Firms can expect a minimum wage investigation once every 500 years

The BEIS and Work and Pensions Committees continued their inquiry into the Taylor Review. Professor Sir David Metcalf CBE, Director, Labour Market Enforcement, was the sole person giving evidence on this occasion. His office is made up of a small team of eight people, which reports to the Home Office (responsible for the GLAA, the Gangmasters and Labour Abuse Authority) and BEIS.

The BEIS and Work and Pensions Committees continued their inquiry into the Taylor Review. Professor Sir David Metcalf CBE, Director, Labour Market Enforcement, was the sole person giving evidence on this occasion. His office is made up of a small team of eight people, which reports to the Home Office (responsible for the GLAA, the Gangmasters and Labour Abuse Authority) and BEIS.  

Sir David told Conservative Alex Burghart that it is not his job to protect traditional working methods against innovation, rather to ensure that the law is enforced. He said his office has not had the resources to develop an ‘intelligence hub’ as yet. The hub would involve taking intelligence from HMRC, Employment Agency Standards (EAS)[GC1] , and the Gangmasters and Labour Abuse Authority, as well as  local authorities, the Insolvency Service, the Pensions Regulator—‘all sorts of bodies’—and trying to put it together to get a better picture of the hidden economy. “We can then use that to help direct the proactive rather than the reactive compliance work”, he added. Sir David told Labour’s Frank Field that he does not expect Health and Safety to fall within his remit any time soon but they may feed into the ‘intelligence hub’.

On Uber, he told Labour’s Neil Coyle that he is not seeking to take test cases, although he said such cases seem to suggest that the Uber-type people are going to be defined as ‘workers’.

He told Chair Rachel Reeves: “If you take HMRC and the minimum wage, there are 1.3 million firms with employees. They took 2,600 cases last year. That means the average firm can expect an investigation once every 500 years. That is hardly an incentive to comply. In that case the fines should be large, but presently the maximum fine is twice the wage arrears. Last year the average wage arrears per worker were £110, so the fine is £220. Everybody wants more resources but, if you don’t have the resources to take more cases, the penalties have to be higher.” BEIS has been reasonably hostile to extra regulation, he said, even though extra penalties can be done by statutory instrument.

There might be a case of relating fines to the turnover of the company, Sir David believes.

SNP MP Chris Stephens wondered how the minimum wage can be enforced adequately when 25 per cent of the staffing complement at the HMRC’s minimum wage compliance unit is vacant posts. Agencies such as HMRC provide very good information, though, Sir David said.

Sir David added:

  • A statement of worker rights or a clear statement in employment terms for each worker would help in allowing an employee or a worker to judge when to make complaint. Workers at present do not have a right to a payslip, whereas an employee does have a right, which he says is wrong.
  • On the minimum wage, he is in favour of naming and shaming, but ‘it is blunt and some of the non-compliance is inadvertent’, but he does not buy the BEIS or HMRC line that it is as much as 80 per cent. He is even in favour of naming and shaming bigger companies involved in the supply chain, but only after private warnings.
  • He told Reeves that he backs the possibility of HMRC embargoing goods, say in the garment trade, to make sure the supply chain was compliant, which apparently happens in America.
  • He would strongly support new legislation to move tax and national insurance more closely together for the self-employed and employed, and to extend the remit of the employment agencies’ body to deal with umbrella companies and payroll intermediaries.
  • He told Labour’s Ruth George that he would like to see HMRC enforce holiday pay, on top of its enforcement of the minimum wage, but he has not thought about sick pay and paid parental leave.
  • The Government’s own evidence is that one in five apprentices is not getting the minimum wage, ‘therefore, there is a task for HMRC to be doing there’.
  • On status, he said the key thing is you should have clarity and right now we do not have clarity.
  • His office will recommend that the Employment Agency Standards Inspectorate take on monitoring the Swedish derogation, but they will need more resources.
  • He told Labour’s Peter Kyle that Taylor’s recommendation that non-guaranteed labour has a premium on the minimum wage/National Living Wage may further complicate matters; we already have five rates, but to go to 10 rates would probably be ‘over-egging the pudding’.

The full exchanges can be read here.

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