online.

"They know we can take them to court if we have to."

But the GMB claims it is all too easy for bad employers to exploit loopholes in the legislation.

And the fact that the victims of low wage abuse are likely to be among the most vulnerable members of society makes enforcement all the more difficult.

Most are simply too scared to come forward, for fear of losing their job and, in many cases, the roof over their head.

Side-stepping the law

The Inland Revenue insists it goes to great lengths to protect the confidentiality of the 70,000 people who contact its helpline every year.

But it also admits employers are becoming increasingly adept at side-stepping the law.

"Our inquiries have become increasingly complex, with all sorts of other issues, such as accommodation that goes along with jobs, coming in," a spokeswoman says.

This has led to a 30% drop in the number of cases the Revenue has been able to take on, even though abuses appear to be on the increase.

Illegal migrants

Meanwhile, law-abiding firms are coming under increasing pressure from unprincipled rivals, who find a ready source of cheap labour among the 500,000 illegal migrants believed to be living the UK.

Last year, home office minister Lord Rooker admitted it was easier to work illegally in Britain "than in any other country in the European Union".

At the same time, he said Home Office prosecutions for illegal working were "virtually non-existent".

But a promised flood of "high profile" prosecutions has so far failed to materialise.

The Home Office has estimated that more than 60% of workers in London's catering trade are illegal migrants, leaving them open to exploitation at below minimum wage rates.

The government has also identified construction, security and contract cleaning as potential problem areas.

Sweatshop labour

The fashion industry has also seen an explosion in back street sweatshops exploiting illegal or underpaid labour.

Baz Morris, deputy general secretary of knitwear union KFAT, says: "Sweatshops are the biggest growth area of our industry."

Companies are reluctant to talk about the problem and reliable figures are hard to come by.

But Anne Carvell of trade body the Knitwear Industries Federation says sweatshop labour could account for up to 40% of the jobs in the clothing and knitwear industry.

'Not a major issue?'

A survey carried out by Leicester City Council in 2001, found 60% of fashion workers quizzed were not being paid the minimum wage.

Some were earning as little as 1.50 an hour.

Ashok Panholi of K and A fashions, in Leicester, says the real problem for legitimate firms such as his is competition from abroad.

"You have companies in Morocco and Turkey who pay people 40 a week and we have to pay 200 a week."

He says there is still a problem with rogue operators in the UK, but that it is "not a major issue".

'Fig leaf'

The High Street retailers make all of their suppliers sign a code of conduct forbidding the use of cheap labour.

But according to one senior industry source, "the retailers like to keep everything at arms length.

"They send in consultants, who have a check list - do you employ illegal labour?

"So if somebody has a complaint about minimum wage abuse, the retailer just says, we employ consultants.

"The consultants are just a fig leaf."

The Low Pay Commission and the various enforcement agencies argue that the way forward is greater public awareness of the minimum, particularly among ethnic minority workers.

"If people don't come forward we can't take action," says a Revenue spokesman.

Workers underpaid by millions
13 Sep 02 |  Business
Will the sweatshops pay?
31 Mar 99 |  Minimum wage

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