Tag Archives: National Minimum Wage

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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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September 24, 2015

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NMW enforcement: David Cameron ramps up the rhetoric (but not much else)

Late last month, prime minister David Cameron used an article in the Times – Parliament is just so yesterday, dahling – to announce that he is putting enforcement of the so-called national living wage (or increased national minimum wage rate for workers over the age of 25, if you prefer) from next April at the heart of his ‘One Nation’ agenda. According to the Guardian – for ideological as well as financial reasons, I am physically unable to read the Times – the prime minister wrote that the national living wage will only work if it is “properly enforced”. And, to that end, “a new labour market enforcement director will be appointed to ensure that firms comply” with the new rate of £7.20 an hour for the over 25s.

Somewhat surprisingly, none of the crack political correspondents reporting the prime ministerial ‘announcement’ spotted that this represents something of a policy climbdown by Cameron. As recently as May this year, he and other ministers were talking of creating “a new labour market enforcement agency” to “crack down on the worst cases of labour market exploitation”, including non-payment of the national minimum wage. Now, that “new agency” has shrunk to just one extra, director-level official. Woo hoo.

On the plus side, Cameron reportedly said his Government will “significantly increase” the budget for enforcement of the national minimum wage, which has already seen welcome increases under the Coalition, from a miserly £8.3m in 2013/14, to £9.2m in 2014/15, and £13.2m in 2015/16. At a time when departmental budgets are being slashed, such increases are not to be sniffed at. Unfortunately, the prime minister gave no indication of the size of the further “significant increase” he has in mind.

Furthermore, the rate at which financial penalties for non-compliance are calculated will be increased from 100% of the underpayment, to 200% (though the current maximum penalty of £20,000 per underpaid worker will remain). And there will be a new team in HMRC to “take forward criminal prosecutions of those who deliberately don’t comply” – in recent years, such (relatively expensive) prosecutions have been even rarer than they were under the last Labour government.

To “unscrupulous employers who think they can get Labour on the cheap”, wrote the prime minister, “the message is clear: underpay your staff, and you will pay the price.”

So it’s surprising that, since the general election in May, ministers have ‘named & shamed’ just one tranche of 75 unscrupulous employers found by HMRC to have breached the minimum wage. For some 50-60 such employers become eligible for ‘naming & shaming’ each month and, as recently confirmed by BIS in answer to a parliamentary question by Jo Stevens MP, the failure to ‘name & shame’ more than 75 since the last tranche of 48 in March means there is now a growing ‘backlog’ of more than 500 unscrupulous employers that BIS has yet to ‘name & shame’. Will it ever do so? We should be told.

Indeed, in late July, BIS announced an effective amnesty from both financial penalties and ‘naming & shaming’ for those NMW-breaching employers that self-report to HMRC. So much for ‘paying the price’ for underpaying your staff. Understandably perhaps, BIS ministers appear somewhat reluctant to say how many unscrupulous employers they have let off ‘paying the price’ since July.

All in all, the message is not quite as clear as the prime minister would have us believe. Underpay your staff, and you might pay the price. Or you might not.

Looking at the details of the tranche of 75 employers ‘named & shamed’ in July, it’s easy to see why Cameron’s announcement did not include any increase in the maximum penalty per worker, as not one of the 75 had to pay anywhere near £20,000 in penalties. The average total underpayment (and so penalty) was just £2052.86, and the average underpayment per worker just £1247.37. In 37 of the 75 cases, the total underpayment (and so penalty) was less than £1,000, and in all but ten it was less than £5,000. In 46 cases, just one worker was underpaid, and only in five cases were ten or more workers underpaid by the employer. One case involved 57 workers, and another 46 workers, but the underpayment per worker in those cases was just £71.41 and £6.61 respectively.

As with previous tranches of ‘naming & shaming’ then, we’re talking about relative small fry – the local hairdressers, beauty salons, pubs, cafes and second-hand car dealers. Indeed, looking at all 285 unscrupulous employers ‘named & shamed’ to date, it does seem that HMRC sees hairdressers and beauty salons as easy targets for keeping its ‘strike rate’ up. Then again, among the 14 hairdressers and beauty salons in this tranche were five of the ten employers found to owe more than £5,000.

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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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April 16, 2015

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Are there really no votes in employment rights?

So, the longest general election campaign in history – it surely started at least 12 months ago – has at last reached its final phase, with the three main political parties publishing their manifestos over a frantic three days at the start of this week. This blog’s founder, the fantabulous Sean Jones QC, has put his sanity at risk (so that you don’t have to) by ploughing through their combined 330 pages and documenting every last relevant policy commitment in the Hard Labour Guide to #ukemplaw Election Pledges. But I can’t resist adding a bit of (highly) subjective commentary.

Overall, it’s hard to avoid concluding that all three main parties see no great electoral advantage in trying to improve the working lives of some 30 million people. In 330 pages, there is just one mention of ‘flexible working’, and even that is just a reference (by the Lib Dems) to the Coalition’s extension of the right to request FW in 2014. Labour and the Liberal Democrats each use the word ‘exploitation’ in relation to workers just once, and the Tories four times – but five of those six uses of the word are in relation to migrant workers. Zero-hours contracts get six mentions by Labour, two by the Liberal Democrats, and one by the Tories, but there are no new ideas on how to tackle the exploitative use of such contracts. Despite the Coalition having handed the EHRC £1m to investigate “systemic” maternity discrimination, the issue gets just one brief mention (by Labour). And there is no mention anywhere of unfair dismissal.

Disappointingly, there is no space in the Liberal Democrats’ whopping, 160-page tome for Vince Cable’s October 2014 promise of a new Workers’ Rights Agency to “revamp efforts to enforce employment law and tackle the exploitation of workers” by combining the remits of “the minimum wage enforcement section of HMRC, the working time directive section at the Health & Safety Executive, the BIS Employment Agency Standards Inspectorate, and the GLA.” Perhaps I shouldn’t have pointed out that this was my idea. [Since I wrote this post, Jo Swinson has responded to a tweet from Sean Jones, saying “the idea still there” – ‘there’ presumably being the inside of Vince Cable’s head.]

Regular readers of this blog – hello David, Gem, Michael, Paul and Peter! – will not be surprised to hear that the first object of my skim reading was the issue of employment tribunal fees. The Tories let the cat out of the bag by claiming credit for “reducing the burden of employment law through our successful tribunal reforms” – that’s not what they said about their hefty, upfront fees at the time – and Labour can only find space for a tweaked, two-sentence version of the pledge previously set out in its Manifesto for Work:

The Conservatives have introduced fees of up to £1,200 for employment tribunal claimants, creating a significant barrier to workplace justice. We will abolish the Government’s employment tribunal fee system as part of wider reforms to make sure that affordability is not a barrier to workers having proper access to justice, employers get a quicker resolution, and the costs to the tax payer do not rise.

However, as noted previously on this blog, this raises at least as many questions as it answers. And note that the Manifesto for Work’s “costs to the taxpayer are controlled” has mutated to the arguably more restrictive “do not rise”.

Somewhat surprisingly, the Liberal Democrats are even more parsimonious on the subject of what their BIS employment relations minister, Jo Swinson, recently described as “one of the most high-profile debates around employment law in the last Parliament”. Their manifesto manages just a wishy-washy half sentence:

We will improve the enforcement of employment rights, reviewing employment tribunal fees to ensure they are not a barrier.

Whoopie doo. The Liberal Democrats devote more space to a promise of legal protection for bumblebee nests. Clearly, worker bees are more important than workers to a Liberal Democrat economy.

On the plus side, all three parties pledge to work to close the gender pay gap. The Tories say they “want to see full, genuine gender equality. The gender pay gap is the lowest on record, but we want to reduce it further and will push business to do so: we will require companies with more than 250 employees to publish the difference between the average pay of their male and female employees”. Similarly, a Labour government would “go further in reducing discrimination against women, requiring large companies to publish their gender pay gap and strengthening the law against maternity discrimination” – though there’s no indication of how they would do the latter. The Liberal Democrats only have enough space to say they would “work to end the gender pay gap, including with new rules on gender pay transparency”. The voting public could be forgiven for not realising that  little if any of this is new, mandatory gender pay gap reporting having been one of the last actions of the Coalition.

More positively, all three parties commit to the national minimum wage, and it’s especially heartening to see the Tories confirm they “strongly support the [NMW] and want to see further real-terms increases in the next Parliament”. They go on to expose the pathetic timidity of Labour’s promise of £8 per hour from October 2019, by stating: “We accept the recommendation of the Low Pay Commission that the [NMW rate] should rise to £6.70 this autumn, on course for a [rate] that will be over £8 by the end of the decade”. This is accompanied by a pledge to increase the tax-free Personal Allowance from £10,600 to £12,500, so that “those working 30 hours on the minimum wage pay no Income Tax”.

However,  as the FT’s John McDermott notes, this pledge is “less than it seems”, as a minimum wage rate of £8 per hour by the end of the decade would mean £12,480 per year for a worker on 30 hours per week. So, “give or take £20, [a Personal Allowance of £12,500] won’t make any tangible difference”. In any case, most workers on the minimum wage work fewer than 30 hours per week, so already pay very little if any Income Tax. And then there’s National Insurance.

Much the same can be said of the Tories’ other eye-catching move to outbid Labour’s core childcare offer (an expansion of “free childcare from 15 to 25 hours per week for working parents of three and four-year-olds, paid for with an increase in the bank levy”) with a pledge to “give families where all parents are working an entitlement to 30 hours of free childcare for their three and four year-olds”. This pledge is costed at £350m, which sounds too good to be true – and it is. As Sarah Hayward, leader of Camden council, points out in a splendid demolition job, the Tories have previously ‘costed’ Labour’s less ambitious pledge at £1.5bn (Labour’s own figure is £800m). So, to deliver 50% more extra hours than Labour for just £350m, “the quality of the childcare would need to be so appalling that no right-minded parent would ever subject their child to it”.

Elsewhere, the Liberal Democrats re-iterate their offer of an extra four weeks of paternity leave, but only at the current, lousy rate of pay (£138 per week, or just 60% of the NMW), and Labour repeats its February 2015 pledge of an extra two weeks, paid at a much more respectable £260 per week. And, in Labour’s separate Manifesto for Women, issued two days after the main event, there is an interesting promise to “consult on allowing grandparents who want to be more involved in caring for their grandchildren to share in parents’ unpaid parental leave, enabling them to take time off work without fear of losing their job”. This has been welcomed by the CBI, and represents a significant and well-deserved win for Grandparents Plus, which has mounted a sustained campaign on the issue.

And that’s about it. I just hope that, in 2020, at least some of the political parties will bear in mind the axiom that less is more. Because I just don’t think Sean Jones could survive 330 pages again.

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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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March 6, 2015

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NMW enforcement: the politics (and economics) of justice

Earlier this week, Labour launched a press and Twitter offensive against Conservative BIS minister George Freeman, after the latter appeared to dismiss the former’s concern about enforcement of the minimum wage as “the politics of envy”. During a short Delegated Legislation Committee debate on draft minimum wage Regulations on Monday, Freeman had been pressed by Labour MPs Stella Creasy and Stephen Doughty on the number of criminal prosecutions of employers for breach of the minimum wage – just one under Freeman’s government to date. And, towards the end of the debate, Ms Creasy hinted at a surprising lack of knowledge of the enforcement regime on her part when she demanded:

Will the Minister talk us through the consequences to companies of not following the [NMW] regulations? If the number of prosecutions is so low, and those who are named and shamed can bear the brunt of not being popular, is there really any consequence of not paying all those low-paid workers?

The Minister responded:

As I set out in my opening remarks, there are very heavy penalties [for non-compliance]. The hon. Lady may not ever have run a business, but I assure her that for people who do so, fines and reputational damage are a major force for compliance. Prosecutions may satisfy the politics of envy of the Opposition, but they are not the best mechanism to drive compliance.

A crass remark, for sure, but one problem with Labour’s head office and MPs making such a loud and gleeful noise about it is that it invites us to ask what approach Labour would take to enforcement of the minimum wage should they find themselves in government on 8 May.

For, crassness aside, the Minister makes a good point. The criminal prosecution of minimum wage rogues has never been a key element of the enforcement regime, with the Labour government that established the regime itself managing only seven prosecutions in the four years after criminal sanctions came into force in 2006. Indeed, that Labour government had deliberately created an enforcement regime based on HMRC securing compliance (and payment of arrears to workers) through investigation and the imposition of civil penalties, without resorting to resource-draining prosecutions in the criminal courts. So it is at least arguable that every prosecution represents a failure of the enforcement regime, as designed by Labour. In other words, the fewer prosecutions there are, the better.

Certainly, the number of prosecutions is not a very helpful yardstick. What matters most is whether minimum wage-flouting employers believe there is a real risk they will be investigated by HMRC. And that depends upon the financial resources made available to HMRC for intelligence gathering, inspections, and investigations.

In any case, the inescapable fact is that criminal prosecutions are at least 25 times more costly than a standard investigation by HMRC. According to official figures cited in the Trust for London report Settle for nothing less, a criminal prosecution costs at least £50,000, while the average HMRC investigation costs just £1,850. So, if prospective ministers such as Ms Creasy want there to be more criminal prosecutions from 7 May, they will either have to come up with (a lot) more money, or face presiding over a substantial cut in the number of HMRC investigations.

To date, there has been no indication from any shadow minister that Labour would increase the spend on minimum wage enforcement – which the Coalition has recently increased by an impressive 50 per cent, from £8 million in 2013-14, to £9 million in 2014-15, and a budgeted £12 million for 2015-16. Indeed, Vince Cable and Jo Swinson have steadily shot most of Labour’s minimum wage enforcement foxes: naming & shaming is (finally) gearing up; the maximum civil penalty has been increased from £5,000 to £20,000; and, as I’ve noted previously on this blog, that maximum penalty will increase again to a more than adequate £20,000 per underpaid worker just as soon as the Small Business, Enterprise & Employment Bill becomes law. Poor Labour MPs are left waving little more than a meaningless pledge to ‘increase’ the maximum penalty to £50,000 (per employer or per worker, no one’s thought it necessary to spell out).

So, do Labour plan to reshape the enforcement regime, with a new emphasis on (expensive) criminal prosecutions? I put that question to Ms Creasy and Mr Doughty on Twitter, but they didn’t respond. I guess it’s easier to make fun of hapless government ministers than it is to explain what you’d do differently if you were sitting in their ministerial chair.

Postscript: Ms Creasy appears to have read this post, but has not (yet) taken the opportunity to explain the extent to which criminal prosecutions would feature in a Labour government’s approach to enforcement of the minimum wage.

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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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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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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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Have your say on the Small Business, Enterprise & Employment Bill

After a slow start – nothing much happened until early 2011 – the Tory-led Coalition has kept us employment policy wonks pretty busy over the last four years. We’ve had one significant piece of primary legislation – the Employment & Regulatory Reform Act 2013 – and several pieces of secondary legislation providing for extensive reform of both employment law and the employment tribunal system. We’ve had an overhaul of the employment tribunal rules of procedure, some tinkering (yet to come fully into force) with the law relating to parental leave, and a major consultation on how to tackle the proliferation and abuse of zero-hours contracts. And, last but not least, we’ve had the introduction of hefty, upfront fees for tribunal claimants that have demolished access to justice on workplace rights.

However, with the Tories and Liberal Democrats having arranged for the nation to enjoy a full five years of coalition government, irrespective of what the nation might want, ministers have decided there’s still time for a tad more employment law reform.

Well, I say ‘reform’, but the handful of clauses on employment law in Part 11 of the Small Business, Enterprise & Employment Bill – which starts its committee stage in the Commons on 14 October – are more tidying-up than fundamental change. And at least three of them are likely to make little if any practical difference, however sensible and welcome they might seem at first glance.

Given the scope and arguably more fundamental nature of the rest of the 142-clause Bill, it seems unlikely that these employment provisions will receive more than limited scrutiny by MPs and peers. But the Committee of MPs that starts work next week is keen to receive external input, and if you have the time and the inclination you can submit your views and comments up until 6 November.

I urge you to do so. And, for what it’s worth, the following is what I have submitted to the Committee, covering clauses 136, 138, and 139.

Clause 136: Financial penalties for non-payment of an ET award

Clause 136 provides for the imposition of a financial penalty of up to £5,000 on an employer who fails to pay a tribunal award (or Acas-conciliated settlement), the aim being to discourage such non-payment.

During my time at Citizens Advice (2000 – 2013), I researched and wrote three reports on the widespread non-payment of tribunal awards: Empty justice (2004); Hollow victories (2005); and Justice denied (2008). So I warmly welcome the financial penalty mechanism provided for in clause 136, not least because it is pretty much the same mechanism that I proposed to ministers in 2012, during the passage of the then Enterprise & Regulatory Reform Bill. Ministers were not (sufficiently) impressed by the idea then, but pressure from the opposition front bench did lead to BIS minister Jo Swinson commissioning further research on the issue (replicating the research commissioned by the Ministry of Justice, in direct response to Justice denied, in 2009). And the damning findings of that BIS-commissioned research have evidently led to a ministerial change of heart.

Some have been quick to note that clause 136 would not solve the problem of non-payment of awards and Acas settlements. Indeed it would not, but then no single measure would, as the problem is extremely complex. There are other steps that BIS and the Ministry of Justice could and should take, such as ‘naming & shaming’ those employers who fail to pay up. But, by creating a meaningful financial disincentive to non-payment of an award, clause 136 could be expected to at least reduce the rate of non-compliance.

Except that, the kind of relatively low-value claim for e.g. unpaid wages, holiday pay and/or notice pay that has in the past often culminated in a hollow victory for the claimant when the employer fails to pay up, is also the very kind that has been eviscerated by the hefty, upfront tribunal fees introduced by the Ministry of Justice in July 2013.

Not surprisingly, vulnerable workers subjected to wage theft by a rogue employer have proven to be reluctant to throw up to £390 of good money after bad. So the number of claims for unpaid wages etc. has tumbled, from an average of 4,587 per month in the nine months immediately before the introduction of fees, to an average of just 1,073 in the nine months up to June 2014.

In short, thanks to the tribunal fees introduced in July 2013, the longstanding problem that clause 136 seeks to (partly) address is no longer quite the problem that it was. So, while BIS might now seek credit for trying to close the stable door, most of the horses have been galloping around the fields since July 2013, and will continue to do so until such time as the tribunal fees regime is substantially reformed.

Clause 138: Maximum financial penalty for breach of the NMW

Clause 138 provides for an increase in the maximum financial penalty that can be imposed by HMRC for breach of the national minimum wage, from £20,000 per employer (technically, £20,000 per Notice of Underpayment), to £20,000 per underpaid worker.

On the face of it, clause 138 is welcome. Fifteen years after its introduction, there can be no excuse for not paying the NMW. But the practical impact of clause 138 would be negligible, for two reasons.

Firstly, as the average underpayment (and penalty imposed) per worker was just £205 in 2013-14, the number of employers who pay even the current maximum penalty of £20,000 is small: just 52 (eight per cent) of all 652 employers penalised in 2013-14. So the number liable to receive a penalty anywhere near the proposed maximum of £20,000 per underpaid worker would be even smaller.

Secondly, HMRC already can in effect impose a penalty of up to £20,000 per underpaid worker, by the simple expedient of issuing more than the normal one Notice of Underpayment to the employer. This practice was adopted in March 2014, when the penalty percentage was increased from 50 per cent to 100 per cent of the total underpayment, and the maximum penalty was increased from £5,000 to £20,000. (I am not aware of any published figure for the number of employers issued with more than one Notice of Underpayment since March 2014, but the Minister may be able to provide that figure to the Committee).

In short, all that clause 138 would do is align the statutory power to set the maximum penalty with the practice adopted by HMRC in March 2014 (in order to meet the Prime Minister’s announcement in November 2013 that penalties would be both increased and imposed on a ‘per worker’ basis). According to the associated BIS Regulatory Impact Assessment, this would save HMRC some £250,000 per year in administrative costs associated with serving a small number of employers with more than one Notice of Underpayment.

However, that would be the sum total of the impact of clause 138. And, as it is not clear from the Regulatory Impact Assessment how HMRC (or BIS) arrived at the total costs figure of £250,000, even that figure might well be an over-estimate.

Clause 139: Banning exclusivity clauses in zero-hours contracts

According to a BIS facts sheet on the Bill, clause 139 would “make exclusivity clauses in zero-hours contracts invalid and unenforceable,” the aim being to address the abusive use of zero-hours contracts.

Such exclusivity clauses – which prevent an individual on a zero-hours contract from working for a second employer, even when no work is on offer from the first – are easily labeled as unfair. But even if clause 139 achieved its aim of making such clauses “invalid and unenforceable” – a rather large ‘if’ – it would still have little if any impact on the abusive use of zero-hours contracts, for the simple reason that such exclusivity clauses are far from essential to that abuse.

In practice, all that an abusive employer has to do is let it be known that taking work with another employer will result in no further work being offered. Employment law specialist Mark Tarran has put it this way:

Zero-hours contracts before [clause 139]: “If you work anywhere else you will be in breach of contract and I won’t give you any more work.”

Zero-hours contracts after [clause 139]: “If you work anywhere else you will not be in breach of contract but I still won’t give you any more work.”

It is worth noting that, according to BIS, only 125,000 – about one in ten – of the estimated 1.2 million zero-hours workers have an exclusivity clause in their contract. And why would employers not have bothered to insert such a clause into nine out of ten zero-hours contracts? They didn’t, because they don’t need to. Take away the exclusivity clause, and the worker is still on a zero-hours contract, with no guarantee of work from one week to the next. And that is what makes them vulnerable to abuse.

To my mind, zero-hours contracts are best viewed as one (very nasty) symptom of a killer disease: the abuse of vulnerable workers by exploitative employers. That disease has become more prevalent and more virulent in recent years. But treating a symptom will not cure the disease, even if it makes the doctor feel more comfortable.

[Postscript: my submission has now been published by the Bill Committee]