Tag Archives: Naming & shaming

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November 6, 2015

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Are hairdressers really *that* bad at paying the NMW?

With the Workers’ Party – or is it the Party of Equality? – leaving no stone unturned in its titanic struggle to “end discrimination and finish the fight for equality in our country”, last month saw the Department for Business, Innovation & Workers’ Rights name & shame another 115 minimum wage (NMW) rogues. Well, another 113 NMW rogues, once you exclude the two businesses – London-based Danhouse Security and Scottish business C & R Tyres – the Department had already named & shamed for the very same breaches of the NMW, in November 2014 and February 2015 respectively.

How hard can it be to manage an Excel spreadsheet? Too hard for the mandarins at BIS, obviously.

The inclusion of Monsoon Accessorize for the retailer’s failure to pay an average of £72.68 to 1,438 of its employees predictably dominated press and media coverage, but otherwise the list of 113 was much like all previous rounds of naming & shaming in being comprised almost entirely of small fry – many of them very small fry indeed. Excluding Monsoon Accessorize, the average underpayment (and so financial penalty) was £2,537.65, and the average underpayment per worker just £1,124.53 (that is, less than the £1,200 that the Party of Equality thinks it is entirely reasonable to charge low-paid workers to pursue a tribunal claim for race, sex or other discrimination). And, excluding the 1,438 Monsoon Accessorize employees, NMW underpayments were recovered by HMRC for just 255 employees of the other 112 firms.

In 53 of all 113 cases, the total underpayment (and so financial penalty) was less than £1,000, and in all but 15 cases it was less than £5,000. In 77 of the 113 cases, just one worker was underpaid, and only in 13 cases were five or more workers underpaid by the employer. Lucky the Coalition government upped the maximum penalty to £20,000 per worker, eh?

And, as with previous rounds of naming & shaming, the list of 113 was dominated by local hairdressers & beauty salons (25); pubs, cafes and hotels (16); and second hand-car dealers (8). I know – not least because former BIS mandarin Bill Wells keeps telling me – that the NMW apprenticeship rates might be difficult for small hairdressing business owners to fully understand, but does that really explain HMRC’s apparent obsession with the sector? And when-oh-when are BIS going to start naming & shaming some of the 100+ social care employers that, back in April this year, then BIS minister Jo Swinson said HMRC were then investigating? (Yes, Bill, I know, there is absolutely no abuse of the NMW in the social care sector, the authors of all those reports saying the opposite are simply deluded).

So – not that Gem will notice, she’s far too busy fighting HR wars with her lightsaber at #CIPD15 – here’s an updated chart, showing the 398 NMW rogues named & shamed by BIS to date, by sector.

NMW Nov 15

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July 13, 2015

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Will BIS meet the compliance challenge of Osborne’s Not-A-Living-Wage?

So, George Osborne so enjoyed his upstaging of Labour on the minimum wage in January 2014 that he cunningly reprised it as the final flourish of last week’s Budget – without bothering even to consult the Low Pay Commission, that will now have the job of translating the Chancellor’s political con trick into a workable plan. (And, according to the House of Commons library, that may well require new primary legislation).

In the days following the Chancellor’s flooring of Harriet Harman in the Commons, there was a small tsunami of newspaper comment pieces and blog posts seeking to analyse the deeper consequences, both political and economic, of the move. Among the more sanguine assessments were those by former Resolution Foundation wonk James Plunkett (The UK’s minimum wage just grew up) and the LSE’s Alan Manning (The National Living Wage: a policy experiment well worth trying), while even the Living Wage Foundation managed to utter a welcome through gritted teeth.

For all this hullabaloo, Osborne’s second minimum wage coup actually didn’t advance very far on his first. In January 2014, he asserted that the UK “economy can now afford” a minimum wage rate of £7 per hour. Now – a full 18 months later – he wins acres of news coverage for committing to a rate of £7.20 from April 2016. Never have so many journalists and wonks got so excited over a difference of 20p.

Whatever, a rate of £7.20 from April 2016 is still a hike of almost 11% from the current rate of £6.50 (due to rise to £6.70 in October). So I was just a little surprised that it wasn’t until Sunday – when the Observer carried an outstanding take-down by Gavin Kelly of the Resolution Foundation – that I saw any commentator give more than passing attention to the potentially significant compliance challenge this will pose for some employers, especially in sectors such as social care where – it is commonly agreed – non-compliance is already systemic. Gavin Kelly notes:

When it comes to employers, many sectors should be able to absorb this wage hike relatively easily, despite inevitable carping. But it will pose a severe challenge in some, above all in social care, where endemic low pay means two-thirds of all care workers currently get paid less than today’s [real] Living Wage. The truly heartening news is that more than 700,000 should now receive a pay rise. The worry is that if more public funding is not forthcoming to accommodate this increased wage bill we can expect an escalation in law-breaking by employers dodging their pay responsibilities, and an intensification of service rationing for the vulnerable.

So, was there anything meaningful in the Budget to address this “severe [compliance] challenge” and likely “escalation in law-breaking by employers dodging their pay responsibilities” from April 2016? No, there wasn’t [but see comment by Craig Gordon and my response]. Indeed, as welcome as any significant hike in the minimum wage rate (except for the under 25s) must be, it’s very hard to see any underlying strategy on the part of the Chancellor, beyond providing a deeply cynical fig leaf for his poverty-inducing slashing of tax credits.

Indeed, two months after taking office, the new crop of ministers have yet to give any indication that they consider compliance with the minimum wage to be much of a priority. It is now four months since BIS named any ‘NMW rogues’ under the ‘naming & shaming’ scheme revamped by the then (Liberal Democrat) ministers in October 2013. Which – according to the answers given by BIS to parliamentary questions tabled by Ian Murray in January and Caroline Lucas this month – means there is now a ‘backlog’ of some 340 employers to be added to the 210 named & shamed to date (under the revamped scheme, all employers issued with a Notice of Underpayment by HMRC get named & shamed, regardless of the circumstances and size of the underpayment involved).

At the end of his answer to Caroline Lucas, BIS minister Nick Boles states that BIS “expects to name more employers shortly.” Which does at least suggest that ministers have not completely given up on the naming & shaming scheme. But either the next BIS ‘naming & shaming’ press release will be very long indeed (the largest to date included just 70 NMW rogues), or ministers will have to be more selective than the scheme provides for (e.g. naming only the ‘worst’ offenders among the 340+). And, from April 2016, that choice is likely to be even more stark.

 

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March 25, 2015

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NMW naming & shaming: frying the small fry?

On Tuesday, in what might well prove to be her last significant act as BIS employment relations minister, Jo Swinson named a further round of 48 employers found by HMRC to have breached the National Minimum Wage (NMW). The BIS press release notes:

Between them, the companies named owe workers over £162,000 in arrears, and span sectors including fashion, publishing, hospitality, health and fitness, automotive, care, and retail. This latest round brings the total number of companies named and shamed under the new regime to 210 employers, with total arrears of over £635,000 and total penalties of over £248,000.

With this sixth round of naming & shaming coming just four weeks after the last one (of 70 employers, on 24 February), and just two months after the one before that (of 37 employers, on 15 January), it’s clear that the rebooted regime that came into force in October 2013 has finally ground up through the gears to reach full speed. And, were there not a general election on 7 May, we could expect this pattern of monthly BIS press releases, each naming some 50 employers, to continue from now on. Accordingly, now seems a good time to take stock of what has been achieved to date, and what that tells us about HMRC’s enforcement of the NMW more generally. So I’ve been crunching the numbers.

Perhaps the most striking – and significant – aspect of my number crunching is that the numbers are pretty small. Although the 210 named & shamed employers between them owed a total of £638,100 to a total of 5,396 workers, some 72 per cent (3,863) of those workers were underpaid by the three worst-offending employers (in terms of number of workers underpaid, though not necessarily the total or average arrears owed). In 121 (58 per cent) of cases, the employer had underpaid just one worker, and only in 12 cases had the employer underpaid 20 or more workers.

Similarly, in 180 (86 per cent) of cases, the total arrears owed by the employer was less than £5,000, and only five employers owed total arrears of more than £20,000 (the current maximum penalty imposed by HMRC in addition to payment of the arrears owed, which is otherwise set at 100% of the total arrears owed). Even more strikingly, overall, the average arrears owed per worker was just £118.25, or just 0.6 per cent of the new maximum penalty of £20,000 per worker provided for in the Small Business, Enterprise & Employment Bill, on the verge of receiving Royal Assent.

Indeed, only 30 employers (14 per cent) owed arrears of more than £2,000 per worker, and only two employers owed arrears of more than £10,000 per worker (NB in both cases, there was only one underpaid worker). In most cases, the sum owed per worker was relatively small: 104 of the 210 employers owed arrears of less than £500 per worker.

The impression that HMRC’s enforcement net is catching mostly small fry is reinforced when we breakdown the 210 employers by sector. From the following chart (which shows only those sectors with two or more of the 210 employers), we can see that 41 – almost one in five – of the 210 employers are hairdressers or beauty salons, and 37 (18 per cent) are a pub, restaurant, cafe or hotel. Only three care homes or home care firms have been named & shamed to date, and in those three cases the arrears owed per worker were just £178.76, £162.81, and £87.68 respectively. Yet, as noted previously, there is broad agreement that at least 200,000 of the social care sector’s 1.5 million workers are unlawfully paid below the NMW.

Name&shame

Yes, there are a few household names among the 210, including (in this week’s round) French Connection UK, Foot Locker, 99p Stores, Pizza Hut, and Bounty (UK) Ltd, which produces the ‘Bounty Packs’ handed out to new mothers. But most such cases appear to involve what Jo Swinson calls “irresponsible mistakes”, rather than the employer “wilfully breaking the law”. French Connection, for example, owed an average of £44.78 to 367 workers, while fellow high street fashion retailer H&M owed an average of just £4.82 to 540 workers.

All in all, the detail behind the headline numbers suggests that whoever has Ms Swinson’s job after 7 May should do rather more than simply decide whether to continue with the monthly BIS naming & shaming press releases. It’s time that HMRC’s enforcement net started catching some of the bigger (and nastier) fish in Britain’s minimum wage rogue lake, as well as the small fry. And that may well require new priorities, new strategies, and (even more) new money.

 

 

 

 

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February 24, 2015

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Labour losing race to the top on employment rights policy

So, the supposedly free-market Tories have had their Stalinist-sounding ‘long-term economic plan’, and now Labour has a ‘better economic plan’. Towards the end of the latter, a chapter entitled ‘Supporting firms to win the race to the top, not get dragged into a race to the bottom’, states:

Too often it is assumed that the only way for firms in sectors such as retail, hospitality and social care to compete is by cutting employee pay and conditions. But many firms in these sectors want to be able to compete through higher skill, higher wage business models, without being undercut and dragged into a race to the bottom.

The [Coalition] Government has actively encouraged a race to the bottom by weakening the UK’s enforcement regime and promoting a hire-and-fire culture: doubling the qualification period for unfair dismissal, introducing fees for employment tribunals, and setting up a controversial scheme whereby employees trade their employment rights in return for a share in the company.

[Labour’s new industrial strategy] is about giving employers the tools they need to raise standards, and also protect them from being undercut, by raising the minimum wage, ending the abuse of zero-hours contracts, and making it illegal to use agency workers to undercut wages and conditions.

Bafflingly, there’s no further mention of – let alone any pledge to reverse – that doubling of the unfair dismissal qualifying period. Nor is there any mention of Labour’s previous pledge to reform the tribunal fees that have done so much damage to the ‘enforcement regime’. Given that employer lobby groups such as the CBI and FSB have openly called for the hefty fees to be substantially lowered, this is an astonishing omission from what is clearly intended to be a business-friendly document.

Indeed, once you cut through the rather repetitive references to ‘the race to the bottom’ and ‘raising our ambitions for the domestically-traded sectors’, there are precious few commitments to policy reform that might actually help achieve the plan’s lofty goals. Apart from reiterating both welcome plans to “encourage more employers to pay a living wage” and the disappointingly modest pledge to “increase the minimum wage to £8 an hour before 2020”, the 80-page document sets out just three broad policy pledges specific to “reducing the pressures employers face to get dragged into a race to the bottom”:

1. Banning the abuse of zero-hours contracts: giving workers on zero-hours contracts new legal rights to be protected from employers forcing them to be available at all hours, insisting they cannot work for anyone else, or cancelling shifts at short notice without compensation, and giving workers on zero-hours contracts who are actually working regular hours week-in week-out a right to a contract with fixed minimum hours. We will also introduce a new Acas Code of Practice [on zero-hours contracts].

This is all very well, but – as I’ve previously noted elsewhere and the document itself recognises just two paragraphs later, in relation to enforcement of the minimum wage – there is no point having rules if they are not enforced. And, presumably, the only way to enforce these proposed new rules would be for individual workers to pursue a tribunal claim against their abusive employer. Which very few workers would be likely to do, even without the fees of up to £1,200 on which the document is so surprisingly silent. So, new Labour ministers could huff and puff all they like, but their shiny new rules wouldn’t blow many rogue employers down.

2. Tackling undercutting by rogue employment agencies: taking action to crack down on rogue agencies that exploit workers illegally for profit – for example through a licensing system that ensures agencies are complying with basic standards or stopped from operating; extending the Gangmasters Licensing Authority approach to cover sectors where there is evidence of high levels of migrant labour and exploitative working practices; and closing the loophole in the Agency Workers Directive that allows agency workers to be used to undercut employees.

This is more encouraging, even if it is somewhat ill-defined. However, both the employer lobby groups and past Labour ministers have been strongly against extending the GLA’s licensing regime to other sectors – with good reason. And, since 2010, Coalition ministers have reduced the BIS employment agency standards inspectorate to a rump of just three staff. So it’s not at all clear who Ed Miliband, Rachel Reeves and Chuka Umunna think would do all the cracking down. In short, there’s a lot of work yet to be done on this policy pledge if it’s to become more than a vague sop to the TUC, which has stuck rigidly to its call to extend the GLA regime.

3. Ensuring proper enforcement of the rules: there is no point in having rules if they are not enforced. Under this Government, the number of inspections into whether the National Minimum Wage was being paid has more than halved and there have been just two prosecutions since 2010. There is widespread agreement that better enforcement would support employers that play by the rules. Labour will improve this by: increasing the fines for breaching the minimum wage to £50,000; extending the remit of the HMRC minimum wage unit to cover holiday pay; giving councils a role in enforcement; and trebling the fines for knowingly employing illegal migrants.

The last of this third set of policy actions is little more than dog whistle politics, but there’s a good case for capitalising on the local, front-line knowledge of councils in order to improve enforcement of the NMW. And extending the HMRC unit’s remit to cover holiday pay is something I suggested in 2011, as an obvious first step in incrementally fusing the HMRC unit and the GLA into a genuine fair employment agency; more recently, it was a recommendation of the June 2014 report on low pay by Alan Buckle.

But Labour are kidding themselves – and the voting public – if they think that increasing the maximum penalty for breaching the NMW to £50,000 will have more than a marginal impact. For the penalty is set at 100 per cent of the total arrears owed, and in all but a handful of cases that sum is relatively small, and certainly well below £50,000. For example, among the 162 NMW-flouting firms named and shamed by BIS to date, including the tranche of 70 named today, the total arrears owed – and so the penalty imposed – was less than £10,000 in 154 cases, and exceeded the current maximum of £20,000 in just four cases. And, as they each involved a number of workers, those four cases would have been more than adequately covered by the Government’s proposed new maximum penalty of £20,000 per underpaid worker, set out in the Small Business, Enterprise & Employment Bill and almost certain to become law before Parliament is dissolved on 30 March.

Of course, Labour could increase the penalties by increasing the penalty rate from 100 per cent of the arrears owed to, say, 200 per cent. But that’s quite different to what Labour are saying they would do, and might be quite hard to justify when, in the vast majority of cases, the total sum owed in underpayments is relatively small, and the employer is a (very) small business. Among the 162 firms named and shamed by BIS, the average underpayment per worker was just £306.11, and no fewer than 35 of the 162 firms are hairdressers or beauty salons. We’re (mostly) not talking big corporates here.

All in all, Labour’s ‘better economic plan’ is depressingly short on credible, fully-formed (and costed) policy ideas for halting the race to the bottom in pay and working conditions. The good news is that I’m available to help sort that out, and my daily rate is a lot less than Jack Straw’s.

Waiting for your call, Chuka.

 

 

 

 

 

 

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January 16, 2015

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Do BIS & HMRC care about the care sector?

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.

 

 

 

 

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January 6, 2015

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BIS, you had one job!

Previously on this blog, I have noted how the revamped BIS scheme for naming & shaming employers found to have breached the National Minimum Wage has struggled to get beyond second gear since it came into force 15 months ago, with only 55 (mostly small) firms being named to date.

Now – after months of side-stepping questions by MPs Caroline Lucas and Stephen Timms – BIS has finally conceded that, in June last year, it somehow managed to wrongly name & shame two long-dissolved firms. Among the 25 firms named & shamed by BIS on 8 June, Michael at Zoom Ltd (company registration no: 08311831) was wrongly named as Zoom Ltd (04906202, dissolved in April 2010), and Masterpart Distribution Ltd (04153440) was wrongly named as Master Distribution Ltd (06878211, dissolved in November 2010).

Unfortunately, because NMW-flouting firms are named & shamed only by means of a BIS press release, with no central on-line register of those named, there is no way for BIS to publicly correct these elementary errors, other than to include the two right names in the next press release – whenever that might be. Until then, the number of ‘NMW rogues’ actually named & shamed stands at 53.

 

 

 

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May 21, 2014

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Is it possible to have a Business Secretary that is too flexible?

Last week, Vince Cable grabbed a few headlines with a notably insightful speech about labour market flexibility. In what looked suspiciously like a significant attempt to differentiate Cable’s Liberal Democrats from their Coalition partners, the Business Secretary quickly got to his point by posing an interesting set of questions:

“Is it possible to have labour markets that are too flexible? Are we in that position now in the UK? If so, how do we maintain the advantages of flexibility – for workers and firms – while reducing the costs?”

As is often the way with politicians, Cable had some ready answers to his own questions. Noting that, due to welfare reform and other Coalition policies, “the incentives to work, particularly in low skilled jobs, have never been sharper”, he suggested that “we need to ensure is that this doesn’t produce an entrenchment of low pay, low productivity jobs”.

Now, this may be the right time for me to advance my theory that Cable actually wrote this speech in 2010, but was never allowed to deliver it. So the speech languished at the bottom of his filing cabinet until last week, when he dusted it down and sneaked off to the Resolution Foundation without telling Dave, Nick or George. Had he delivered it in 2010, the speech might have enhanced his reputation as an avant-garde thinker on economic issues. Now, it just sounds rather too much like the rusty hinges of a dilapidated stable door swinging shut, several years after the horse has bolted.

Whatever, Cable had a number of specific ideas on how to prevent the entrenchment of low pay, low productivity jobs. You know, the entrenchment that hasn’t yet happened.

The most headline-grabbing of these was the suggestion that workers on a zero-hours contract should have a “right to request a fixed-hours contract, building on the model we already have for flexible working”. This is so left-field that I can’t decide whether it’s a stroke of brilliance or just plain daft. Perhaps some kindly #ukemplaw person could put me right on this.

Rather more mundanely, Cable suggested that, alongside “encouraging companies to invest in training their workforces”, the government should be ensuring “a strong structure to protect the minimum wage and strengthen [its] enforcement”.

Now it just so happens that Cable is the government minister in charge of protecting the minimum wage and strengthening its enforcement. So this is one area where he could really crack on with preventing the entrenchment of low pay, low productivity jobs.

And, to his credit, Cable has recently (if somewhat belatedly) increased the financial penalties for non-compliance. Furthermore, not only has the HMRC minimum wage enforcement division escaped the worst of the Coalition’s austerity cuts, but at 180 the number of NMW enforcement staff is actually some 20 per cent higher than when Labour left office in 2010 (though the number of compliance officers is much the same).

On the other hand, since Cable and his Coalition colleagues took office in 2010, not one employer has been prosecuted for criminal non-compliance with the minimum wage. And, since Cable introduced a process for ‘naming & shaming’ employers found by HMRC to have flouted the minimum wage in early 2011, just six employers have been so ‘named & shamed’ by Cable’s Department for Business, Innovation & Skills (BIS).

As recently as October last year, that ‘naming & shaming’ scheme was revamped, with Cable’s then junior minister, Jo Swinson, boldly asserting that the new, streamlined process 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, since that ministerial fanfare, just five (small) employers have been ‘named & shamed’ by BIS. Yet HMRC tell me (in response to a FoI request) that about 270 employers were issued with a Notice of Underpayment – the trigger for ‘naming & shaming’ under the revamped process – between 1 October and 28 February. Even allowing for the appeal process that Cable has indicated takes “roughly 150 days”, with the end of May approaching it is deeply puzzling why fewer than two per cent of those 270 “minimum wage rogues” have so far been ‘named & shamed’ by Cable’s department.

Has the process of ‘naming & shaming’ employers proved more difficult than Cable and Swinson envisaged? Or is their department simply being too flexible when it comes to tackling the entrenchment of low pay jobs?

Update (8 June): BIS has today named & shamed a further 25 (small) employers. But this still means that only 30 of the 270 minimum wage rogues caught by HMRC between 1 October and 28 February have been named & shamed under the new scheme. What about the other 240? How many have successfully appealed against being named & shamed? We really should be told. As the Independent notes, the 25 small employers named & shamed this week between them accounted for just £43,000, or less than one per cent, of the more than £4.6 million in underpayments identified by HMRC in 2013/14. And not one of the 25 firms will have paid anywhere near the current maximum penalty of £20,000, let alone the proposed new maximum of £20,000 per underpaid worker that Vince Cable seems to think is needed.

Update (16 June): Brilliant detective work by Michael Reed of the Free Representation Unit has uncovered the surprising fact that at least three of the 25 businesses named & shamed by BIS on 8 June were dissolved several years ago, in one case as long ago as 2009. Is BIS padding out its lists of those named & shamed with some ancient cases from the HMRC archives?

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February 28, 2014

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NMW naming & shaming: a start, but not much of one

So, Vince Cable has (sort of) stuck to his word. Back in January, he told MPs that he expected to see “a significant number” of employers, found by HMRC to have flouted the National Minimum Wage, to be ‘named & shamed’ under the new BIS scheme “by the end of February”.  The new scheme came into being on 1 October last year, replacing a previous scheme, introduced in January 2011, under which only one employer was ever named & shamed.

And so, on the very last day of February, BIS has just issued a press release in which it names five offending employers:

  • Peter Oakes of Peter Oakes Ltd, Macclesfield, neglected to pay £3619.70 to 2 workers
  • Lisa Maria Cathcart of Salon Sienna, Manchester, neglected to pay £1760.48 to a worker
  • Mohammed Yamin of Minto Guest House, Edinburgh, neglected to pay £808.56 to a worker
  • Anne Henderson of Chambers Hairdressers, Middlesbrough neglected to pay £452.22 to a worker
  • Ruzi Ruzyyev a car wash operator in Carmarthen neglected to pay £225.38 to a worker

However, as the TUC was quick to point out, all five are “small businesses who’ve underpaid [just one or two] members of staff. There are companies out there who are cheating hundreds of staff out of a legal minimum wage. These are the biggest offenders and their pay crimes must be made public too.”

Moreover, I’m not sure I’ll find any dictionary that defines ‘five’ as ‘a significant number’.  HMRC imposed penalties for flouting the NMW on just over 700 employers in 2012-13, and over 900 employers  in both 2011-12 and 2010-11.  So it seems reasonable to conclude that HMRC has imposed such penalties on some 250-400 employers since the new ‘naming & shaming’ scheme came into force on 1 October last year (and yes, I have asked for the actual number, by means of a FoI request, but HMRC has declined to answer).  Even allowing for the appeal process, which Cable said in January takes “roughly 150 days” – though quite why it should take that long in all cases isn’t at all clear – we might have expected a first tranche of at least 60 employers to have been named & shamed by now.

So, why have only five (small) employers been named & shamed to date?  And will a significant number of employers be named & shamed in the coming weeks and months?

Time will tell. But, credit where credit’s due, at least BIS has made a start.  Let’s hope those press releases keep coming.

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January 22, 2014

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NMW ‘naming & shaming’: Vince Cable gives hostage to fortune

You may by now have forgotten – always assuming you noticed in the first place – that, last Wednesday, Labour devoted one of their precious Opposition Day debates to the National Minimum Wage (NMW).  And you’d be in good company, for the entire Labour front bench seem to have done their best to forget it too.  And with good reason.

The most obvious reason is George Osborne’s brilliantly-timed NMW coup on Thursday evening, which seemed to catch shadow ministers not just napping but comatose.  And the real genius of Osborne’s strike was in crudely tossing aside the 15-year-old political pact that setting the NMW rate will be left to the Low Pay Commission (and, bar a few growls from the CBI, getting away with it).  For Osborne knew Ed Miliband couldn’t use his set-piece speech on the economy the following day to launch a counter-attack – “I’ll see your £7.00 per hour, George, and raise you £7.50 per hour”, perhaps – without the trade unions throwing their toys out the pram.

But even before Osborne launched his coup via Nick Robinson and the BBC, shadow work and pensions secretary Rachel Reeves, who kicked off Wednesday’s debate, had blasted both barrels of her shotgun through Labour’s own feet by launching a puerile and ill-informed ad hominem attack on business secretary Vince Cable, over his non-attendance at crucial votes on the then National Minimum Wage Bill in 1998.  An admirably restrained Cable initially declined to rise to the bait, but when he did it was both dignified and devastating:

Vince Cable: The Honourable Member for Leeds West [Rachel Reeves] made a great deal of the fact that, as she put it, the Conservatives opposed the national minimum wage and many Liberal Democrats opposed it. She speaks with all the self-confidence of somebody who was not here at the time.

Chris Bryant (Labour): You were and you didn’t vote.

Vince Cable: I did not particularly wish to raise this, but I am being asked personally to explain why I did not vote [in 1998]. It had a lot to do with the fact that my late wife was terminally ill at the time and I was in the Royal Marsden hospital. That is why my voting record at the time was poor on that and other issues.

As Isabel Hardman noted in a scathing Spectator blog post the following morning, “it’s not the first time someone has made the mistake of assuming that non-attendance at a vote has a sinister rather than sad explanation, but it rather blunted Labour’s attack on the Liberal Democrats” and was “all the more surprising given [Labour’s] recent rage over a Sun article describing Lucy Powell as ‘lazy’ when she had in fact been on maternity leave”.  Both Reeves and Chris Bryant later apologised to Cable.

For Labour and the hapless Reeves – who must surely be looking for a new researcher – it was all downhill from then on, and I’d be very surprised if anyone in Labour ever mentions this car crash of a debate ever again.  Cable was even able to parry Labour’s pledge to increase the civil penalties for non-compliance with the NMW (or ‘fines’, as shadow ministers wrongly insist on calling them) by confirming plans, first announced by the Prime Minister in November, to substantially increase the penalties from next month.

However, before sitting down Cable himself made a comment that I suspect may also come to be seen as something of a mistake.  Without having been pressed to defend the fact that only one employer has been ‘named and shamed’ for non-compliance with the NMW by his department since he introduced the practice in January 2011, the business secretary volunteered that “new guidelines for the naming and shaming process were issued to HMRC in October” – as indeed they were.  And he went on to say:

“There is also the question of due process.  Companies that are about to be named and shamed can appeal, and it is estimated that that process takes roughly 150 days.  I imagine that a significant number of cases would begin to emerge by the end of February; we can test that when the issue arises.”

The new guidance issued to HMRC in October under “revamped plans to make it easier to clamp down on rogue businesses” is certainly wider in scope than the original, clearly duff scheme.  According to the BIS press release at the time, “the revised scheme will name employers that have been issued with a Notice of Underpayment (NoU) by HMRC. This notice sets out the owed wages to be paid by the employer together with the [civil] penalty for not complying with minimum wage law”.  And, every year, HMRC issues some 700 NoUs.  So, were every employer issued with a NoU to be ‘named and shamed’ under the new scheme, then allowing for Cable’s 150-day due process we might indeed expect a first tranche of some 60 employers to be ‘named and shamed’ in late February or early March.

However, shortly after this revamp of the naming and shaming scheme came into force in October, the BIS employment relations minister, Jo Swinson, let slip on Twitter (in an exchange with the magnificent @HRBullets) that employers will not be ‘named and shamed’ via some kind of central, publicly-accessible register, as one might reasonably expect, but “through [BIS] press releases to maximise coverage” in “local [and] regional newspapers”.  So, either BIS will be issuing an awful lot of ‘naming & shaming’ press releases each month, or it will be releasing one or two press releases each containing the names of dozens of employers.  And, frankly, neither scenario sounds terribly likely to me.  Certainly, Jo Swinson didn’t take the opportunity provided by the Twitter exchange to confirm that all employers issued with a NoU by HMRC will be ‘named and shamed’ by BIS.

Whatever, as Vince Cable says, come the end of February, we will be able to test the issue.  And I will be very happy to be proven a cynic.

Postscript: Since posting the above, I have come across this written statement by Jo Swinson’s maternity cover, Jenny Willott, in the House of Commons yesterday in response to a PQ by Paul Maynard MP:

The revised NMW Naming and Shaming scheme which came into effect on 1 October 2013 made it easier to name employers that break national minimum wage law. By naming and shaming employers it is hoped that bad publicity will be an additional deterrent to employers who would otherwise be tempted not to pay the NMW. We anticipate naming employers very soon.