It’s a shame about BIS (and its NMW naming & shaming policy)

“I’ve never been too good with names,” sang Evan Dando and The Lemonheads on the title track of their fifth album It’s a shame about Ray in 1992. The song (and the album) is an indie classic that has easily stood the test of time. Well, it has in my house. Which is more than can be said of the BIS policy, first introduced in January 2011, of naming & shaming employers found by HMRC to have flouted the national minimum wage (NMW).

It is now 14 months since the naming & shaming scheme was rebooted in October last year, the original scheme having managed to name & shame just one NMW-flouting employer (a hairdresser). Announcing the revamp, BIS minister Jo Swinson confidently asserted that the new scheme would “give a clear warning to rogue employers who ignore the rules, that they will face reputational consequences as well as a fine if they don’t pay the minimum wage”.

However, to date BIS has managed to name & shame only 30 such rogue employers: a tranche of five in late February 2014, and a second tranche of 25 in early June. And this despite HMRC issuing Notices of Underpayment (the trigger for naming & shaming by BIS) to some 7-900 employers each year, and despite business secretary Vince Cable telling MPs in January 2014 that they could expect to see “a significant number” of NMW underpayers being named & shamed by BIS under the revamped scheme “by the end of February” (i.e. the following month). Not surprisingly, there have been accusations that BIS is failing to deliver on its promise.

Unfortunately, what Jo Swinson failed to make clear in October last year – seemingly even to her boss – is that the revamped naming & shaming scheme applies only to cases in which the HMRC investigation commenced on or after 1 October 2013. Given that it can and often does take HMRC six months or more to complete an investigation, and that (according to Cable) the process of appealing against being named & shamed can then take “roughly 150 days”, it would have been more honest of the business secretary to tell MPs not to expect huge numbers of rogue employers to be named & shamed much before February 2015.

Then again, Ms Swindon has confirmed that, as of 31 July 2014, Notices of Underpayment (NoU) had been issued to 118 employers in cases where the HMRC investigation commenced on or after 1 October 2013. Given that BIS policy is that “the vast majority of employers issued with a NoU will be named & shamed once the time limits for appeals have expired,” it is somewhat surprising that only 25% of those 118 NMW underpayers have been named & shamed to date. Perhaps the next tranche – which, on 4 November, Ms Swinson said will be “coming into the public domain in the not-too-distant future” – will be a big one.

Ms Swinson has also failed to quash the suggestion – first made in June 2014 by fellow wonk and blogger Michael Reed of the Free Representation Unit – that two of the 25 rogue employers named & shamed by BIS that month were in fact dissolved several years ago. According to the online Companies House register, Master Distribution Ltd (Company Number: 06878211) was dissolved in November 2010, and Zoom Ltd (04906202) was dissolved in April 2010. And it’s not easy to see why HMRC would in late 2013 launch investigations against companies dissolved in 2010.

In response to a series of parliamentary written questions by MPs Caroline Lucas and Stephen Timms, Ms Swinson has confirmed that the investigations against all 25 employers named & shamed by BIS in June 2014 commenced on or after 1 October 2013, that all 25 companies were “still in existence” at the time of the HMRC investigation, and that all 25 companies “paid the arrears due to workers and also the financial penalty imposed.”

Which may well be true, but in that case why did Ms Swinson dodge a follow-up question by Stephen Timms asking BIS to confirm the company registration numbers of the Master Distribution Ltd and Zoom Ltd named & shamed by BIS in June? If the Master Distribution Ltd and Zoom Ltd named & shamed by BIS are different to the two companies listed by Companies House as having been dissolved, or if the Companies House register is simply wrong, why not just say so?

If the Minister or anyone else at BIS is reading this, and would like to clear the matter up, they’d be very welcome to do so by posting a comment.

[Evan Dando is playing the Union Chapel, Islington on 27 February 2015. I am going. Be there, or be square.]

Postscript (27 November, 2pm): BIS has just named & shamed another tranche of 25 NMW-flouting employers, including the Barber Institute of Fine Arts, Birmingham and Walsall FC Community Programme. As with the previous tranche, most of the 25 employers appear to be small businesses. This means that BIS has now named & shamed just 55 (47%) of the 118 employers who had been issued with a NoU as of 31 July, and a much smaller proportion of those issued with a NoU to date. And no doubt Michael Reed is matching the 25 new names against the Companies House register even as I type …

As with the previous two tranches, the most striking feature of the 25 new cases is the small number of workers involved, and the relatively small size of the NMW underpayments in question. In all but eight cases, only one or two workers were involved, and overall just 80 workers benefited. The highest underpayment to a worker was £5,054.89, the lowest was £36.32, and the median was £695.19. Of the 80 workers, 22 received arrears of less than £100.

Only in one case did the total amount of arrears identified exceed £20,000, the current maximum financial penalty that can be imposed by HMRC (the penalty rate is 100% of the arrears owed; until March 2014, it was 50%). And, as there were 16 workers involved in that case, the average arrears per worker of £1,597.09 was well below the Government’s proposed new maximum penalty of £20,000 per worker.

So, by and large, the 25 employers named & shamed today are small fry, and it will be interesting to see whether the press and media maintain the high level of interest shown in relation to the first and second tranches. In February and June, BIS secured an impressive amount of coverage, on the BBC and ITV, and in the Financial Times, the Independent, and the Daily Mirror, as well as in local and regional press.

However, the headlines generated in June weren’t entirely positive. One of the companies named that month, HSS Hire Service Group Ltd, in Manchester, publicly demanded an apology from BIS on the basis that its underpayment of a total of just £149.00 to 15 workers was no more than an administrative error that had been quickly corrected. And the company was supported by its local MP, who raised the matter in the House of Commons during debate on the Queen’s Speech (scroll to column 628). This might well help explain why it has taken BIS five months to name & shame a third tranche of NMW underpayers.

Postscript (16 December): BIS has confirmed that, to date, only three employers have successfully appealed against being named & shamed, and a further eight have not been named & shamed as they owed arrears of £100 or less. Which only adds to my puzzlement that only 55 employers have been named & shamed to date.

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