Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018

Lord Henley Excerpts

Monday 16th April 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Order laid before the House on 8 February be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, the order was laid in the other place on 8 February 2018.

Providing workers with transparency over their employment rights underpins good work. It leads to a motivated and productive workforce. In the Government’s response to the Taylor review of modern working practices, we welcomed the principle of increasing transparency to workers.

The order goes beyond the recommendations made in the review. It was laid alongside a separate order, entitled the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018. Together the two orders will provide workers with more information about their pay and help them to spot any cases of underpayment.

Specifically, the orders will give all workers in all sectors the right to regularly receive a payslip—addressing the current anomaly that only employees, a sub-category of workers, are legally entitled to receive a payslip. It will require all employers to provide clear information on the number of hours that workers are paid for in their payslips. This will ensure greater transparency over how their pay is calculated and what they are paid for.

Although a significant number of employers already provide their workers with a payslip, up to 30,000 workers do not receive one. They will once the order comes into force. The other order is subject to the negative resolution process. That order will require employers to clearly record the number of hours that time-paid employees are paid for in their payslips. This means that up to 1.6 million people will be entitled to receive hourly information in their payslips.

It is important to note that the hours recorded in employees’ payslips are the hours they are paid for—not hours for national minimum wage purposes as defined by the National Minimum Wage Act. This information will therefore assist workers in spotting and addressing incidences of underpayment—including, but not limited to, national minimum wage underpayment.

When a worker thinks they may have been underpaid, I encourage them to raise this with their employer. However, where this is not possible, workers should contact ACAS for free and confidential advice.

I thank the independent and expert Low Pay Commission, which first recommended the need to provide greater transparency over pay in staff payslips. Its recommendation proposed that the Government,

“considers introducing a requirement that payslips of hourly-paid staff clearly state the hours they are being paid for”.

To develop our policy, the Government engaged with a wide range of stakeholders. They included worker and employer representatives and payroll and software providers. The majority of stakeholders supported an initiative that would encourage greater transparency and ensure that information is shared more widely with workers. The majority of employers are already compliant with this proposal and already provide all their workers, not just their employees, with a payslip. Some employers also already provide a breakdown of the hours worked. However, a significant minority do not. The order that I move today will ensure that all employers converge to the good practice evident during our consultation with stakeholders.

The Government are committed to creating an economy that works for everyone in terms of fair pay and fair working conditions. Bringing these orders into force is one of many government interventions to tackle non-compliance and ensure that workers are paid fairly. We are clear that anyone entitled to the minimum wage should receive it. This month, the national living wage and national minimum wage all increased above inflation. Those increases benefited over 2 million workers.

A rising minimum wage means a higher risk of non-compliance. Therefore, investment in minimum wage enforcement has nearly doubled. We now spend over £25 million annually on ensuring that employers meet their legal responsibilities, up from £13 million in 2015-16. When employers pay workers under the minimum wage rate, they face returning all back pay they owe to their staff, paying a fine of up to 200% of the underpayment, and being publicly named under the Government’s naming scheme.

I am proud to lay these employment rights before the House. We all expect a basic fairness in the workplace. The right to receive clear payslips is just one element of the Government’s good work agenda, which was published in February, following the review of modern employment practices. It underpins our vision for a workforce with fairer and more transparent employment practices, whereby workers can hold their employers to account for being paid fairly and for all hours worked. It will form an integral part of our efforts to prevent underpayment of the minimum wage. I commend the order to the House.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, I join other noble Lords in congratulating the Government on bringing forward these two SIs for consideration today. This one is affirmative and the other will go through on a negative basis. At a time when the gig economy and zero-hours contracts are growing, it is right to raise the issue of treating workers differently from employees—and what can be more important than pay? I thank the Minister for his contribution to this debate, and for opening up the issues in the round. I also thank his department for its work on the impact statement.

I have noticed that a considerable amount of work has been put into recent SIs. Those who have looked at this will not be surprised that it is of the high standard that we now expect. Not only does it run to over 20 pages but it includes, for the first time, Venn diagrams and flow charts. However, I reiterate a point I have made before: it is quite hard to read them if they are not in colour. Can we at last invest in a machine that would allow noble Lords on these Benches, who see them in mere black and white, to read them in the same glorious technicolour as Ministers? Maybe that is just the status of being in opposition.

Noble Lords who have listened to me talking before about statutory instruments from the department for business, enterprise and training will know that I have a fixation about the dates on which regulations come into effect. It has been agreed by all parties that we should work to common commencement dates, and I have been punctilious in picking up every one of the orders coming forward that does not comply with that—and there are rather a lot of them. Last time we debated this, only a month ago, the Minister was gracious enough to say that he agreed with me that we should think harder about the impact that regulations made in this House have on people and businesses who have to implement them, and that he would do his best to ensure that the department paid more attention to that in future. There are occasions when it is necessary to do things in a different way, but this is not one of them. My point is not that they have selected a common commencement date—they have—but 6 April 2019 is almost a year away, for something which is clearly beneficial to a lot of people. I am surprised that the department did not wish to use the other common commencement date of 1 October, and I would be grateful for the Minister’s comments.

I will make two points in passing. The first is on the way the Explanatory Memorandum is set out. It takes a line which is primarily about the advantages that will flow to the policing of the implementation of the national living wage—or, in this case, the national minimum wage, as it is defined. However, the Minister in his introduction took a much stronger line, which is that there is a principle of equity here: people who receive a payment should understand the basis on which that payment is made. The Minister made that clear. We are talking about transparency, and this simple change here will make a huge difference to a lot of people who have difficulty in following that through. It should be welcomed on that ground alone.

It may be—and I am sure will be—effective as regards policing the national minimum wage and rooting out the very small number of employers now who do not pay the national minimum wage as they should do. Of course it will help, and I am not against that, but the important thing here is the question of transparency and helping all workers to understand the benefits that flow from the employment and what is part of it.

However, it seems that the Government’s decision to move on this issue at this time, welcome though it is—and perhaps necessary as it is because of the changes in the economy, such as gig jobs and zero-hour contracts—raises wider questions about why we continue to differentiate between workers and employees. As the Government themselves say on their website, everybody is a worker—if they take out a certain number of issues that are tested in what they do—but not everybody is an employee. Employment rights, normally delivered under contract, are significantly better than workers’ rights. Can the Minister comment on whether further consideration might be given to that in future work on the good work agenda?

It is bad enough that we still have difficulty in trying to work out what a person’s employment status is in relation to taxation, and it is bad that we retain that in these regulations and that no attempt has been made to move that forward. It is very difficult; the onus is on the employer to ensure that the taxation arrangements are applied properly and correctly. However, the guidance given on the GOV.UK site is vague almost to the point of obscurity. It does not clarify—rather, it confuses. You are warned as you read it, as a possible employer, that you have to go through a checklist of nearly 15 bullet points which you test, and the answer to the question of whether an employee should be taxed as a self-employed or an employed person is the probability that most of the statements you are checking are true. That is not right for a modern economy that is looking to try to get people into work and to work productively and well. We should be better at it than that. Perhaps that might be part of the agenda.

To go back to my earlier point—which the noble Lord, Lord Fox, made as well—if we are to see a growth in workers as opposed to employees, we also need to think a bit harder about what we are saying to those in the worker category, which is the lesser of the two categories, as regards statutory sick pay, maternity pay, minimum notice periods, protections against unfair dismissal, the right to request flexible working and time off for emergencies. At the moment something like 290,000 people in the economy are workers and not employees, and it seems odd that in this world we still discriminate against them. I do not have an easy solution, but perhaps the Minister might respond to it and take it forward in the agenda and in the department that is moving it forward. However, we support this statutory instrument.

[Lord Henley]

My Lords, I am grateful to the noble Lord, Lord Monks, and to all other noble Lords for the very constructive approach they have taken to this order. I trust that this constructive approach will be noticed by the House and will be continued throughout the week on all business that comes before us.

I hope to deal with some of the questions that have been raised by noble Lords. However, I start off by correcting some of my earlier words to save myself making a Personal Statement tomorrow. In my opening remarks I said that some 30,000 workers did not receive a payslip. The paragraph I read out stated: “Although a significant number of employers already provide their workers with a payslip, up to 30,000 workers do not receive one”. I should have said that, “up to 300,000 do not receive one”. They will now receive one. I just want the House to be aware: for “30,000”, please read “300,000”.

Perhaps I may deal briefly with some of the questions put by noble Lords. First, the noble Lord, Lord Anderson of Swansea, asked whether it might be appropriate to have uniform payslips. That sounds very attractive, but this order is designed to ensure convergence with best practice, and I think that it would be right to leave employers with a degree of flexibility in how they continue to provide that. However, I note what he said.

I also noted what the noble Lord, Lord Stevenson, had to say about common commencement dates. He has criticised me in the past, so I was grateful that he spotted that on this occasion we have observed the rules on having a common commencement date, although he regretted that it would not be until April 2019. We could have gone for the other common convergence date in 2018, but that would have given employers considerably less time to prepare for this matter, and we therefore decided that 2019 would be better.

The noble Lord, Lord Fox, asked whether hourly rates could be included in payslips. We listened to arguments for including even greater detail on payslips, which is what this would amount to. I accept that he makes a perfectly valid point and we notice that UNISON provided input on this to the Government. However, we tested the idea of requiring employers to include a full disaggregation of hours, including those on employees’ payslips, but the costs of doing so for employers would be high and, we reckoned, disproportionate. However, again, I note the arguments put forward by the noble Lord.

The noble Lords, Lord Fox and Lord Stevenson, made a number of comments about the difficulties faced by independent contractors involving the definitions of “employee” and “worker”. We all know the difficulties of managing the distinction between “employee” and “self-employed”—a matter that has only recently gone to the Supreme Court and one that we have discussed in this House. This goes slightly beyond what we are discussing today. I accept that these are very difficult matters and obviously they will be taken into account in continuing to deal with the Taylor review. I certainly remember from my Bar exams some 40 years ago the difficulties around the definitions of “self-employed” and “employee”. The fact that it is going to the Supreme Court indicates that it is a very difficult matter. We also know that, as the noble Lord, Lord Fox, said when talking about the gig economy, times are changing. Again, these are difficult issues—but we have the Taylor review, which we will continue to consider.

I am grateful for all the remarks that have been made about this order and its relevance, and I think that I have had a degree of support from around the House. As I said, long may that continue. I commend the order to the House.

Motion agreed.