There was much ministerial self-satisfaction in evidence yesterday, as BIS named & shamed a further 37 employers for breaches of the national minimum wage. This brings the total number of firms named since the scheme was rebooted in October 2013 to a less than impressive 92. Or just 90, if you allow for BIS wrongly naming, so not actually shaming, two of the 25 firms it named in June last year.
“Paying less than the minimum wage is illegal, immoral and completely unacceptable,” said BIS minister Jo Swinson. “If employers break this law they need to know that we will take tough action by naming, shaming and fining them as well as helping workers recover the hundreds of thousands of pounds in pay owed to them.”
Or the average of £4.82 in pay owed to them, in the case of the 540 workers to whom retailer H&M failed to pay a total of some £2,600. It was this case that – no doubt to the delight of press officers at BIS and the chagrin of those at H&M – most national media chose to focus on, presumably because H&M were unlucky enough to be the first (and so far only) household-name retailer to be shamed by BIS. Never has so little been owed to so many by “time-logging errors in some stores”.
Of course, household-name corporations like H&M – which, according to the Independent, made profits of “more than £600m in the last quarter alone” – could avoid the risk of such adverse publicity by paying their staff a living wage, rather than just the legal minimum.
However, it was another of the 37 shamed employers that caught my eye. Ultimate Care UK Ltd, in Ipswich, became the first of Britain’s 35,000 adult social care employers (i.e. both residential and domiciliary care providers) to be named & shamed by BIS, for failing to pay a total of £613.79 to seven workers. With just 15 care staff, and having won a National Home Care Employer of the Year (< 250 employees) award in 2011, Ultimate Care are probably feeling as aggrieved as the corporate fat cats at H&M at being shamed by BIS when there are clearly a great many bigger fish in Britain’s pool of minimum wage rogues.
Indeed, just two days before BIS dumped on Ultimate Care, Jo Swinson’s Liberal Democrat colleague Paul Burstow – a former health minister (2010-12), and chair of a Commission on Home Care – used a Westminster Hall debate to highlight a number of challenges in the adult social care sector, including “the low pay, low status culture that pervades the sector.” Noting that the National Audit Office estimated in early 2014 that as many as 220,000 (15 per cent) of the sector’s 1.5 million workers are illegally paid below the minimum wage, and that “the problem is getting worse, not better”, Mr Burstow called for action to ensure that “those who are exploiting their workers” are “properly and vigorously pursued.”
Mr Burstow is far from alone in contrasting the evidence of systemic flouting of the minimum wage in the sector, with the apparent lack of effective enforcement action against the employers in question. In March 2013, a number of MPs – including Simon Hughes, Liz Kendall, and Alison McGovern – expressed concern about the exploitation of their constituents during a Westminster Hall debate initiated by Labour MP Andrew Smith. And in August that year, a report by the Resolution Foundation think tank highlighted the “national scandal” of care workers being illegally paid as little as £5 per hour:
While headline pay rates for care workers who visit clients at home are set at or above the national minimum wage of £6.19 an hour, in practice those workers often lose at least £1 an hour because they are not paid separately for the time spent travelling between appointments and because providing decent care often takes longer than the time allocated by the employer for each visit. This would mean that over the course of a year, a care worker who spent an average of 35 hours a week at work for 48 weeks would lose out on more than £1600.
In November 2013, an evaluation by HMRC of its enforcement work in the social care sector in 2011/12 and 2012/13, including both complaints made via the Pay & Work Rights Helpline and targeted enforcement against 40 residential care providers and 40 domiciliary providers, concluded that inspectors had “identified higher and increasing levels of non-compliance with minimum wage legislation than has been previously found in the sector.” HMRC noted:
[We] are concerned that many employers had failed to keep sufficient records of working time to demonstrate that workers are being paid at least the national minimum wage, particularly given that non-payment of travelling time for workers in domiciliary care was commonplace [sic].
In May 2014, the Kingsmill Review – a report into working conditions in the sector by Baroness Denise Kingsmill, commissioned by Labour leader Ed Miliband – concluded that “the low status of care work and poor treatment of workers has led to a vicious downward spiral, with widespread exploitation.” Two months later – in response to the March 2014 NAO report cited by Paul Burstow – the Public Accounts Committee of MPs said they were “astonished that up to 220,000 care workers earn less than the minimum wage and little has been done to rectify this.”
In November 2014, Andrew Smith initiated a second Westminster Hall debate, during which Labour MPs queued up to express their concern at the lack of government action on the issue. And, last month, launching a campaign and petition calling on ministers to “end the scandal of illegally paid care workers”, the trade union Unison noted that:
In 2011 and 2013, HMRC investigated the care sector and found that only half of care providers were paying [at least] the minimum wage. Thanks to those investigations, several companies were forced to pay care workers the money that they were owed.
Now, because of the ongoing cuts to care budgets and a lack of follow-up action from HMRC, the situation has become worse. This is in part because most care workers are on zero-hours or temporary agency contracts, with the employers cutting out paid time wherever they can. A full day on the job can translate into only a handful of paid hours.
In short, pretty much everyone who has considered the issue has concluded that exploitation, including non-compliance with the minimum wage, is rife in the social care sector. So why were investigations completed in relation to just 70 residential care homes in the four-year period 1 April 2010 to 31 March 2014? Why has the overall number of investigations by HMRC (i.e. not just the care sector) fallen in each of the past three years, from 1,140 in 2010-11, to 680 in 2013-14? And why does the Government say, in its recent evidence to the Low Pay Commission, that “non-compliance as a result of gross exploitation is very low”? Something’s not right here.
In response to Paul Burstow’s Westminster Hall debate, BIS minister Jo Swinson said:
Proactive investigations happen. There was a particular period of targeted enforcement in the care sector, from 2011 to 2013. We recognise that the issue is important and are returning to the care sector for proactive work. That process is now under way, so more will happen. Currently, 94 employers in the care sector are being investigated for national minimum wage issues, and when those investigation conclude, we will see whether they have broken the law. If so, there are tough penalties, including naming and shaming, and we have taken steps to increase the resources available to HMRC for that vital work.
Presumably, one of those 94 care sector firms is the former employer of Debra Claridge, who made a complaint to HMRC about prolonged payment below the minimum wage (due to non-payment for travel time between appointments) as long ago as November 2012, but – astonishingly – has still not had her case resolved.
Ms Swinson has (laudably) made a habit of including the phone number of the Pay & Work Rights Helpline in her contributions to House of Commons debates and replies to written parliamentary questions, but it makes a mockery of the minimum wage enforcement system for those who follow the Minister’s advice and call the Helpline – as Mrs Claridge did – to then wait two years or more for HMRC to conclude its investigation and recover the arrears owed (or close the case and explain why).
All in all, there is a clear need for a step-change in enforcement of the minimum wage, not least to tackle the “commonplace” but unlawful practice in the domiciliary care sector of not counting travel from one work assignment to another as working time. In a letter to Jo Swinson co-signed by 36 other MPs, Andrew Smith has now requested an urgent meeting to “discuss how BIS, in tandem with HMRC, the Department of Health, and the Department for Communities and Local Government, can ensure that care providers operate within the law and that all care workers are legally paid.”
The £3 million increase in HMRC’s enforcement budget for 2015-16 that BIS announced alongside the naming & shaming of H&M, Ultimate Care and 35 others – an increase not to be sniffed at in these days of austerity and cuts – is clearly welcome, and will no doubt make a difference. But even £12.2 million per year is a piddling sum, given the (growing) size and nature of the challenge. The next government is going to have to do a lot more than name and shame a single social care employer.