One in twenty workers say they are not receiving any paid holiday entitlement

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Around one in twenty workers report not receiving any holiday entitlement, while around one in ten do not receive a payslip ­– highlighting the scale of labour market violations across the UK – according to new analysis published today (Monday) by the Resolution Foundation.

The analysis, published to mark the start of the Resolution Foundation’s three-year investigation into labour market enforcement, supported by Unbound Philanthropy, uncovers the extent of unlawful working practises across the UK, and identifies where abuse is most common. Focusing on three key labour market violations, it finds that:

  • Around one in twenty workers report receiving no paid holiday entitlement, despite being legally entitled to at least 28 days a year (pro-rated accordingly for part-time workers).
  • Almost one in ten workers do not receive a legally required payslip, making it hard for workers to calculate whether they’re receiving the right level of pay, pension and holiday entitlement and check for deductions.
  • HMRC identified a record 200,000 cases of workers not receiving the minimum wage as a result of its enforcement work last year, with the Foundation’s analysis finding that at least a quarter of those earning within 5p of the minimum wage are paid less than the legal minimum.

The analysis shows that the likelihood of a worker being subject to labour market violations is closely connected to their personal characteristics, their type of employment contract, the firm they work for, and the industry they work in.

Workers aged under 25 and over 65 are the most likely not to receive a payslip, according to the research. Around one in six workers aged 65+ report they have no paid holiday entitlement, more than any other age group, while workers aged 25 and under are almost twice as likely be underpaid the minimum wage as any other age group.

The analysis finds that workers in the hotels and restaurants sector are the most likely to miss out on minimum legal workplace entitlements. Around one in seven workers in the sector report receiving no holiday entitlement, three times the rate across the rest of the economy, while around one in seven do not receive a pay slip (a rate 50 per cent higher than the rest of the labour market).

The analysis also finds that workers in small firms (employing fewer than 25 employees) are most likely to miss out on pay slips and holiday leave, as are workers on zero-hours and temporary contracts.

The government has taken welcome steps to increase both the resources and powers of bodies such as HMRC and the GLAA (Gangmasters and Labour Abuse Agency) in recent years. However, the UK still largely relies on individuals to hold non-compliant firms to account, with the Employment Tribunal (ET) system receiving over 100,000 applications last year.

The Foundation says however that those workers who are most likely to require redress through the ET system are the least likely to use it. It notes that young people are disproportionately likely to be subject to unlawful working practises, but make far fewer applications than any other age group. In contrast, managers are the least likely to be subject to labour market violations, but are among the most likely to make tribunal claims.

The Foundation says that the scale of labour market abuse highlights the need for the state to step up to ensure the UK’s labour market rules are better enforced. It welcomes the government’s plans to create a new single enforcement body to tackle labour market abuse, though it says that the new body must be properly resourced in terms of funding and staff, and have legal teeth.

Lindsay Judge, Senior Economic Analyst at the Resolution Foundation, said: “The UK has a multitude of rules to govern its labour market – from maximum hours to minimum pay. But these rules can only become a reality if they are properly enforced.

“Labour market violations remain far too common, with millions of workers missing out on basic entitlements to a pay slip, holiday entitlement and the minimum wage. The government’s welcome proposal to create a new single enforcement agency should leave it better placed to tackle these labour market violations than the multiple bodies currently operating, as long as it’s properly empowered and resourced.

“Our analysis suggests that while violations take place across the labour market, the government should also prioritise investigations into sectors like hotels and restaurants, along with firms who make large use of atypical employment contracts, as that’s where abuse is most prevalent.”