01 December 2020

The CIPP’s policy and research team outlines recent and continuing developments and the government’s response

As the government continues responding to the pandemic, it is important that workers are protected and that support is offered to businesses to help them be compliant in these unnerving times. With recent allegations of exploitation in clothing factories in Leicester the need to protect workers is further demonstrated.

The role of the director of Labour Market Enforcement (‘the director’), created through the Immigration Act 2016 (‘the Act’), was designed to tackle labour market exploitation and bring increased attention and strategic co-ordination to the enforcement of labour market legislation by the following three enforcement bodies:

  • the Employment Agency Standards Inspectorate
  • HM Revenue & Customs’ (HMRC’s) national minimum/living wage team
  • the Gangmasters and Labour Abuse Authority (GLAA).

Appointed as the first director on 1 January 2017, Sir David Metcalf CBE was required by the Act’s provisions to prepare an annual labour market strategy report. The aim was to assess the extent and nature of non-compliance within the labour market, to set priorities for the future for the three enforcement bodies, and to distribute resources needed to deliver those priorities.

Important changes have already been made since the last strategy release, including legislation which extends to all workers the right to receive a payslip and ensures that employers must also state hours worked for those classed as ‘time paid’ workers.

In July 2019, shortly before retiring, Sir David Metcalf published the 2019/20 strategy, making 44 recommendations to the government. All the recommendations had the aim of building on developments already made by the enforcement bodies, in response to the director’s introductory strategies that were published in July 2017 and May 2018.

In June 2019, the government opened a public consultation on the proposals for establishing a new single enforcement body for employment rights (https://bit.ly/2Tt4NMt) and will be formally responding to the consultation shortly.

In August 2019, Matthew Taylor was appointed as the interim director of Labour Market Enforcement, and the government will shortly begin the recruitment process to appoint a permanent successor. The appointee will have a role to play in the transition to a new body, guaranteeing enforcement outcomes are maintained. The government will need to work directly with the director during the process to develop and implement plans for the new body.

The government’s response
In October 2020, the government published a response to the director’s 2019/20 strategy. Of the 44 recommendations considered by the government, 35 are accepted, eight partially accepted and just one rejected in full. As well as setting out the steps the government is taking to protect vulnerable workers, supporting businesses to adhere to the law and to improve joint working between the enforcement bodies, the actions detailed in the response represent an important foothold to deliver on the Conservative party’s manifesto’s pledge of establishing a single labour market enforcement body. It is intended this body will bring together all the enforcement bodies listed above into a single organisation to develop best practices.

National minimum wage (NMW) and its compliance dominates the strategy set out by Sir David Metcalf, with a strong emphasis on communication and collaboration between the government departments, which enforce the need for the single enforcement body. It was highlighted that there was a strong need to better understand the scale and nature of non-compliance within the labour market. By doing so, this would enable effective prioritisation of the enforcement resources available and fully evaluate the impact of enforcement activity. This was agreed by the government, with them stating that “it is important that resources and interventions are targeted in the most effective way to reduce employer non-compliance and protect workers and welcomes the recommendations in this area”.

National minimum wage
Currently, HMRC deploys national resources in order to meet the commitments set out in their service level agreement with the Department for Business, Energy & Industrial Strategy. The NMW compliance strategy – based on promote, prevent, respond – sees HMRC taking a differentiated approach to tackle identified risks, ensuring that efficient use of resources occurs and to maximise the scope of coverage to the enforcement programme. Action has already been undertaken to broaden the coverage by way of extension to include Scotland and Northern Ireland, with new teams being created in areas of concern such as Bradford and Nottingham. Some 166 joint working operations have been conducted by the HMRC serious non-compliance teams in areas which have been identified as being high risk which includes car washes, nail bars, construction, and the textile industries.

Recommendations were made for HMRC to review its strategic intelligence function, which is already actioned by way of the production of the NMW Risk Strategic Report assessment that includes complaints along with intelligence analysis reviewed monthly at the Risk Governance Board. The Risk Intelligence Service analytical report includes analysis into the relevant sector or risk area derived from Risk Model information, Complaints, and Intelligence Analysis.

As NMW dominates the strategy, ensuring NMW compliance has never been more essential. Although a review of the ‘naming and shaming’ scheme for non-compliant NMW employers was suggested in the 2018/19 strategy, during this period the scheme was placed on hold. The review has been conducted and the government has decided to resume the naming for non-compliance. Cases where arrears are more than £500 per employer will be published which will enable focus on more serious cases; however, repeat offenders will be subjected to the previous lower threshold of £100 per employer.

When compared to the figures of 2015/16, the budget for NMW has more than doubled. Sir David’s recommendation of an increase to the budget for compliance and enforcement was accepted and increased to £27.4 million, which was beyond his actual recommendation.

The government also accepted that the GLAA should undertake more unannounced visits across the sectors that have been identified as being non-compliant.

Improving awareness of workers’ rights
It was recommended that the government and the enforcement bodies raise the awareness of workers’ rights. Both the government and the bodies understand the importance of this and accept there are opportunities for awareness to be increased. Measures have already been put in place to assist with this, one of which came into force in April 2020. From this date, it became a day-one right that all workers receive a written statement of particulars, and a key information document must be given to all agency workers who have registered with an agency.

It is recognised that the majority of employers want to do the right thing and comply with the complexities of employment law. Although guidance is updated across all sectors regularly, we are aware it can be a challenge to interpret. In the 2019/20 strategy, it was recommended that supplementary booklets should be produced to sit alongside published guidance. The government has advised that this recommendation will be partially accepted and that it will be publishing thematic guides on areas where breaches are most common. HMRC already deliver webinars to help with understanding complex topics surrounding employment rights and to aid employers to be compliant.

NMW and NLW are continually advertised not just to employers but to employees, too. Campaigns around the time when rates are changed are frequent, with the use of various types of media platforms. The excuse of not being aware of NMW/NLW requirements is not viable, especially with reminders being present almost everywhere.

Featured in the December 2020 - January 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.