The Low Pay Commission publishes blog on non-compliance in Leicester

01 September 2020

The Low Pay Commission (LPC) is interested in compliance in terms of the National Minimum Wage (NMW), even though it is not responsible for the enforcement of it, as this is managed by HMRC, on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). The overall strategic direction for enforcement is controlled by the Director of Labour Market Enforcement (DLME).

The LPC makes recommendations on what the levels of minimum wage should be each year, and also gathers evidence on the topic from both workers and employers. This includes discussion of the problem of underpayment. Underpayment issues range from ‘marginal’ underpayment of smaller figures, to more serious forms of abuse, which are linked to criminal activity, such as trafficking and modern slavery.

A new blog has been published by the LPC, as underpayment in the garment manufacturing industry in Leicester has been on its radar for some time. Initially, in 2009, and then in 2015, commissioners visited Leicester and listened to groups involved in, or aware of, problems of non-compliance in the city, which the LPC has detailed in some of its previous reports. It is important to state, however, that it is not just Leicester, or the garment industry, that unfortunately have a reputation for underpayment. Stakeholders have suggested that, in London and Manchester, garment manufacturers use similar practices and that there are prevalent issues in other industries. Leicester is noted as one of the most persistent and notorious areas for underpayment.

Journalists have frequently investigated and highlighted labour market abuses in this area and industry, and there have been a number of publications on the issue. Conversely, data drawn from employers seem to indicate that there isn’t any problem with under-payment which worryingly suggests that they are attempting to conceal the practice.

Both the DLME and HMRC are interested in Leicester’s textile industry but it is not an area that’s been focused on in more recent non-compliance reports, however the analysis of the challenges for the enforcement and compliance system are still relevant to the problem.

Workers have a tendency to refrain from reporting underpayment. The government should continue to highlight to workers what their rights are, and the LPC suggests that the complaints system should be more user-friendly for workers. BEIS and HMRC both carry out campaigns, but the example of Leicester seems to suggest that those campaigns could benefit from being more targeted. Localised campaigns have been piloted in Leicester, to target communities most vulnerable to exploitation.

The LPC identifies the fact that individual workers may feel uncomfortable in raising and pursuing complaints, particularly if English is not their first language and they are concerned about their immigration status. This may prevent them from reporting underpayments.

The Commission has, over recent years, recommended changes to the third-party complaints system, as feedback has highlighted its opacity, particularly for unions who are raising complaints on behalf of their members. It has been reported that there is little to no feedback on these cases, which undermines confidence in the enforcement system, among the groups it depends on.

If confidence in the third-party complaints system increases, then this would help more vulnerable workers in making complaints. They will, however, need support and encouragement from institutions they place trust in – unions, charities and community groups.

Non-compliance is enforced by HMRC, in which there are a variety of teams – some teams are focused on serious non-compliance, whilst others are dedicated to ‘large and complex’ cases. More serious non-compliance is not only a challenge for HMRC, as there is a need to coordinate between different agencies.

Only one textile manufacturer in Leicester has been included in the Government’s naming rounds of employers that underpay workers. This means that enforcement work in the city does not currently match up to the perceived scale of the problem.

The LPC released a report on non-compliance and enforcement in 2020, which suggested that HMRC should think about how it measures the cost-effectiveness of a variety of activities, to compare the relative value of different enforcement approaches. This would aid an understanding of how enforcement can provide a long-term solution for problem areas such as Leicester, in the future.


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