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May 26, 2015

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How not to measure the ‘level of ET claims’. Oh, too late …

Last weekend, Giles Wilkes – who served four years as special adviser to then business secretary Vince Cable – responded to a fairly innocuous blog post of mine, in which I urge new Tory ministers to conduct their long-promised review of the employment tribunal fees regime introduced in July 2013, by tweeting back:

Was there definitely nothing wrong with [the] ex-ante level of claims?

Now, this is uncomfortably close to one of the standard responses to criticism used by political scoundrels throughout public policy history: ‘So, you would have done nothing, huh?’ To which the answer is almost always: ‘No, I just wouldn’t have done what you did’. And my tweeted retort to Giles was indeed that there was “very little” wrong with the level of claims in mid-2011, when Dr Cable and then justice secretary Ken Clarke agreed to introduce hefty claimant fees, not least because claim/case numbers were at that time going down.

However, as one of the good guys in life (and the Coalition government), Giles deserves a fuller response to his question than it is possible to give in one or two tweets. So I promised him this blog post. What a lucky chap he is.

So, what was the ex-ante level of ET claims (or cases) in 2011? Well, the answer to that question is slightly complicated by the fact that there are two different types of ET case: (a) single claims/cases brought by individual workers; and (b) multiple claimant cases involving tens, hundreds or even thousands of workers, each with an identical (or very similar) claim against the same employer. For example, in 2012-13 – the last year before fees – there were 54,704 single claims/cases, and 6,104 multiple claimant cases (involving a total 136,837 claimants), brought against a total 60,808 employers (give or take some single claims brought against the same few recidivist employers). And, as a result, there are two alternative ways of measuring the ‘level of ET claims’.

The first way is to add the number of single claims/cases to the total number of claimants in the relatively small number of multiple claimant cases. This produces the ‘headline’ measure used exclusively (and wrongly) by Coalition ministers in 2011, 2012 and 2013. Giles will know better than me why they chose to use this measure, but the number of claimants involved in a handful of unusually large multiple claimant cases (mostly equal pay claims brought against NHS trusts and local authorities) enabled ministers to make otherwise un-evidenced (and grossly misleading) statements such as:

“Workplace disputes are increasingly being settled through tribunals – over 200,000 claims last year. We are in danger of getting away from the principle that they should be the last resort, not the first option.”

The second – and far more meaningful – way to measure the ‘level of ET claims’ is to total the number of single claims/cases and the number of multiple claimant cases. This is the measure that Dr Cable and Giles Wilkes should have focused on in 2011 and 2012, for two simple reasons: (i) it’s a much more meaningful measure of the workload of the ET system (as, in most multiple claimant cases, the tribunal only has to resolve one or two lead claims, even if there are 50,000 claimants in the case); and (ii) it equates to the number of employers affected. And, if that was obvious to me – a lowly policy officer in an under-resourced charity – in late 2011 and early 2012, it should have been obvious to the business secretary, his SpAD, and the then employment relations minister, Ed Davey.

This measure of the ‘level of ET claims’ is set out in the following chart, from which we can see that, in 2008-9 and 2009-10, the number of ET cases did rise quite significantly. However, as economists, Dr Cable, Giles Wilkes and Ed Davey would have known that this was entirely to be expected, given a little local (and global) difficulty in the economy from late 2008, and the associated wave of job losses and outright business failures. Indeed, in early 2011 a regulatory impact assessment issued by Dr Cable’s department noted that there had been “a clear rise in [the number of ET claims for unfair dismissal] coinciding with the downturn in the economy and particularly the level of redundancies which peaked in the second quarter of 2009”.

annual for GW blog

We can also see that, in 2010-11 – the first financial year of the Coalition government – the number of ET cases fell by 13 per cent, from 78,700 to 68,500. These figures were published in the autumn of 2011 – several weeks before Dr Cable announced the plan to introduce ET fees on 23 November – but they would have been available to, say, a SpAD in the private office of the business secretary or the BIS employment relations minister several months before that.

So, when Dr Cable told that somewhat partisan audience at the EEF in November 2011 that “we are in danger of getting away from the principle that [ETs] should be the last resort, not the first option”, he knew – or should have known – that the level of claims was in fact falling sharply. And, later, he would (or should) have known that this downward trend continued in both 2011-12 and 2012-13, as he and Ken Clarke (later Chris Grayling) finalised the ET fees regime for implementation in July 2013 – by which time the ‘level of claims’ was pretty much back to its lowest level since the turn of the century. In short, Dr Cable and his ministerial colleagues at the Ministry of Injustice could have ‘achieved’ a record low level of ET claims without even going into the office.

Now, Giles might well say that, just because the level of claims was falling, it cannot be said that there was nothing wrong with the level of claims. I cannot actually recall Dr Cable, Ed Davey or Norman Lamb making any speeches along the lines of ‘the level of ET claims is falling to a record low, but that is still far too high so we must take radical action to reduce it by another 65 per cent, and sod access to justice’, but hey. Nor can I recall even the maddest of the employer lobby groups suggesting that two-thirds of all ET claims were vexatious.

So let’s look at that 2010-11 figure of 68,500 ET cases more closely. Only about two-thirds (i.e. 45,000) of the 68,500 employers affected were private sector businesses, as one-third of all cases (and the vast majority of multiple claimant cases) are brought against public or voluntary sector employers. And there are about 1.2 million private sector employers in the UK. Accordingly, at the time Dr Cable rose to his feet at the EEF in November 2011, the average private sector business employer risked facing an ET claim about once every 27 years. Yet, according to a series of speeches delivered by Dr Cable and other ministers, this marginal risk was enough to keep our valiant entrepreneurial classes awake at night as they fretted over whether to take on another employee.

None of which is to say that, in 2011, there was not scope to improve the speed, consistency and efficiency of the ET system (and, to that end, I was later to play a tiny but entirely supportive role in the Underhill review of the ET procedural rules, also announced by Dr Cable in November 2011). But introducing fees of up to £1,200 to bring a claim for unfair dismissal or pregnancy-related discrimination was never itself going to improve the speed, consistency or efficiency of the system. Nor is it to say there was no case for a genuinely fair and reasonable ET fees regime – I argued for such a fees regime in 2012, including in the response of Citizens Advice to the formal consultation on ET fees, and have continued to do so ever since. Was Giles even aware of such alternative proposals for raising the Ministry’s £9-10 million per year?

In short, Vince Cable appears, at best, to have consented to Tory ministers’ proposal for hefty claimant fees on the basis of an entirely false premise about the ‘level of ET claims’, and without any evident understanding of the predictable (and predicted) impact of such prohibitive fees on workers’ access to justice. But then why spend time searching out the (informed) views of lowly third sector policy wonks or employment lawyers when you can spend it hanging out in the grand offices of the Institute of Directors and British Chambers of Commerce?

Throughout the lifetime of the Coalition, the Liberal Democrat ministers at BIS – Vince Cable, Ed Davey, Norman Lamb, Jo Swinson and Jenny Willott – appeared entirely uninterested in what they might learn from those outside the powerful lobby groups with their vested interests. And now, having ignored us, our evidence and our (dire) warnings for five long years, during which they consented (seemingly without much of a fight) to the single most damaging reform ever made to Britain’s system of employment rights – far more destructive than anything proposed by Adrian Beecroft – they blithely assure us we will miss them.

When it comes to employment rights, what’s to miss?

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February 17, 2015

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Will the next government put the ‘fair’ back into unfair dismissal law?

Last week, for some reason, my mind kept wandering back to 2011, the year in which every stakeholder meeting with BIS officials was dominated by a shouty policy wonk from the British Chambers of Commerce. The year in which BIS spent taxpayers’ money compiling a consultation response that – without so much as a ‘winking’ emoticon to let you in on the joke – stated:

In a survey of 1,100 of their nuttiest members, the Institute of Directors told us that large numbers of businesses had expressed concerns about dismissal and the risk of tribunal claims in relation to recruitment plans. Fifty-one per cent of respondents to the survey said that the one-year qualifying period for unfair dismissal was a ‘significant’ or ‘very significant’ factor in considering whether to take on an additional employee.

Yes, OK, I added ‘nuttiest’. But I don’t think it makes any difference. For the fact is business secretary Vince Cable opted to extend the unfair dismissal qualifying period to two years, on the basis that 561 (two per cent) of the 34,000 members of a Pall Mall-based organisation that’s had only two female heads in its 112-year history thought they could get a bit more deregulation of the labour market by ticking a box in a survey questionnaire. Perhaps, being a Liberal Democrat, Dr Cable just felt a natural affinity with the largely woman-free Institute.

To be fair to Dr Cable, the somewhat less nutty CBI did say that extending the unfair dismissal qualifying period would “have a positive impact on marginal hiring decisions, particularly in smaller firms.” But then that sort of depends on how you define ‘marginal’. Because what the November 2011 BIS consultation response failed to note is that, at that time, the UK’s 1.2 million employers faced an unfair dismissal claim just once every 27.5 years, on average. So, if business leaders really were hamstrung by anxiety over whether their next hiring decision would result in an unfair dismissal ET claim, then we know who to blame for the UK economy lagging behind so many of its competitors.

The BIS consultation response also overlooked the fact that, as shown by the following chart, the number of unfair dismissal claims had been declining steadily since early 2009 (when, of course, the economy was not exactly in best form). Faced with such statistical evidence, as distinct from the views of a self-selecting sliver of the membership of an exclusive Pall Mall club, most time-pressed ministers would probably have opted not to try and fix something not obviously broken. But poor Dr Cable had the abominable Adrian Beecroft and his pals in 10 and 11 Downing Street to deal with. So, with the economy struggling to get out of first gear, Dr Cable thought it best to make workers (aka consumers) a little bit more insecure, but not quite as insecure as Beecroft would have made them.

UDeras

And so it was that, in April 2012, the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012 extended the unfair dismissal qualifying period from 12 months to two years, and what we might call the Blair-Brown era of unfair dismissal claims (the red columns in the chart) came to an end. Then, somewhat ironically, given that the BIS consultation response had predicted the extension would result in a 3.3 per cent fall in the number of unfair dismissal claims, the dawn of the Beecroft-Cable era (the blue columns in the chart) saw a not insignificant increase in the number of such claims. (That 3.3 per cent, incidentally, is what we policy nerds call ‘spurious precision’. BIS had absolutely no idea how much claim numbers would fall by, if at all, but cunningly concealed that fact by suggesting it had calculated the drop to a tenth of one per cent. MPs and especially journalists fall for this every day of the week.)

Yes, there might have been an even bigger rise, had Dr Cable not acted as indecisively as he did. There’s simply no way of knowing. Whatever, by early 2013, the number of unfair dismissal claims had slipped back pretty much to where it had been in late 2010. And then, of course, we entered the Grayling-Swinson era (the orange columns in the chart), during which the number of unfair dismissal claims has fallen to levels not seen since the Institute of Directors last had a female head, in 1926. With the result that UK employers now face an unfair dismissal ET claim just once every 87 years, on average.

In short, this was evidence-free policy making, based on nothing more than an ideological hunch that eroding legal protection against unfair dismissal would somehow boost job creation. Yet, amid ever greater casualisation of the labour market, the move has unquestionably shifted the imbalance of power between workers and employers a little bit more in favour of the latter. So, with the economy now doing somewhat better than it was in late 2011, there’s a good case for putting the qualifying period back to one year (or even lowering it all the way to six months).

Good employers would have nothing to fear from such a move, as the law on unfair dismissal does not prevent an employer from dismissing a qualifying employee for incompetence or even just for not working hard enough – it simply requires the employer to follow a fair process when doing so. And, as Simon Jones notes in this blog post, that isn’t hard to do. But a shorter qualifying period would create a bit more security in what is an increasingly insecure labour market.

It seems safe to assume this is not a direction of travel in which Conservative ministers would go after 7 May, and the Liberal Democrats’ pre-manifesto, published last September, is entirely silent on the matter. The July 2014 report of Labour’s National Policy Forum, which is supposed to form the basis of the party’s general election manifesto, does include the extension of the qualifying period among a list of Coalition policies that have “fundamentally undermined employment rights”, but there’s no clear commitment to reverse the extension. Similarly, Labour’s better economic plan for prosperity, published yesterday, states:

The [Coalition] Government has actively encouraged a race to the bottom [in wages and skills] 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.

Despite this highlighting of the issue, there’s still no place in the plan for a pledge to reverse the doubling of the qualifying period for unfair dismissal (or, indeed, to do anything at all about the equally controversial employment tribunal fees). But then there was no mention in the National Policy Forum report of increasing paternity leave and pay, and that omission – together with a price tag of some £150m per year – hasn’t prevented Ed Miliband from pledging to do exactly that if Labour win in May.

If they genuinely believe in supporting businesses to win the race to the top, not get dragged into a race to the bottom, senior figures in both Labour and the Liberal Democrats should ensure their election manifesto includes a commitment to promptly lower the unfair dismissal qualifying period to 12 months. British bosses should not need more than 12 months to decide whether or not they’ve hired the right person. And the Institute of Directors should be told to go fish.

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October 12, 2014

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New parlour game: hunt the ET fees review

For much of this year, whenever the justice-denying impact of the employment tribunal fees introduced by the Ministry of Justice in July 2013 has been raised in public with business secretary Vince Cable or BIS employment relations minister Jenny Willott (covering Jo Swinson’s maternity leave), they have shielded themselves from any criticism by suggesting that the fees regime is under review.

For example, at a conference of employment lawyers in April, just weeks after the release of the first full set of quarterly figures showing a dramatic fall in the number of cases, Jenny Willott reportedly deflected questions from the floor by stating that “the level of fees” will be one of several issues considered under a review of the fees regime.

And, in the House of Commons in mid-July, just two weeks before the first anniversary of the fees regime coming into force, Vince Cable responded to an intervention by Labour MP Debbie Abrahams, drawing attention to the drop-off in the number of cases in the months up to 31 March, by stating:

“Yes, I am aware of a substantial fall in numbers. There are several reasons, which we are currently investigating, one of which could be connected with fees. Another reason is that earlier legislation sought to introduce an arbitration mechanism through ACAS as a first port of call.” (Hansard, House of Commons, 16 July 2014, col. 909)

Let’s leave aside the fact that the system of early conciliation by Acas to which Dr Cable was referring did not come into force until 6 April, so played no part in the dramatic fall in tribunal cases in the six months up to 31 March, and focus on that phrase “we are currently investigating”. Not ‘we will consider as part of a review at some point in the future’, but “we are currently investigating”.

The MPs who listened to Dr Cable that day in July, and anyone who subsequently read the Hansard record of the debate, could be forgiven for concluding from this that the government (or, at least, that part of the government in which Dr Cable includes himself) has been ‘investigating’ the tribunal fees regime for at least the last three months.

Except that … it hasn’t. At least, not according to Jo Swinson, who returned from maternity leave to her role as BIS employment relations minister over the summer.

Asked on Twitter last Thursday to confirm whether she agrees with Liberal Democrat Policy Paper 120 – adopted at the party’s conference in Glasgow earlier in the week – when it states that the “high level of tribunal fees presents too much of a barrier” to justice, Ms Swinson dodged the question but volunteered that the “lead department on this is [the Ministry of Justice] not BIS so they will be launching the review [of the fees regime]”.

Er, they will be launching the review?

Yes. Asked to clarify whether her earlier tweet meant that the government’s review of the fees regime is in progress or has yet to start, on Friday Ms Swinson tweeted confirmation that the review has “yet to start”. And, asked to say when it might start, Ms Swinson declined to answer but suggested the question be directed to the Ministry of Justice.

So, contrary to the statement made by Dr Cable to the House of Commons in mid-July, no one in government is yet investigating the “substantial” fall in tribunal cases since July 2013 (at least, not in any meaningful sense). And this despite just about everyone outside government – including the CBI and the Federation of Small Businesses – having concluded that the dramatic fall in the number of cases is entirely due to the fees being set far too high.

Ministers at the Ministry of Justice may start ‘investigating’ these matters at some point in the future, but if they have a timetable for doing so they don’t appear to have shared it with the BIS employment relations minister.

Which begs the question: what the **** are they waiting for? It’s not as if there is that much to ‘investigate’. Fees came in, and the number of cases dropped off a cliff that no one in government saw coming. End of.

It’s perhaps worth adding that, according to the answer to a written question in the House of Lords given by justice minister Lord Faulks, the Ministry was “currently finalising arrangements for the timing and scope of the review” as long ago as 24 June. Almost four months have passed since then. What are they doing? It’s not as if they are being asked to rerun the Hutton Inquiry.

 

 

 

 

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June 1, 2014

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Queen’s Speech: “May government will achieve grayth in hollow cable”

So, going by their breathless blog announcements earlier today, the most exciting legislative measure that the Liberal Democrats have been able to come up with for this week’s Queen’s Speech is … [drum roll] … an increase in the maximum penalty that can be imposed by HMRC for non-compliance with the national minimum wage.

Not only is this not news – the increase was formally announced by Vince Cable’s department in January, and was then re-announced in February – but in practical terms it’s next to meaningless, for the simple reason that very few if any of the minimum wage rogues caught by HMRC will receive financial penalties anywhere near the new maximum.

Until March this year, employers found by HMRC to have breached the minimum wage had to pay the unpaid wages, plus a financial penalty calculated as 50 per cent of the total underpayment for all workers found to have been underpaid, subject to a maximum of £5,000. However, following January’s announcement and the tabling of new Regulations, on 7 March the financial penalty percentage increased from 50 per cent to 100 per cent of the total unpaid wages owed to workers, and the maximum penalty increased to £20,000.

Now we’re told that, in line with the January and February announcements, a Bill in the Queen’s Speech will increase that maximum penalty to £20,000 per underpaid worker. Which will have all those minimum wage rogues running for cover! Er …won’t it?

Well, possibly, but I very much doubt it. In 2012/13 – the most recent year for which the relevant HMRC data is available – the average amount of underpaid wages was just … £300 per worker. Which means that, even under the new Regulations that came into force in March, the average financial penalty is in the region of £300 per worker – or just 1.5 per cent of the £20,000 per worker maximum that the Liberal Democrats, at least, seem to see as their jewel in the Queen’s Speech crown.

Indeed, we also know that, in 2012/13, just 51 (seven per cent) of the 708 minimum wage rogues caught by HMRC received the then maximum penalty of £5,000.  From which it seems reasonable to assume only a very small number of employers will receive the current maximum penalty of £20,000 that came into force in March, let alone the £20,000 per worker for which Vince Cable is now set to legislate.

In any case, if even the current maximum penalty of £20,000 is considered inadequate, why does Vince Cable not simply increase it to £50,000, or £100,000? That wouldn’t require a new Bill – the financial penalty percentage and maximum penalty can be increased at the flick of a minister’s pen, as they were in March.

The answer, of course, is that this measure has little if anything to do with ‘enhancing enforcement of the national minimum wage’. It’s a political move, intended to capture a few headlines and shoot one of Labour’s low pay foxes: Ed Miliband and other shadow ministers have repeatedly indicated they would increase the minimum wage financial penalties if elected in 2015.

While politicians play these meaningless games, back in the real world the bottom line is that better enforcement of the minimum wage requires a bigger chance of rogues getting caught by HMRC. And that means more HMRC boots on the ground. Which no political party is (yet) offering.

Postscript

Since I write and posted the above on Sunday, HMRC has issued a press release with key figures on enforcement of the minimum wage in 2013/14. This shows that, in 2013/14, the average  amount of underpaid wages was just … £205 per worker. Which means that, even under the new Regulations that came into force in March, the average financial penalty is just £205 per worker – or just one per cent of the proposed £20,000 per worker maximum. Interestingly, unlike last year, the press release does not include a figure for the number of employers who received the maximum penalty (of £5,000). Why could that be, I wonder?

Update (19 June):

BIS has today, in response to a parliamentary question by Caroline Lucas MP, confirmed that in 2013/14,  just 52 (eight per cent) of the 652 minimum wage rogues caught and issued with a financial penalty by HMRC received the then maximum penalty of £5,000.

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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.