Ethical Pay in a Fair Society

Summary: Here I define and describe possible situations of ‘Wage Theft’ and offer advice on how to prevent it. 

“There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible” (Henry Ford)

Violations involving pay—both intentional and unintentional—are increasingly being characterised as 'Wage Theft'. Wage Theft is defined as the illegal withholding of wages or the denial of benefits that are rightfully owed to an employee. It can be conducted through various means such as: failure to pay overtime, minimum wage violations, employee misclassification, illegal deductions in pay, working off the clock, unfair redundancy / severance packages, withholding bonuses, commissions and tips from employees, or not being paid at all. Employers could also encourage potential intrusion of work into their employees’ private lives through computer-mediated communications. These relate to messaging or email communications delivered to personal computers and smart mobile devices outside working hours, including weekends.

Wage Theft occurs at all levels of the income ladder, but by far, low-wage workers suffer the most from it. Employee surveys in the UK reveal that a staggering 45% of respondents feel that they aren’t being paid fairly for the work they do. In-depth interviews reveal that for them the most blatant form of wage theft is not being paid for work done: employees being asked to work overtime, working through lunch breaks and / or their weekends, or being asked to report early and/or leave late from work (overtime denial). Another common area of complaint is ‘under-staffing’ as another form of wage theft, when workers are forced into completing a task designed for a larger workforce. Employees also mention attempts are sometimes made to define ordinary employees as independent contractors (zero-hour contracts).

In the words of a disgruntled employee:

“If you steal from your employer, you’re going to be hauled out of the workplace in handcuffs, but if your employer steals from you, you’ll be lucky to get your money back”

In this respect Business Leaders and HR professionals can definitely play a crucial role in mitigating the risk of wage theft and unintentional non-compliance (among other potential unintended unethical practices). Consider the following actions:

• Raise awareness: HR should train management on the organisation’s wage and hour policies. Clarify to them how a living wage differs from the legal minimum wage. Encourage them to pay their lowest paid employees a Living Wage, the amount necessary to meet the basic cost of living, rather than the legally required minimum wage. Let’s not forget, paying employees a living wage results in greater productivity, higher morale, and lower absenteeism.
• Organise ethical training: The effect of this training is difficult to assess, but it works best when it encourages employees to identify and discuss ethical dilemmas that arise in their working environments.
• Encourage employee feedback: HR should also facilitate open communication with workers and provide an opportunity for workers to express concerns regarding wage and hour compliance. In this respect employee opinion surveys are important: Do you know how your employees feel about their current pay and working conditions? And how it impacts their work performance and levels of engagement with your organisation? Here I provide some key statements that you could use in your next employee survey: I think I am paid fairly for the work I do; I feel I receive a fair share of the profits made by this organisation; This organisation’s benefit program fits my needs.
• Guarantee full transparency: This is probably the most important measure for encouraging ethical behaviour. If the public is able to monitor a company's behaviour, if the company is required to make data available about its operations, then it has an interest in avoiding unethical behaviour.
• Review job descriptions: In most organisations, potential employee job misclassification errors can contribute to pay violations.
• Monitor requests for interns: If a particular division or department starts bombarding HR with requests for interns, take a closer look to ensure that they are not being misclassified and are being offered a fair pay for the job they do.
• Blow the whistle: HR should encourage ethical companies to report violations when they learn that competitors are not complying with wage and hour laws. Wage theft enables companies to operate with lower labour costs, giving them an unfair advantage in the market by allowing them to offer products or services at a lower price. Honest employers shouldn’t have to compete against wage-theft violators.
• Encourage the monitoring of supplier practices: Truly ethical organisations are working to improve wages in their supply chains and lobby for the improvement of wages in sourcing countries. These organisations ensure cost of living wages are accommodated throughout the value chain and if necessary in product price. This can be achieved by building long term, mutually trusting relationships with suppliers and work together to understand the drivers of prevailing wage levels and how they can be influenced.
• Empower employees: Workers still face retaliation for trying to organise. Improve workers’ collective bargaining power and ensure their right to freedom of association is respected. Also encourage employee representation on company boards which may encourage transparency and subsequent ethical behaviour (Read more: Trade Unions have been vilified for too long).
• Conduct pay-gap audits: An audit of wage and hour practices by an external legal counsel can help an organisation measure compliance with existing laws and take steps to address potential problems. Such audits can also identify pay gaps among different minority groups of employees.

These actions should be a key part of any organisation’s corporate social responsibility initiative. Employers are morally required to pay a living wage and offer decent work conditions, people are owed a basic minimum standard of living. Many employees accept wage theft and less than optimal work conditions because they’re simply glad to have a job and never make complaints often because they fear retaliation by their employer or because they do not think it will make a difference to their current work conditions.

Wage theft is not only against the law but morally and ethically incomprehensible. This is the reason most countries have some kind of minimum wage laws which are intended to protect unskilled or inexperienced workers against 'exploitation' by employers who, in the absence of such laws, presumably would not pay wages their employees deserve and need to support themselves. 

Unethical employee wage cost reduction practices don’t serve the company’s reputation, its market and employer brands suffer, and not paying a living wage lowers worker productivity and creates stress on employees who should be viewed as human beings and not just workers, or even worst, just numbers on a spreadsheet, yet many board compensation committees still fail to address these risks… Does it mean that corporate logic is incompatible with ethical behaviour?

• Read more: If Retaining Top Talent Is a Struggle… Then Read This!
• Read more: Human work is not a commodity
• Read more: Paying lip-service to Corporate Social Responsibility

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Disclaimer: The author is making this ‘Opinion Blog’ available in his personal effort to advance the understanding of best practices in workplace related matters. The author assumes no responsibility or liability for any errors or omissions in the content of this ‘Opinion Blog’ or for the results obtained from the use of the information provided. The information is provided on an ‘as is’ basis with no guarantees of completeness, accuracy, usefulness or timeliness and without any warranties of any kind whatsoever, express or implied. The views expressed are solely those of the author in his private capacity and do not in any way represent the views of any entity whatsoever with which the author has been, is now, or is to be affiliated in the future.