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Dishonest employer (my client)

Dishonest employer (my client)

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I offer payroll services. One of my clients asked me to prepare payslips for his employee: 20h/week, min wage, which I did for several months.

Now I found out that the employee was working more hours and was paid below the min wage.

The employer wants to put things right ( from April) and he assured me that his payslips will reflect the actual money earned ( paid to the employee).

I am not sure how to behave, can you please advise?

Replies (24)

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By ShirleyM
24th Apr 2013 18:30

I think you have an obligation to make a SOCA report

The only way out is for the previous payroll to be corrected. It isn't enough to just stop doing something wrong, the wrong done in the past has to be put right, too.

It is a criminal offence to pay below minimum wage, so if you turn a blind eye you will be implicated too. Employers like this really wind me up!

Hopefully, our resident expert David Winch will be along to give you better guidance.

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Replying to lionofludesch:
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By Yvonnel_b
24th Apr 2013 18:38

Shall I backdate all the payslips? Even if I was doing what he instructed me to do?

He had one more employee like that ( I suspect again was paid a different figure) and P45 was issued and figures went to hmrc.

 

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David Winch
By David Winch
24th Apr 2013 18:37

Your options are limited
Unfortunately your options are limited.

You should advise the client employer that it is a criminal offence to pay below the minimum wage and he needs to pay the underpaid staff member(s) the amount necessary to make up the pay shortfall from the past.

If the employer refuses to do that then you have to file a report with SOCA under the MLR 2007 and s330 Proceeds of Crime Act 2002.

David

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Replying to Viciuno:
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By Yvonnel_b
24th Apr 2013 18:41

Thank you David:)

Shall I advise in writing?

Shall he make it up in current period?

 

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By Roger.Thornton
24th Apr 2013 18:49

He deserves everything he gets - and more.

The minimum wage is a miserable amount as it is. To deliberately set out to pay under that amount by falsifying the hours worked is a blatant criminal act.  This is blatant, not accidental, and he deserves to be taken to task for it. Personally I would make him pay over the monies owed, drop him in it anyway, and get rid of him as a client.

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Replying to Justin Bryant:
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By BKD
24th Apr 2013 19:27

Over-reaction?

Roger.Thornton wrote:

The minimum wage is a miserable amount as it is. To deliberately set out to pay under that amount by falsifying the hours worked is a blatant criminal act.  This is blatant, not accidental, and he deserves to be taken to task for it. Personally I would make him pay over the monies owed, drop him in it anyway, and get rid of him as a client.

We've only been given limited information so have no idea of the circumstances, employer's motives etc. Whilst agreeing that a wrongdoing is a wrongdoing, suggesting that one would make a report even after the offence has been remedied is in my view overstepping one's authority. The MLR obligations are absurdly onerous enough without having to apply them unnecessarily.

Hopefully the OP will follow David's more reasoned advice.

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Replying to lionofludesch:
By Roger.Thornton
24th Apr 2013 19:41

Defrauding the employee AND the taxpayer

BKD wrote:

We've only been given limited information so have no idea of the circumstances, employer's motives etc.

 

There is no lawful motive for deliberately defrauding employees and the taxpayer.

Perhaps you have not considered the full implications of the behavior of this “employer”.

He has deliberately underpaid employees – an offence.

There is, therefore a serious risk that these employees have been claiming working benefits, or higher benefits than they would have if paid in full  – so the employer is indirectly guilty of defrauding the taxpayer.

By underpaying employees he has reduced the amount of tax /NIC that they pay – again defrauding the taxpayer.

Personally I consider the minimum wage to be a sick joke, something used by cheapskate employers to get cheap labour while the taxpayer in the form of working benefits makes up the difference, thereby subsidizing the employer. If an employer cannot afford to pay the proper rate for the job then he should not be employing staff.

 

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Replying to SteveHa:
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By BKD
24th Apr 2013 20:00

Sense of perspective

Roger.Thornton wrote:

There is no lawful motive for deliberately defrauding employees and the taxpayer.

Agreed - but there could be mitigating circumstances

Roger.Thornton wrote:

Perhaps you have not considered the full implications of the behavior of this “employer”.

Potential full implications

Roger.Thornton wrote:

He has deliberately underpaid employees – an offence.

Which he wants to correct

Roger.Thornton wrote:

There is, therefore a serious risk that these employees have been claiming working benefits, or higher benefits than they would have if paid in full  – so the employer is indirectly guilty of defrauding the taxpayer.

Conjecture and speculation

Roger.Thornton wrote:

By underpaying employees he has reduced the amount of tax /NIC that they pay – again defrauding the taxpayer.

If the full wage would have in fact led to tax and NI liabilities that may indeed be the case. But again we are told the employer wants to put things right.

Roger.Thornton wrote:

Personally I consider the minimum wage to be a sick joke, something used by cheapskate employers to get cheap labour while the taxpayer in the form of working benefits makes up the difference, thereby subsidizing the employer. If an employer cannot afford to pay the proper rate for the job then he should not be employing staff.

That is your opinion (which I would not necessarily disagree with) but it is of no relevance to the topic in hand. Which is specifically about what the OP should do in the circumstances.

 

 

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David Winch
By David Winch
24th Apr 2013 18:54

Face to face
I think the best option (not perhaps the easiest though) is to meet with him and explain the position. You should follow that up with a letter 'telling him what you told him' if you understand my meaning!

You can IF YOU WISH tell him that if he refuses you would have a legal obligation to report him. However there are obviously pros and cons to telling him that.

There is of course a risk that you will lose the client.

If he makes some sort of sensible suggestion (eg to pay the money over a few weeks or months) then I don't see any reason for you to be unnecessarily awkward.

Hope that helps.

David

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Replying to TomHerbert:
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By Yvonnel_b
24th Apr 2013 18:56

David - one more thing: how can I be sure he declares the right amount of money now ( backdated and current). How to I cover myself? Shall I make him to sign something?

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Replying to SteveHa:
David Winch
By David Winch
25th Apr 2013 01:02

Reasonable limit

Yvonnel_b wrote:

David - one more thing: how can I be sure he declares the right amount of money now ( backdated and current). How to I cover myself? Shall I make him to sign something?

Yvonne

I can only express my own personal view on this one.  Others may disagree.

You are not an arm of law enforcement.  I suggest you are entitled to use your knowledge of the client to try to bring about the best outcome.  You need the client's co-operation to sort this out and, for that, he needs to feel he has your professional support.

At the end of the day if he wants to lie to you and mislead you about what he does to put things right then he will.  If that's what you believe he will do then get rid of him now as a client, because he will be nothing but trouble for you.

But if you think you can continue to have a proper professional relationship with him then don't jeopardise that too much by letting him see you being concerned primarily to 'cover yourself'.

Form you own opinion as to whether you can trust him and continue to work with him.

David

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Replying to TomHerbert:
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By essex accountant
24th Apr 2013 22:25

tipping off

davidwinch wrote:
I think the best option (not perhaps the easiest though) is to meet with him and explain the position. You should follow that up with a letter 'telling him what you told him' if you understand my meaning! You can IF YOU WISH tell him that if he refuses you would have a legal obligation to report him. However there are obviously pros and cons to telling him that. There is of course a risk that you will lose the client. If he makes some sort of sensible suggestion (eg to pay the money over a few weeks or months) then I don't see any reason for you to be unnecessarily awkward. Hope that helps. David

 

David: surely if you tell the client that you have a legal obligation to report him then that is tipping off which i thought was a no no?

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By ShirleyM
24th Apr 2013 19:46

@Yvonne

I would also recommend you follow David's advice. He has been on AWeb quite a long while, is a much respected contributer, and never (to my knowledge) advised anyone wrongly.

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Replying to Branski:
By Roger.Thornton
24th Apr 2013 22:37

"Personally"

ShirleyM wrote:

I would also recommend you follow David's advice. He has been on AWeb quite a long while, is a much respected contributer, and never (to my knowledge) advised anyone wrongly.

 

As I made clear by the use of the term “personally” whist David quite rightly set out the MINIMUM action that the law required to be taken I would take additional action, not least ceasing to act for the client. What other scams is he up to that the OP doesn’t yet know about?

Besides, as I again made clear I “personally” disapprove of the minimum wage and of employers who are cheap enough to pay it whilst letting the taxpayer subsidize their workers.

 

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By Tosie
24th Apr 2013 21:26

Maybe employee knows situation

I had the misfortune to come across what I suspect was a similar situation but was done with

full knowledge of employee. The employee was claiming tax credits and the employer was paying part through payroll rest cash in hand.

There was no way I could prove anything and had to accept what the client was saying but the employee seemed to run the business which would have been impossible on the hours declared.

We agreed to part company.

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By BKD
24th Apr 2013 21:45

But, Tosie

You did suspect that something was amiss, and went uncorrected, so in that case I would have thought a report would be perfectly in order.

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By Tosie
24th Apr 2013 22:16

BKD

Yes agreed a money laundering report situation.

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By BKD
24th Apr 2013 23:14

Off-topic

I would take additional action, not least ceasing to act for the client

One is of course free to take whatever additional action one deems appropriate in the particular circumstances, depending on their view of the world and prejudices.

Shirely was merely, correctly, pointing out that the OP would be well-advised to listen to the expert on the matter and to follow his considered advice.

And as I said before, one's personal view of the NMW is completely irrelevant to the discussion.

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Replying to MGD:
By Roger.Thornton
24th Apr 2013 23:22

Personal views

BKD wrote:

And as I said before, one's personal view of the NMW is completely irrelevant to the discussion.

  That's odd, your comments are often full of your personal opinions. As you clearly dislike my commenting style, obviously feel you are entitled to dictate what others may say, and seem to be making a point of saying so after every comment I make, perhaps it would be better if you simply gave your own response to the question in hand, and kept your criticism of others to yourself as your constant often convoluted and contrived comments are becoming tiresome. 
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Replying to lionofludesch:
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By BKD
25th Apr 2013 08:19

Relevance

Roger.Thornton wrote:

BKD wrote:

And as I said before, one's personal view of the NMW is completely irrelevant to the discussion.

  That's odd, your comments are often full of your personal opinions. 

My point wasn't about personal opinion - each is entitled to their own (without, BTW, being accused of having a closed mind just because that opinion happens to differ from one's own). My point - quite simply - was that the comment in question was entirely irrelevant to the discussion, and if you had been a member of AWeb for longer you would realise that such off-topic comments, particularly on contentious subjects, risk de-railing the entire thread. I'm only suggesting that if you want to discuss the merits or otherwise of NMW that would best be done in a separate thread - because it has nothing to do with the OP's dilemma here.

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David Winch
By David Winch
25th Apr 2013 00:51

Tipping off (not)

A tipping off offence can occur when you disclose to someone (outside your own organisation) that a report has been made (either internally to the firm's MLRO or externally to SOCA) or that an investigation by the authorities is underway or is in contemplation - see s333A PoCA 2002.

So, once Yvonne has made a report she would be risking tipping off if she told her client that she had done that.

But I was not suggesting that.  I was suggesting that she MIGHT point out to the client that if he doesn't 'play ball' she would have no option to make a report to SOCA.  That's not tipping off.

Additionally she would be making that disclosure (if she did it) in order to dissuade the client from criminal conduct - not to assist him in achieving it, see s333D(2).

And I can give her my personal assurance that there are, in fact, some very pleasant prisons should she find herself taking an unplanned career break!  (Only kidding!)

David

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By mrme89
25th Apr 2013 09:28

.

Bit off topic, but if an employer can’t pay its employees NMW, then to me it doesn’t have a viable business model. 

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By BKD
25th Apr 2013 10:13

Slightly off-topic, yes ...

... but there's a difference between can't and won't. We have no idea which applies in this particular case - though given employer's apparent desire to put things right it would appear to have been the latter.

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By mrme89
25th Apr 2013 09:44

.

Can’t – possibly insolvent

Won’t – employment tribunal 

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