Employers who fail to pay their workers correctly risk damage to their reputation

New research from the Department for Business, Innovation and Skills (BIS) reveals businesses that 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:

  • eight out of ten 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”; and
  • 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. 90% said that they would actively resent their employer and 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.

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 research indicates, perhaps unsurprisingly, that employers who pay correctly are more likely to enjoy better local and industry reputation and more motivated, hardworking staff.

At Palmers, we have many years’ experience in employment law and provide a wide range of advice to employers about what procedures they should be following, including guidance on the National Minimum Wage. For more information about our employment law services and our HR package, please visit our website or contact Lara Murray, Karl Barnes or Charlotte Woolven-Brown.