National Minimum Wage (Amendment) Regulations 2014
Viscount Younger of Leckie
That the Grand Committee do consider the National Minimum Wage (Amendment) Regulations 2014.
Relevant documents: 19th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)
My Lords, I shall also speak to the National Minimum Wage (Variation of Financial Penalty) Regulations 2014.
The purpose of these proposals is, first, to clarify that work experience opportunities offered to young people as part of traineeships, helping them to compete in the labour market, are not subject to national minimum wage requirements—this reflects the situation with other government programmes—and, secondly, to take a tougher approach on employers who do not pay their workers the minimum wage that they are legally entitled to by increasing the financial penalty that employers have to pay.
First, let me turn to traineeships. The Government are committed to tackling youth unemployment. Central to this is equipping young people with the skills that employers need. Employers tell us consistently that young people often lack the right skills, attitudes and experience when they apply for an apprenticeship or other job. Some 29% of employers say that experience is “critical” when recruiting, and a further 45% say that it is “significant”.
The traineeship programme was introduced in August 2013 to address this problem in England. Traineeships in England are a training programme that includes work experience. Lasting a maximum of six months, the programme has three core elements: work preparation training; English and maths for those without a good GCSE standard in these subjects; and a high-quality work experience placement with an employer. Traineeships unlock the sometimes hidden potential of young people who are motivated to work but unable to get on the first rung of the ladder because they lack basic skills and are not yet ready for work. Traineeships are there for these young people to equip them with the life skills and confidence that they need to make that vital first step into sustainable employment.
Over 500 training organisations have indicated that they will deliver traineeships in the first year of the programme, and many employers are already on board, including household names such as Virgin Media and Siemens. Many smaller employers have been engaged locally by training providers. We expect the programme to grow over time, helping more and more young people to get jobs, but we rely on employers offering work experience opportunities to make this possible.
Exemptions from the minimum wage for participants in government schemes or programmes with work experience, such as traineeships, are commonplace in minimum wage legislation. The Government consider that traineeships are covered by an existing exemption. However, given that there are a number of government programmes with work experience to which different exemptions apply, we are pursuing a bespoke exemption that specifically names and describes traineeships in the regulations, for the avoidance of any doubt that any work undertaken as part of a traineeship is exempt from the national minimum wage.
I will now turn to the second reason that noble Lords are here today in Committee. The Government continue to be committed to increasing compliance with minimum wage legislation and effective enforcement of the law. Everyone who is entitled to the minimum wage should receive it. The Government actively target employers who disregard their responsibilities and we investigate any complaints made against them. We will not hesitate to pursue civil and criminal proceedings where necessary.
Her Majesty’s Revenue and Customs began enforcing the minimum wage in April 1999. Since then, HMRC has identified more than £45 million in arrears for over 200,000 workers during more than 65,000 employer interventions. Her Majesty’s Revenue and Customs follows up every single complaint from a worker made through the free pay and work rights helpline. This commitment is at the core of minimum wage enforcement.
Our compliance and enforcement action is making an impact. In 2012-13, HMRC identified £3.9 million in wage arrears for over 26,000 workers. This is a 33% increase in the number of workers that the Government were able to help in 2012-13 and a 26% increase in arrears identified compared to 2009-10. Noble Lords will know how vital the minimum wage is for low-paid workers, and the Government are actively keeping our compliance and enforcement strategy under review. Our approach will continue to be informed by intelligence and data, where we ensure that we make the best use of all the tools and resources at our disposal.
Employers have a responsibility to ensure that workers receive the minimum wage that they are legally entitled to and should be well aware of the different rates for the national minimum wage depending on the circumstances of their workers. If employers are unsure, they should call the pay and work rights helpline for information.
Lord Jones (Lab)
My Lords, I thank the noble Viscount, Lord Leckie, for his useful introduction—if I may call it that. Looking at the Explanatory Memorandum to the National Minimum Wage (Variation of Financial Penalty) Regulations, I think that it appears to the reader here in Grand Committee to be a helpful, positive approach.
I welcome a tougher approach—that may be quoted—and the aim of skilling the young unemployed must be welcomed. I note that on this matter he mentioned England but, perhaps understandably, he did not venture to mention Wales. Is he able to give any information when he replies to the Committee as to what is happening in Wales on this matter?
It is also worth welcoming the aim of increasing compliance, which will necessarily involve instituting criminal proceedings. We heard in the Committee just now a very welcome commitment to the national minimum wage itself, which is a foundation statement when bringing in legislation such as this to your Lordships’ House. However, I recollect that in another place, when the national minimum wage was proposed by the Government of Mr Tony Blair, the opposition to it was somewhat lengthy and rather loud. It is good to hear from Her Majesty’s Government now a different tone of voice and a very obviously sincere commitment from the Minister.
With reference to the legislative background, we can only give three cheers to the phrase in the Explanatory Memorandum which states that,
“workers are entitled to be paid at least the minimum wage which is specified as one of four hourly rates”.
Also, paragraph 4.2 states that,
“the officer may serve a notice of underpayment requiring the employer to pay arrears to the worker or workers named in the notice”.
We can only imagine the difficulties of young people who are getting a miserable wage by law—some are not getting even that—and trying to make their way in a very difficult climate. Her Majesty’s Government should not lose sight of that dreadful situation across the nation today.
The Explanatory Memorandum also makes clear that there will be a requirement on,
“the employer to pay a financial penalty to the Secretary of State within 28 days of service of the notice”.
That has to be welcome, but I have questions concerning the policing that aims to prevent underpayment. Is the Minister able to tell us how many people make up that specific unit in HMRC’s enforcement section? If the work of the Government is to be done effectively, one hopes that that specific arm of government is adequately staffed. Often the suspicion is that HMRC is not adequately staffed, and it would be reassuring to hear what the numbers are.
Secondly, is the Minister able to tell us the total amount of fines for the latest available year? What was the largest fine imposed? Is he able to throw any light on that large fine, such as the details of the company? Is he able to enlarge on the answer, should he have it available to him?
Lord Young of Norwood Green (Lab)
My Lords, I thank the Minister for his introduction of these statutory instruments. I will deal with the traineeships first.
When reading the Explanatory Note, I noticed that the traineeships do not get any pay, or if they do it will be up to the employer; nor is there any requirement to pay travel expenses or lunch et cetera. I wonder how much the travel expenses—never mind the lack of pay—act as a deterrent to young people taking up these traineeships.
Obviously, we welcome anything that makes young people more employment ready. There was a reference to English and maths, but I am always surprised these days when I do not see any reference to IT. That is now such a key part of any young person’s employment capabilities that I would have thought it would have been in the mix.
It was also interesting to hear from the Minister that 500 training organisations have agreed to deliver these traineeships. As we know from experience, some of the apprenticeship training that was being delivered lacked quality and the Government had to take action. Bearing that in mind—it is not only this Government who have suffered, as we also had some difficult experiences—I think that it really emphasises the need to ensure that there is a monitoring process to ensure that we are getting value for money and a quality training process.
On minimum wage compliance, there have been lots of announcements by the Government. I certainly welcome the number of probing questions asked by my noble friend. I will be interested to hear the Minister’s answers. The Government have been saying over a period of time that they are going to “name and shame” those firms. It might act as an extra deterrent if they did so. Like my noble friend Lord Jones, I welcome the Government’s espousal of the minimum wage. He is absolutely right to remind us of the dire predictions that were made at the time about the terrible effect that it was going to have and the millions of jobs that were going to be lost—not taking into account the impact on millions of workers who were being paid, in some of the worst examples, £1 an hour.
I am glad that the Government are now fully in favour of the minimum wage, although not every Conservative Member of Parliament seems to be—indeed, some of them have put down Motions calling for small firms to be exempted from paying it. I would welcome some assurance that the Government will not be going down any such road. Given their previous strange decision regarding their magnificent bargain offer to employees to get rid of their employment rights in return for shares, I wonder what take-up there has been on that. It was almost like buy one get one free—if you believe in that, clearly you also believe in a free lunch.
To return to this statutory instrument, I found myself a bit confused by all the statistics being given by the Minister. I think I have this right: he talked about there being £45 million of arrears; I was not sure how many complaints that had resulted from. I could not quite comprehend whether or not these figures were going down as a result of the enforcement. That is what we want to see. I was pleased to hear the Minister introduce the pay and work rights helpline. It seems to be carrying out its function.
We welcome the higher penalties, although we probably think that they should be even higher still because there still seems to be a significant number of employers that believe they can get away with not paying the minimum wage, which is a real disgrace. The Minister and the noble Lord, Lord Jones, referred to getting a 50% reduction if you pay what you should have been paying. I suppose that I can see some logic in that if it gets them to pay up, but I would like some assurance that, if the same employer were to commit this offence again, we would not allow them to have a second chance of getting a 50% reduction. Would that apply if there were a repeat offence?
To summarise, we generally welcome this measure. I would be interested to know why we have not yet had any examples of the Government actually naming and shaming employers, which might act as a further deterrent, and I would like some clarification on how many cases of enforcement there have actually been over the period that this has been taking place.
Viscount Younger of Leckie
I thank noble Lords for their contributions during this very brief debate and I hope to address all the points that were raised.
The noble Lord, Lord Jones, raised important points about young people. It is true that there is much more work to be done. Although the deterioration of the labour market situation for young people predates the recession and this Government and the recession hit the employment rates among young people particularly hard—I think that everybody is aware of that—there are signs of recent improvements in the statistics.
In the three months to November 2013, there were 920,000 unemployed young people. While that figure was down 39,000 both over the quarter and over the year, that number illustrates how much work we need to do and must do. However, around a third of young people were in full-time education. The unemployment rate for this group was 18.1% in the three months to November 2013—young people make up around 9% of the total population. The number of young people on the claimant count has fallen for 19 consecutive months and was 315,000 in December 2013. In addition, the number of young people who have been claiming JSA for more than 12 months is down by around 25% over the year.
Youth unemployment remains lower than after past recessions: for example, 9% of 16 to 24 year-olds have left full-time education and are workless, against 12% back in 1993 and 14% in 1984. I thought that it might be helpful to produce some context for this discussion but at the same time reiterate how much more work there is to be done.
The noble Lord, Lord Jones, referred to Wales—a very important country and I say so as a Scot. I should clarify that the national minimum wage is a reserved matter. Changes to the penalties regime will cover the United Kingdom. Traineeships will be available only in England and the bespoke exemption will apply only in England. Therefore, in effect, it is not applicable in Wales and there will be no impact there.
The noble Lord also raised the issue of policing to prevent underpayment and asked how many people made up the enforcement unit within HMRC. That is a very specific question on which I will be very happy to write to him to give the figures.
The noble Lord, Lord Young, raised the issue of pay for traineeships. As he said, the general view is that traineeships would not be paid; there is no obligation for employers to pay. It is very much hoped that all employers will see fit to pay for meals and for some transport, but there is no obligation to pay them. He also mentioned skills in maths and English. As he knows, we are progressing with those skills for those people who do not have the necessary GCSEs.
On IT, the noble Lord made a very good point. I think that it is fair to say—and it is a bit of a generalisation, I know—that most young people are pretty savvy when it comes to IT, but it is noted that the noble Lord has raised that issue. It is not part of the programme, but it is noted and I shall take it away.
Lord Young of Norwood Green
I agree with the Minister that they are savvy in some ways. Most of them have PhDs in social networking, though not necessarily in the dangers and risks. I am interested in IT skills as they would apply to enhancing their employment prospects, which is a slightly different sector.
Viscount Younger of Leckie
I fully accept that point. I shall endeavour to write to the noble Lord with some information on that if we have it, looking specifically at the traineeships and IT.
The noble Lord asked whether the 50% reduction in penalties applied if someone was a repeat offender. The answer is yes. It applies only to the financial penalty. Just to be clear, the employer has to pay back the full arrears to employees within 14 days for the 50% reduction to be applicable.
The noble Lord raised an important point about quality and asked how we would ensure the quality of the traineeships. We have put in place a number of measures to ensure that the work experience is a high-quality learning experience for each young person. Only providers who are graded good or outstanding by Ofsted are eligible to deliver traineeships. The Department for Education has published guidance on what is required to ensure that the work experience is of good quality. Providers are responsible for actively monitoring the work experience placement and working with employers to ensure that it meets each individual’s needs. Providers are given funding to support them to do this, and we have commissioned an external evaluation of traineeships starting from the first year. My department, BIS, is funding the Education and Training Foundation to deliver a traineeship support programme for providers delivering traineeships, focused on ensuring that they are high-quality programmes. I hope that gives some reassurance to the noble Lord.
The noble Lord, Lord Young, raised the matter of naming and shaming. I can assure him that that is very much on our radar. He will be aware that the revised national minimum wage naming and shaming scheme came into effect on 1 October 2013. As I said earlier, the new rules are part of government efforts to toughen up enforcement of the national minimum wage and to increase compliance. By naming and shaming employers, it is hoped that our publicity will be an additional deterrent to employers who would otherwise be tempted not to pay the national minimum wage. This is on top of financial penalties, to which I just referred, which employers already face if they fail to pay the national minimum wage. As for the timing—which was the specific question from the noble Lord—I cannot give a precise date, but we are likely to start naming employers very soon.
The noble Lord, Lord Jones, asked about the total amount of finance available for enforcement in the latest year available. HMRC enforces the national minimum wage on behalf of the Department for Business, Innovation and Skills. The national minimum wage enforcement budget allocation for 2013-14 is £8.3 million.
The noble Lord, Lord Young, asked a question as to what financial support is available to young people on traineeships. I mentioned earlier that employers are not required to pay young people, but I failed to mention that young people on traineeships will be undertaking educational training and will be able to apply to existing programmes of financial support aimed at learners, including the £180 million bursary fund for those aged 16 up to 19 and the discretionary learning support fund for those aged 19 up to 24. I hope that gives a fuller answer than my previous one.
I believe that I have covered all the questions raised, but I would like to reiterate, in conclusion—
Lord Young of Norwood Green
I asked the Minister for some clarification on the figures that he quoted for HMRC—the amount that was in arrears—so that I could get a clearer picture of how well HMRC is succeeding in tackling this problem. He did not really return to that. There were two figures that I wrote down: one was £45 million in arrears, and I am not quite sure what period of time that related to; the other figure he quoted was something like £3.9 million in wage arrears. I just could not make sense of those; that might be my fault rather than his, so that is why I asked for clarification.
Viscount Younger of Leckie
The noble Lord is right to ask for clarification, not to the extent that we do not have the figures. The best thing to do would be for me to write to the noble Lord with the figures. There is a tabulation in front of me and I think it is better to give those specific figures, and to copy in any noble Lords here today who might also like to see them.
I would like to conclude by reiterating the value of the government-funded traineeships programme in England, which is providing young people with the skills and experience they so vitally need to take their first step into the labour market. Traineeships are a central pillar in this Government’s commitment to tackling youth unemployment. These regulations simply clarify the fact that employers offering work experience opportunities to young people as part of a traineeship on their journey towards employment will not be required to pay the national minimum wage, as is the case with other government programmes that include work experience. These regulations will now be debated in the other place in the charge of my honourable friend Jenny Willot MP.