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Does 'naming and shaming' employers work?

Over 200 employers were named and shamed by the government last week (December 9) for failing to pay staff the national minimum wage.

The 208 employers had illegally taken £1.2 million from employees’ pay, leaving around 12,000 workers to suffer the loss.

This round of naming follows the previous round in August, publishing a list of companies more than £500 in arrears to employees.

One employee at a fish and chip shop was owed £17,000.

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Pay gap reporting is failing women as pay gap widens

UK's largest occupations driving gender pay gap

‘Naming and shaming’ has become a popular solution to many issues of corporate governance, where companies fail to meet their social, regulatory, and market obligations.

Since 2017, for example, it has been mandatory for all private and voluntary sector organisations of more than 250 employees to report their gender pay gap - and in September, the CIPD urged the government to make ethnicity pay gap reporting mandatory from 2023.

An October 2020 study showed that gender pay gap reporting has a ‘name and shame’ effect’, discouraging companies from flouting their obligations.

Emily Liddle, communications and campaigns manager for women’s rights and gender equality charity Fawcett Society, told HR Magazine that ‘naming and shaming’ tactics were an effective means of prompting organisations to act responsibly.

“Mandatory gender pay gap reporting has been proven to be effective, both in terms of getting big employers to act, and in closing gaps within firms who report [their gap], where they have taken decisions that lead to rises in women’s pay,” Liddle said.

While reporting the problem has proven useful, the Fawcett Society has called for more measures than just sharing data.

Liddle added: “We want to see the government require mandatory action plans from employers to tackle the gender pay gap, reduce the threshold for reporting to 100+ employees and introduce reporting on the gender pay gap by ethnicity.”

Kate Palmer, HR advice and consultancy director and HR at employment law consultancy Peninsula, told HR Magazine that the success of the government’s national wage name and shame scheme depends on companies’ sense of shame.

She said: “The naming and shaming scheme pushes employers to comply with minimum wage regulations to protect their reputation.

“However, organisations who are unconcerned by public opinion may not give significant weighting to this initiative.”

Despite some companies’ lack of concern, the financial implications of appearing on a list of ‘shamed’ companies - such as customers and clients shopping elsewhere - will continue to put pressure on companies to award pay fairly.

“Although government-led schemes like these are not, at times, favoured or respected by individual organisations, employers will still be concerned about the financial repercussions of non-compliance and the impact on their ability to continue operating,” Palmer added.

In November, a report by think tank The Resolution Foundation found that name and shame tactics for the minimum wage have a definite, but small, impact on companies’ behaviours. 

Yet this impact was concentrated in sectors where the rate of detection for underpayment was already high. 

To make a real impact, the report suggested, the government will have to publicise the lists much more widely, and implement harsher financial penalties.

Not all underpayment, however, is intentional and so Charles Cotton, senior performance and reward advisor at the CIPD, pushed for further education. 

“It’s right to name and shame employers who are deliberately not paying the national minimum or living wages, but there are instances where some, particularly SMEs, have inadvertently done so,” he told HR Magazine.

“This is because of a lack of HR resource or expertise.

“Giving these SMEs better access to HR support to improve their pay processes and practices would be a more helpful and proportionate response - and will prevent more employers from accidentally breaking the law.”