Leicester factories still underpaying and exploiting staff, new study finds

New research by the Low Pay Commission (LPC) said that, although the sector had changed “substantially” since the Covid-19 crisis, non-compliance with the minimum wage remained “a serious issue affecting too many workers” and was “going undetected”.

The culture of under-paying workers remains rife because most are scared of losing their jobs if they make a complaint. Several staff told the LPC that employers threatened to make sure any ’troublemakers’ would “never work again”. Another said that managers coached workers on what to tell inspectors. 

According to the LPC report, first reported by the Financial Times, rogue operators are also dodging scrutiny by under-reporting the number of hours employees work for a given amount of pay, or paying the minimum wage but forcing workers to hand back part of their pay in cash to managers.

The LPC hit back at the idea that non-compliance in the fashion sector was no worse than in others – witnesses who contributed to its report described it as “widespread and flagrant”.

LPC chair Bryan Sanderson called on the government to take “comprehensive action”, adding: “The case of Leicester is not unique. Across the UK, workers in precarious positions face the same obstacles.”

It comes two years after working conditions at Leicester factories, which are used by the likes of Boohoo to produce their clothing, came under the spotlight, when unsafe working conditions were blamed for the spread of Covid-19 in the city. 

Although enforcement agencies have ramped up the number of inspection visits since then – and retailers including Boohoo have launched investigations and crackdowns – the LPC warned that the scale of the abuses remained “impossible to determine”.

HM Revenue & Customs, which polices compliance with the minimum wage, has struggled to combat “phoenixing”, when businesses close factories but reopen them under new names.

Retailers’ own efforts have made more of a difference than those of the authorities, the LPC found.

HMRC said it had “a range of measures and powers” in place to tackle phoenixing – new legislation has enhanced its ability to pursue individuals when a company is dissolved. It declined to comment further on the LPC’s recommendations until the report had been published.

The government insisted the UK had “made strong progress in bringing forward legislation to ensure that our employment law keeps pace with the needs of our labour market” and that it took “robust enforcement action” against businesses that did not pay the minimum wage.

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