Hospitality businesses paying under National Minimum Wage risk ‘serious damage’ to reputation

01-Nov-2013 - Last updated on 26-Apr-2021 at 18:25 GMT

Employers failing to pay employees the right wages face losing business, the Low Pay Commission report says

Restaurants, hotels and pubs paying employees less than the National Minimum Wage (NMW) could be at serious risk of damaging their reputation and losing business, says the Department for Business, Innovation and Skills (BIS) after research showed that 80 per cent of people would not use a company if it paid staff less than the current rate.

According to the results of a report by the National Minimum Wage Low Pay Commission, eight out of 10 people would not use the services of a business if they knew it paid less than NMW while 90 per cent called those employers ‘a disgrace’.

It also found that staff productivity dropped when staff were paid less than the NMW of £6.31 an hour for over 21s; £5.03 per hour for 18 to 20-year-olds and £3.72 per hour for 16 and 17-year-olds with 80 per cent of people saying they would not work as hard if they were underpaid.

As the hospitality industry had one of the highest proportions of workers receiving NMW (a quarter of the workforce), the BIS said it was at a greater risk of losing reputation and seeing low staff productivity, which Rockliffe Hall owner Nick Holmes and chair of the British Hospitality Council said could have a serious impact on service.

“Staff retention and continuity are important for any good business, but particularly in the hospitality industry," he said. "Where we sit, at the five star end of the market, customer experience is crucial. I don’t think our clients would get the high-end experience they expect from a resort like ours if our staff weren’t valued and well-treated.

“Lots of our business is repeat business, and the number of returning customers we have means staff retention is very important – if staff were paid less than National Minimum Wage, I think it would create a feeling of ‘I’m not here for the long term’. There is a lot of demand for good, loyal, staff, and a business needs to be competitive to attract the best.”

Name and Shame

The report comes as the Government ramps 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.

Employment Relations Minister Jo Swinson said: “Most employers are responsible and pay their staff properly. The 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."

Employers unsure of NMW rates should call the Pay and Work Rights Helpline on 0800 917 2368 or visit www.gov.uk for free advice and information.