Draft National Minimum Wage (Amendment) (No. 2) Regulations 2023
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move,
That the Committee has considered the draft National Minimum Wage (Amendment) (No. 2) Regulations 2023.
It is a pleasure to serve with you in the Chair, Ms Harris. This statutory instrument will help to ensure that so-called live-in domestic workers will be paid at least the national minimum wage for the time that they are working.
The live-in domestic worker exemption was created as part of the National Minimum Wage Regulations 2015 and provides that work done by a worker residing in the employer’s family home and treated as a member of the family is not “work” for the purposes of the national minimum wage, and therefore the individual does not have to be paid the national minimum wage. The exemption was originally created mainly for au pairs so that they could gain experience of cultural exchange through living—and being part of a family—in the UK, although the legislation covers other types of domestic workers as well.
Currently, the National Minimum Wage Regulations state that workers do not need to be paid the minimum wage if they live with their employer and are genuinely treated as part of the family. Such treatment is particularly expressed in the provision of living accommodation and meals, and the sharing of tasks and leisure activities. The exemption is not compatible with most jobs, and it is hard to prove whether someone is or is not being treated as a family member.
The removal of the exemption will remove the inequality facing these workers, who are more likely to be migrant workers and women. In 2016, an employment tribunal judgment considered whether the exemption indirectly discriminated against women. The tribunal found that the exemption had given rise to unjustified indirect discrimination, and thus the exemption was disapplied in this case.
After the employment tribunal judgment on live-in domestic workers was published, the Government asked the Low Pay Commission to conduct research on low-paid live-in domestic workers. In 2021, the commission published its report into the live-in domestic worker exemption and, during the gathering of that research, it concluded that the exemption should be removed.
The Low Pay Commission heard evidence of employers using the exemption to exploit domestic workers, often non-British nationals, who were required to work long hours and not being truly treated as members of the family. The commission found that the exemption has rarely been used for its intended main purpose, as, in practice, there are now few au pairs in the UK, and it provided a clear recommendation to Government that the exemption should be removed.
The Government accepted the recommendations and announced in March 2022 that the live-in worker domestic exemption would be removed. During that period, the employment tribunal decision was appealed, and the Employment Appeal Tribunal agreed in 2023 that the exemption should be disapplied. Those decisions established the removal of the exemption as a matter of case law.
Taking into account the existing case law, and under the more general legislation, live-in domestic workers have reasonable arguments that they are entitled to be paid the national minimum wage. However, that is not a matter of certainty. Therefore, with our National Minimum Wage (Amendment) Regulations, we are putting the matter beyond doubt by amending the regulations to remove the exemption, from the date that this measure comes into force.
Shailesh Vara (North West Cambridgeshire) (Con)
I am grateful to my hon. Friend for giving way, and I welcome the measure that he is putting forward. He will appreciate that many of these people are in a vulnerable position, with a powerful employer living on the premises. Notwithstanding this legislation going through, is the Department proposing to keep a watchful eye to ensure that employers are doing what they are supposed to do and abiding by these rules, so that it is not simply a question of “business as usual”?
Kevin Hollinrake
My right hon. Friend makes a strong point on enforcement. Legislation without implementation is pretty much a waste of time, so he is absolutely right to identify that. I will come on in a moment to talk about what His Majesty’s Revenue and Customs does to act on complaints—even anonymous complaints. It can investigate those kinds of complaints to ensure that people are following the rules.
These amendment regulations remove uncertainty and the risk of accidental national minimum wage non-compliance within this workforce. The regulations need to be put forward to ensure that the workers and families who hire these workers are able to clearly understand the national minimum wage laws for live-in domestic workers. As the workers will be entitled to the national living wage and minimum wage, I would like to remind the Committee of the achievements of the national living and minimum wage and the new 2024 rates. On 1 April 2024, the Government will increase the national living wage for workers aged 21 and over by 9.8% to £11.44 an hour. We are pleased to confirm that that record cash increase of £1.02 per hour means that in 2024 we will hit the target for the national living wage to equal two thirds of median earnings for those aged 21 and over. That will end low hourly pay for this group.
My right hon. Friend the Member for North West Cambridgeshire referred to enforcement. HMRC enforces the national minimum wage in line with the law and policy set by the Department for Business and Trade. HMRC follows up on every worker complaint it receives, even those that are anonymous. That includes complaints made to the ACAS helpline via its online complaint form and those received from other sources. The policy will ensure that all work is treated fairly, and will end the misuse of the exemption to exploit workers, particularly migrant women. The overwhelming majority of workers covered by the exemption are employed by families, not by businesses. The impact on business will therefore be negligible.
Through the national minimum wage and national living wage, the Government protect the lowest paid in our society. Protecting workers’ rights, especially those of vulnerable workers, is a priority of this Government, and we have taken action to remove this exemption. That does not remove the right to have a live-in domestic worker such as an au pair, or other domestic staff; it just means that they will have to be paid at least the national minimum wage. This is the right thing to do to help protect these vulnerable workers and make it clear that our legislation affects the case law on this issue.
Kevin Hollinrake
I thank hon. Members for their valuable contributions to the debate. I think all contributions focused on enforcement, quite understandably. As I said earlier, legislation without implementation is rather a waste of time, so let me say exactly what we are doing. As the shadow Minister and the SNP spokesperson said, it is quite a daunting thing to challenge one’s employer, especially in this kind of environment. As I said in my remarks to my right hon. Friend the Member for North West Cambridgeshire, these complaints can be made to Acas online or on the phone, or anonymously to HMRC, so they do not necessarily risk that relationship—although in some circumstances it would be pretty clear who had tipped off the agencies.
In terms of information campaigns, I agree, and that is what we are planning to do. We will work with Acas, which will update its guidance. The Government website will also be updated with guidance. However, that is not necessarily the place where everybody is going to look—we are also working with the au pair and domestic worker agencies, for example, to make sure that they are fully aware of responsibilities in this area. We are also working closely with charities that support vulnerable workers in this kind of space.
Justin Madders
I have a suggestion that might help the Minister. Is it worth talking to the Home Office about information that goes through when visas are processed?
Kevin Hollinrake
That is a challenge I am very happy to take on, and advice I am very happy to take up. We work very closely with our colleagues in the Home Office. As the hon. Gentleman may have noticed, some officials are here so I am sure that is what we will do.
The hon. Gentleman also rightly mentioned capacity. He will be aware that over the last seven years we have doubled capacity on enforcement in HMRC—it is now £27.8 million. That comes in two areas: a promotion campaign, which is upstream work with employers to make sure that they are aware of their responsibilities, and enforcement, which includes very significant levels of potential fines. We have found that the most effective deterrent is the naming and shaming work we do on employers that are breaching the national minimum wage regulations. That is something we are very keen to do, and are doing, more often. Furthermore, employers are required to keep records for six years, which feeds into the point made by my right hon. Friend the Member for North West Cambridgeshire. If there is an anonymous tip-off and HMRC investigate, it is much easier for them to make sure that the rules have been followed.
The legislation will ensure that all work is treated fairly and end the misuse of the exemption to exploit workers, particularly migrant women. I would like to conclude by once again extending my thanks to the Low Pay Commission. Thanks to its independent and expert advice on this national minimum wage exemption, we can ensure that the right balance is struck between the needs of workers, affordability for business, and the wider impact on the economy. I put on the record my thanks to Bryan Sanderson, who has been the chair of the Low Pay Commission for some time. We worked very closely with him. He is now moving on to pastures new, but he has done a brilliant job leading that commission. I thank the commission for its recommendations on the 2024 rates, which will give a record cash increase to the national living wage and end hourly low pay for those aged 21 and over. I commend the regulations to the House.
Question put and agreed to.