National Minimum Wage (Amendment) (No. 2) Regulations 2023

Debate between Lord Palmer of Childs Hill and Earl of Minto

Tuesday 14th November 2023 Grand Committee

[The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)]

My Lords, these regulations were laid in draft before the House on 13 September 2023. This statutory instrument will help 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 part of the National Minimum Wage Regulations 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 does not have to be paid the national minimum wage. The exemption was originally created mainly to cater for au pairs, so that they should gain experience of cultural exchange through living and being a 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, 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 discriminates against women, as such workers tend to be women. The employment tribunal found 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 research low-paid live-in domestic workers.

In 2021, the Low Pay Commission published research into the live-in domestic worker exemption. During the gathering of this research, the commissioners came to a consensus conclusion 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 were not fully treated as members of the family. They found examples of domestic workers suffering abuse, including physical abuse, with little recourse for enforcing their employment rights. The commission found that the exemption is rarely being used for its intended main purpose, as in practice there are now few au pairs in the UK.

The Low Pay Commission’s extensive evidence in 2021 on this issue provided a clear recommendation to government that the exemption should be removed. The Government accepted the Low Pay Commission recommendations and announced that the live-in domestic worker exemption would be removed in March 2022. During this period, the employment tribunal decision was appealed, and the Employment Appeal Tribunal agreed earlier this year that the exemption should be disapplied. These decisions established the removal of the exemption as a matter of case law.

Taking into account the existing case law and other more general legislation, live-in domestic workers have reasonable arguments that they are entitled to be paid the national minimum wage. However, this is not a matter of certainty, and therefore with the National Minimum Wage (Amendment) (No. 2) Regulations we are putting the matter beyond doubt by amending our regulations to remove the exemption from the date that the amendment comes into force. In the meantime, we recommend that live-in domestic workers are paid the national minimum wage in this short interim period.

These amendment regulations remove uncertainty and the risk of accidental national minimum wage non-compliance within this workforce. These regulations need to be put forward to make sure that the workers, and the families that hire these workers, are able to clearly understand the national minimum wage laws for live-in domestic workers. These amendment regulations will ensure that live-in domestic workers are paid at least the relevant minimum wage rate, providing protection from exploitative low pay.

HMRC will enforce the national living and minimum wage for this group, in line with other sectors. HMRC enforces the national minimum wage in line with the law and policy set by DBT. HMRC follows up on every worker complaint it receives, even those which are anonymous. This 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 this exemption are employed by families, not by businesses. The impact on businesses will therefore be negligible. However, many vulnerable workers will now enjoy the same protections that almost all other employees receive.

As live-in domestic workers will be entitled to the national living and minimum wage, I would like to remind the House of the achievements of the national living and minimum wage. The Government remain committed to their ambitious target for the national living wage to equal two-thirds of median earnings by 2024, provided that economic conditions allow. We look forward to announcing the 2024 rates in due course. The national living wage, which applies to those aged 23 and over, increased to £10.42 an hour in April 2023. As a result of this increase, a full-time worker on the national living wage has seen their annual pay increase in excess of £1,600 per annum. This increase ensured that our national living wage rate remains one of the highest in the world.

These regulations will provide clarity to live-in domestic workers and the families who employ these workers. With this exemption removed in legislation, there will be no ambiguity between what is in case law and the statute book. Through the national minimum wage and the national living wage the Government protect the lowest paid within our society. It is right that we ensure that the lowest paid are fairly rewarded for their contribution to the economy, and ensuring live-in domestic workers are entitled to the national living wage is vital to achieving this. Protecting workers’ rights, especially those of vulnerable workers, is a priority for this Government and therefore we have taken action to remove this exemption.

This does not remove the right to have a live-in domestic worker, such as an au pair or other domestic staff; it just removes the right to pay them less than the national minimum wage. This is the right thing to do to help protect these vulnerable workers and make it clear that our legislation reflects the case law on this issue.

[Lord Palmer of Childs Hill (LD)]

I thank the noble Earl for his comprehensive introduction to this SI, which deals with regulations as to work in a family household, and rightly seeks to protect such workers by acknowledging their rights as workers and not as some inferior being. On my Benches, we support this new regulation.

The Minister expanded beyond this SI, for which I am grateful, so can I use the opportunity to say to the Minister that this is only one such unfair anomaly? Could I also call attention for the need of the abolition of the separate apprenticeship wage? I had a briefing from the End Child Poverty coalition, which talked about how this is a barrier to young people from less well-off backgrounds going into apprenticeships, because they are not sustainable.

Could I also ask for an assessment on the policy of having different wages for different ages? Is this the right thing to do? The cost of living is the same no matter how old you are, and it is hugely ignorant of the Government to assume that young people will be able to have support from their families.

Finally, unfairness goes right through the system. Could the Minister comment on the policy of paying under 25s less universal credit? This is punitive, particularly for young parents and care leavers. Again, we cannot assume that parents can or will give financial support to their adult children.

I welcomed the Minister’s expansion on this SI, and what the Government are doing, but I have tried to point out that there are still some gaps, which I hope the Government will remove in ensuing legislation and statutory instruments.