01 April 2020
The CIPP policy and research team set out the response to the call for evidence.
The Director of Labour Market Enforcement (DLME) is responsible for setting a strategy that directs the activities of these three key employment enforcement agencies:
- HM Revenue and Customs (HMRC) which has responsibility for enforcement of national minimum wage (NMW)
- Gangmasters and Labour Abuse Authority (GLAA)
- Employment Agency Standards Inspectorate (EAS).
The post was originally held by Sir David Metcalfe, who retired in 2019 following publication of the DLME’s 2019/20 strategy. It is now held on an interim basis by Matthew Taylor who, following his review of modern employment practice, needs no introduction.
The 2019/20 strategy focused on prioritising resources, helping employers to be compliant, and addressing serious/persistent non-compliance via joint working across the three bodies. In the latter endeavour and for the most egregious cases, the three agencies work alongside police forces and the National Crime Agency.
In the call for evidence for the 2020/21 strategy, which is to be presented to government by the end of March, the DLME has turned the focus on four key areas found to have high levels of non-compliance in delivering employment rights to their employees and workers. These comprise: agriculture, construction, hand car washes, and social care sectors.
Despite this focus, stakeholders were not precluded from providing comments or evidence on other subjects or more general areas of employment. Due to the short time given to this consultation it was to this latter area that the Institute’s policy and research team focussed our response, using evidence and views gained from discussions with members and the wider profession during 2019.
The CIPP does not condone intentional non-compliance and criminal activity which is typically representative behaviour of the most egregious employers.
Our response to the call for evidence aimed to highlight some of the key challenges impacting employers striving both to achieve compliance with the complex structure of legislation governing worker rights and employer obligations across the UK, and to provide fair working conditions for their employees and workers.
In the 2018/19 strategy, the DLME discussed concerns raised during the call for evidence as to the lack of a comprehensive programme of education and support for employers which would enable them to fully comprehend and thus comply in delivering employee and worker rights as they relate to the NMW. The DLME wrote: “where there is lack of intent, compliance theory would suggest that one effective enforcement approach is to concentrate on providing information, education and support to help prevent these mistakes. Stakeholders reported back to us however that this was not their experience with [minimum wage] enforcement.”
Although we have observed a slight increase in education delivery on the subject of NMW administration (e.g. webinars through the HMRC Talking Points programme), anecdotal evidence suggests that experiences when faced with a NMW inspection reveal problem areas that could have been avoided had guidance and information been more ‘joined up’. An example would be uniforms, which has relevance: for the employer from a tax and National Insurance contributions (NICs) reporting perspective; for the employee from a tax relief perspective; and for the self-employed from allowable expenses perspective. The rules for tax and NICs surrounding uniforms can be complex to understand; consider the wide definition used in describing a uniform for NMW purposes – and an area for error and mistake arises.
Deductions from pay for earnings attachments issued by the courts and others, also give rise to error as HMRC have strictly defined these as being a deduction made ‘for the benefit of the employer’. Yet, because they are permitted to be made – as highlighted in the earnings attachment notice – the unwary employer falls foul of the rules where the employee is paid at or around the NMW rate. This continues to capture the unwary.
Guidance and educational materials should cover the different impact that varying policies have on common themes and subjects. This would be a new provision and require significant cross-government working, with stakeholders potentially providing significant help in this endeavour.
The technical operation of NMW (and pay as you earn and NICs) largely does not vary across sectors. However, useful directed case studies within guidance and information (whatever media are used) could aid employers to understand and apply correctly the rules explained in guidance from the Department for Business, Energy and Industrial Strategy (BEIS). This is particularly where that guidance is in HTML format online.
Impact of legal rulings
Where court rulings set legal precedence, the impact on the operation of NMW (and other subjects) should be made clear by BEIS and HMRC at the earliest opportunity. Media campaigns should be used to raise wide awareness of the impact, together with prompt updates to operational guidance and education materials. The delays that have been experienced in recent years across many policy subjects are unacceptable.
Whilst the media should not be relied upon to cascade critical technical information without direction (which otherwise can lead to misinformation and confusion), neither BEIS nor HMRC fully utilise the efficiency of stakeholders to cascade important and accurate messages and updates in the interim, while working to update their library of employer information, education, support materials and resources.
Stakeholders and employer support mechanisms
When an employer recruits their first employee or worker, no longer can they work to comply in isolation with the myriad of legal obligations that are placed on them.
On the contrary, they need a significant support mechanism in order to deliver and stay up to date as they attempt to provide compliant payroll and human resources (HR) services, which as a minimum will include: accountants and payroll providers, software developers, legal/HR services, and banking services.
Guidance and technical information therefore needs to be provided at appropriate levels and at a time that recognises the needs of the users. A prime example of where this process is not as robust as it once was, and thus is failing employers, is software developers that support all stakeholders – they are key in ensuring the compliance chain.
We are pleased to see that BEIS and HMRC have begun to utilise the skills, knowledge and experience of stakeholders in delivering NMW compliance through the use of forums and gatherings, but more can be done. We welcome the opportunity of being involved now and in the future.
We believe that the DLME will play a key role in the establishment of the single enforcement body. Though we know this isn’t the focus of this call for evidence, it can’t be ignored as it will have an impact on the strategy and the work output of all three agencies.
We look forward to further discussions and trust that ample time will be given to develop and establish such an agency so as to ensure employers continue to be compliant and those experiencing unintentional non-compliance when paying NMW reduce in numbers. This is of particular importance as the reach of the minimum wage continues to increase.
This article was featured in the April issue of Professional in Payroll, Pensions and Reward magazine and was correct at the time of publication.