Are You Owed a Pay Rise?: Channel 4 Dispatches

3 July 2016

Channel 4 Dispatches tonight (Monday 4th July) investigates the reality of the impact of the new National Living Wage (NLW) on low-income employees – revealing that some of Britain’s biggest companies, including Tesco and B&Q, are cutting perks and privileges for the low-paid at the same as introducing the National Living Wage. And the programme asks how low wages and job insecurity affected the EU referendum result.

In April 2016, the National Living Wage was introduced in the UK. Workers over the age of 25 are now entitled to a minimum wage of £7.20 per hour. George Osborne claims that more than a million low-wage workers will be paid more as a result of the NLW. However, when Dispatches spoke to workers across a range of large British companies the programme discovered that whilst the NLW increased their base rates, cuts to other perks and benefits meant that workers were often worse off financially.

 

There are companies that have fully embraced the national living wage, but for plenty of other poorly paid workers across Britain, the decision to leave the EU, may make their lot even worse.

 

Poorly paid people in deprived areas were more likely to vote to take Britain out of European Union. Norman Pickavance, former head of Morrison's and retail expert, tells Dispatches: "I think you’ve got a large number of people in the UK who feel that they've really lost control, they can't determine where the work is gonna come in, they can't determine the hours of work, they don't know how much money they’re bringing home, and what you're seeing you saw it in the campaign slogan for Brexit, which was take control. So that appealed directly to a group of people who feel that they’ve lost control in their lives."

He continues: "I think there are some real threats, there are employers who are already knocking on the door ah, of Westminster to say can we have certain pieces of legislation repealed. The way I can see this right now is we’re not going to see an improvement in wages and we’re certainly not gonna see an improvement in worker rights."

Case studies:

Pennine Foods – food factory in Sheffield:

Pennine Foods provides Marks and Spencer with 750,000 ready meals per week. In May 2016 its workers went on strike, with unions claiming that 40% of workers in the factory would be worse off after the implementation of the NLW. Cuts to overtime hours mean that weekend workers at the factory could be between £5,000-£5,500 worse off per year due to new payment structures.

Pennine Foods says that it had been planning these changes since long before the introduction of the NLW and the majority of staff will be in a better financial position. Further strike action is now on hold while the company and the unions try to negotiate a deal.

 

Icelandic Seachill – the biggest fish processors in Grimsby:

Steve Usher, who voted Leave, works for Icelandic Seachill and after the introduction of the NLW had his basic salary increased by 62p per hour - up to £7.35 - 15p over the required salary. But in order to make this happen the company cut other benefits and extra pay.

Icelandic Seachill says it is trying to reduce the overall reliance on overtime working and an enhancement to the basic rate is better than employees working excessive overtime hours. It says the changes are meant to make the company operate efficiently and most workers will be better off. But this doesn’t include Steve, who has since resigned from his job after 14 years of service to the company.

B&Q:

B&Q is the biggest DIY chain in Britain. When it introduced the NLW, many staff were dissatisfied and the company threatened job losses for any staff member who spoke to the press. However, one employee - ‘David’ - was happy to speak to Dispatches.

B&Q raised basic pay for all its staff, not just the over 25s, to a minimum of £7.66 per hour, but at the same time, cut some other ‘premium payments’. For David’s pay packet, bank holidays used to be double time but now they are time and a half. Sundays were time- and-a-half but now they’re paid at the normal rate. He says his pay packet will decrease by £735 per year.

MP Siobhain McDonagh has been contacted by dozens of B&Q workers who say they are worse off since the NLW was brought in.

She tells Dispatches: "[I] absolutely support the living wage. We can argue about what level it should be, but it was a great idea and I completely agree with the Chancellor that everybody deserves a pay rise. Where it becomes a problem is where people aren’t getting that pay rise because their other terms and conditions are being cut so they don’t actually get more money, indeed many get less."

B&Q says it has introduced the changes to be fair to all staff and the changes are in addition to other attractive aspects of the company’s pay and reward package including paid breaks, bonuses and pension contributions. Although the company initially offered to pay staff losing out one year’s compensation for the shortfall, after pressure, it raised it to two. Now, the company says it is also reviewing ways of ‘enhancing the overall reward package to ensure they remain one of the best and most attractive employers in retail’.

Norman Pickavance tells Dispatches: "I think the fact that in this day and age, some employers are using the introduction of the National Living Wage, which was really designed to help raise living standards in the UK, that they’re using that as an opportunity to cut other benefits so that their overall cost base doesn’t increase is really scandalous. And I don’t think it’s good for the bottom line because you ultimately don’t drive productivity and don’t get the commitment of employees, so the results don’t actually get better."

Tesco:

Matt has worked as a general assistant at Tesco for more than twenty years and voted Leave. A pay review means he reckons he’ll lose £1,200 – or around 8 per cent - of his yearly salary of approximately £14,500. Although Matt’s pay packet will see his hourly rate rise from £7.39 to 7.62, his double time on Sundays and bank holidays is going down to time-and-a-half. His night-time premium and overtime rates are also being reduced.

Dispatches has been given a Tesco handbook distributed to staff which states that the hourly rate for the lowest paid staff will increase by 3.1 per cent. However, more than half of this will be funded by what Tesco refers to as ‘reinvestment from existing payroll’ - essentially, taking money from the salaries of long-serving staff members.

Similarly to B&Q, Tesco is compensating staff due to lose out by paying them a lump sum to cover the shortfall for the first 18 months. Tesco states that 85% of its staff will benefit from this deal.

Tesco says the changes have nothing to do with the NLW and point out that their pay and benefits were already above the new minimum. It says it is introducing a fairer pay structure to ensure colleagues doing the same job are paid the same amount.

The British Retail Consortium represents around 80% of British retailers. BRC Chief Executive Helen Dickinson tells Dispatches: “I think what we are seeing is a sort of focus on what’s happening within the workforce and across the industry. The industry as a whole is supportive of a living wage and over the last couple of years what we are seeing is a big sort of structural change that was actually happening within retail before the Chancellor got up and made his announcement last year. There will be fewer jobs in retail in the future, there are likely to be fewer jobs in local communities and it is the more vulnerable people in those more deprived areas that are more at risk of this structural change.”

Companies such as Eat and Café Nero have increased their minimum wages, however they have culled staff perks such as paid for lunch breaks and free lunch.

Companies not paying NLW:

Dispatches sent a reporter undercover to a range of cafes and restaurants across the South East of England, who discovered that many companies were offering between £5-6 per hour, some even as low as £4.32.

The Government says it’s given HMRC extra staff and budget to police those breaking the National Living Wage, but around a quarter of cafes visited didn’t even acknowledge it.

Siobhain McDonagh tells Dispatches: "The need for enforcement has become even greater and I know that the Revenue have said they have increased staff but we really need to see how it’s working on the ground."

Many companies use loopholes to avoid paying NLW, including courier companies who retain the same staff on a regular basis but ensure they are on self-employed contracts. This means they are not legally obliged to pay the NLW. The Social Market Foundation has carried out research for Dispatches. It shows two-thirds of self-employed workers in the transport and storage industry earn less than £7.20 an hour.

 

Alan Price runs Croner Group, one of the biggest HR consultancy firms in the country, which has been receiving many calls since the NLW came in. He tells Dispatches: "Some employers have rung up and have been very clear to say 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, so under two years’ service, can we let them go tomorrow?"

 

The Government wants the NLW to be £9 by 2020 but at that rate more perks, premiums and proper jobs may be dumped forever. The National Living Wage and the bigger pay packets that go along with it for the moment are enshrined in UK law. But, with Brexit causing uncertainty about the future of some EU worker protection rights could the working poor be even poorer than before?

 

 

 

	Base Pay pre NLW	Overtime pre NLW	Weekend pre NLW	Base Pay post NLW	Overtime post NLW	Weekend post NLW	Perks stopped
Icelandic Seachill	£6.73	2 x salary	2 x salary	£7.35	1.25 x salary	1.5 x salary
B&Q	£6.70	2 x salary	1.5 x salary	£7.66	1.5 x salary	1 x salary
Tesco	£7.39	2 x salary	2 x salary	£7.62	Reduced	1.5 x salary
Café Nero				£7.20			Free lunch replaced with 65% discount
Eat				£7.60			30 minute breaks no longer paid for