National Minimum Wage Regulations 2015
Debate between Lord Popat and Baroness Donaghy
Lord Popat (Con)
My Lords, before turning to the reason for this debate, I will focus on the success of the national minimum wage. Recognition must be given to the Labour Party for introducing the national minimum wage, which last year was voted the most successful government policy of the preceding 30 years.
The key reason for its success is its simplicity. An independent Low Pay Commission provides balanced advice to the Government about minimum wage rates. But setting the rate is just the start. The Government have taken action to create the conditions for economic growth and higher living standards. Since the election, an extra 1.88 million people are now in work, and wages are now growing faster than inflation.
The Government also have a major role to play in ensuring that the minimum wage is enforced. That is why we have increased enforcement budgets by 50% over this year and next. There are now tougher penalties. We have increased the financial penalty percentage from 50% to 100% of unpaid wages owed, and the maximum penalty from £5,000 to £20,000. Provisions in the Small Business, Enterprise and Employment Bill will change the scope of the maximum penalty from a per business basis to a per worker basis.
There are also reputational consequences. The Government have already named 162 employers who have not complied with the national minimum wage. Such bad publicity will be an additional deterrent to employers who might otherwise be tempted not to pay the national minimum wage.
I turn to the reason for this debate. An important element of ensuring compliance is the clarity and accessibility of information. Since their introduction 17 years ago, the regulations have been amended numerous times, resulting in 27 separate sets of regulations. For such important legislation that is directly relevant to so many workers and their employers, lack of clarity could result in people not being paid what they are legally entitled to. This draft instrument consolidates the 27 sets of regulations into one in order to make the rules clearer and more workable for employers and workers alike.
In response to an eight-week consultation last summer, most of the 22 respondents told us that, while they welcomed the consolidation, even greater clarity would be welcome, particularly in the guidance. We agree. Once these regulations take legal effect, we will review the guidance during 2015 in order to improve the information available to individuals and employers. I commend the draft regulations to the Committee.
Baroness Donaghy (Lab)
My Lords, these proposals seem to be eminently sensible and are to be welcomed—and it is very good to have cross-party agreement on the success of the national minimum wage. As the Minister will know, I served as one of the first members of the Low Pay Commission; we established the first figure for the minimum wage. More importantly, we established the framework for what was included—and what was not—in the minimum wage, such as overtime, London weighting and all the other important details that have led to the continuing success and recognition of the minimum wage.
I do not think that it is remembered now what pressures there were before the minimum wage was established—political pressures and also pressures on the Low Pay Commission—for absolute secrecy, because any leaks would have undermined the whole venture. I remember one of the away weekends that the Low Pay Commission had in its first few months. It was in the days before everybody had a mobile phone. We were incommunicado in this particular place. Relatives could get through only by ringing the residential place we were staying in and using the code word “chrysanthemum”. Has the world not changed in 17 years? It seems laughable that so few people had mobiles. I am not sure how many relatives of mine could even have said the word “chrysanthemum”.
Nowadays, we underplay—not deliberately, because it is so well established on a cross-party basis—the importance of the minimum wage. I very much hope that it will remain a cross-party venture and that we do not play politics too much with this issue. The Low Pay Commission does a very important job representing, on a tripartite basis, all the interests involved in the world of employment—and long may that continue.
Lord Young of Norwood Green (Lab)
My Lords, I, too, welcome this particular statutory instrument and the introduction by the Minister. I thank my noble friend for her historical assessment. I am sure that her relatives could have said “chrysanthemum”. They might have had trouble spelling it, but that is another matter.
I thank the Minister for recognising that we introduced the minimum wage—though, I have to say, that was against the wishes of some and with dire predictions about the millions of jobs that would be lost. I am glad that we have put that behind us and I welcome the enthusiasm now.
Obviously, anything that simplifies and clarifies is to be welcomed. I welcome the point about the enforcement budgets being increased. I am interested in whether the statistic of 162 employers being named is, as I presume, for 2013-14. Maybe I missed the precise date. I just wonder whether the number of employers being reported is going up. Is the number of queries to workers’ rights helplines increasing?
I note from the Explanatory Memorandum that the Minister is due to clarify the guidance this year. It is really important that we get that right. As a matter of interest, are we keeping any statistics on the fact that, over the recent past few years, we have now had introduced the concept of a living wage? I do not expect the Minister to have any information on that, but I wonder if we are keeping any statistical evidence on it. If he has something on it, better still. Other than those questions and comments, I am happy to support this.
Small Business, Enterprise and Employment Bill
Debate between Lord Popat and Baroness Donaghy(9 years, 10 months ago)
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Baroness Donaghy (Lab)
My Lords, perhaps I may say a couple of words in support of these amendments. I was a member of the first Low Pay Commission when it was formally established in 1998. We obviously spent some time on the issue of enforcement. The difficulty was that the people who were in industries that did not pay a statutory minimum wage were very often reluctant to complain in the first place. Certainly, in some of the textile industries that we visited, it became fairly clear that if anyone put their head above the parapet, not only would they eventually lose their job in their own workplace but they would not find a job again in any textile industry within travelling distance. I am sure that that is not unique to textiles, so it will always be a major problem to enforce this and to get people to make a formal complaint and take that kind of risk with their future.
The Low Pay Commission is also keen for there to be a very good system of accessible information for people who want to know what their rights are. The original information issued by the Low Pay Commission was very good. Unfortunately, this Government changed it so that it was no longer fit for purpose. That was a statement made by the Low Pay Commission—that the website was no longer fit for purpose—so it is hardly surprising that the number of complainants is not only not rising but is probably falling in relation to the increased number of people in the labour market as a whole.
As my noble friends Lord Watson and Lord Whitty have said, the casualisation—or further casualisation—of the workforce makes this extremely difficult to enforce. My view is that the more headline news you get about successful prosecutions and fines, the more likely people are to put their head above the parapet. It always amazed me when people used to say about the previous employment tribunal system, “Oh, the penalties that you can get are £50,000 a year”, which was ridiculous; the level at the time when I was chair of ACAS was £5,500. That was the average settlement, not the headline figures that newspapers would imply. The reality of the minimum wage and its enforcement is so far removed from the kind of discussion that we are having today that it is almost difficult to know where to start. I urge the Minister to think about accessible information, and perhaps to consult the Low Pay Commission to ensure that it is adequate for both applicant and respondent.
Lord Popat (Con)
My Lords, I thank the noble Lord, Lord Young, for his amendments to Clause 147, and for giving us the opportunity to debate the important subject of the national minimum wage. I have heard a number of concerns raised by the Opposition about the underpayment of the national minimum wage. I hope that my notes will cover what the Government are doing about that.
Clause 147 is an important step towards ensuring that employers comply with the national minimum wage legislation. It will amend the National Minimum Wage Act 1998 so that the maximum penalty that can be imposed through a notice of underpayment will be calculated on a per-worker basis rather than per employer. This will substantially increase the penalty for employers who owe large arrears to a number of workers. My noble friend Lord Storey asked this question, so I am pleased to confirm that the penalty of £20,000 is per worker.
By applying the penalty to each worker, employers owing high arrears to a number of workers may be issued with a greater penalty overall, as well as a higher maximum penalty. The higher penalty will deter employers from breaking national minimum wage law in the first place, ensuring that workers receive what they are entitled to and to come down harder on those employers who continue to break the law.
I will now respond to each amendment. Amendments 68ZN and 68ZP are designed to increase the maximum civil penalty available for non-payment of the national minimum wage from £20,000 to £50,000 per worker. I heard what the noble Lords, Lord Whitty and Lord Watson, had to say on this subject, and we welcome the recognition from the Opposition that there is a need to increase these penalties but we do not see the evidence to set the upper limit at £50,000. As the impact assessment for the measure sets out, 6% of cases in 2013-14 involved total arrears in excess of £20,000. None of these cases was anywhere near the upper limit suggested in the amendment.
Under the Bill, the penalty will be applied on a per worker basis, as I said. When you look at the cases where HMRC issued a notice of underpayment in 2013-14, the change means that in almost every case, the employer would have been issued with a penalty equivalent to the total amount of arrears they owed, rather than having the overall penalty capped at £20,000. As a result, the amendment would have had very little impact on the level of penalties in those cases.
However, I reassure noble Lords that if, in future, there is evidence to suggest that a higher maximum is needed, we can make that change through secondary legislation. I hope that I am giving reassurance to the party opposite that if we think in future that £20,000 is not enough and we need to raise it, we can bring in secondary legislation to increase the penalty.
Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2014
Debate between Lord Popat and Baroness Donaghy(9 years, 11 months ago)
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Lord Popat (Con)
My Lords, the recruitment sector plays an important role in the labour market by matching demand for jobs to demand for workers. The sector is regulated by the Employment Agencies Act 1973 and the conduct regulations. The legislation covers all employment agencies and employment businesses in Great Britain, providing a framework for contracts between agencies, hirers and work-seekers. It also restricts fee charging and ensures that temporary workers are paid for the work they have done.
However, the legislation does not currently regulate where employment agencies place advertisements for vacancies. The Government are concerned that some agencies may be advertising British-based jobs in other European Economic Area countries without advertising those jobs in Britain. This means that workers in Britain do not always have the opportunity to apply for jobs that are based here. We believe this is wrong.
In The Plan for Growth, the Government set out their ambition to create a competitive and supportive business environment that allows businesses to establish themselves, to grow and to employ people. An important part of this ambition is the need to achieve a strong and efficient labour market—a labour market that gives people opportunities to find jobs that are right for them and allows employers to access the type of labour that matches the skills they need.
To fulfil this, we need to achieve a labour market that is flexible, effective and fair, and which encourages job creation and makes it easy for people to find work and stay in work. The Government believe that overseas-only advertising undermines the fairness of the labour market. It reduces the job choices available to people in Britain and for businesses that are hiring it also limits their choice of candidates. We want to do something about this. We want to ensure that people in Britain have the opportunity to enter the workplace, especially the young and the unemployed. We want to create a level playing field for workers in Britain.
Overseas-only advertising is already potentially a breach of the Equality Act 2010. However, the proposed regulations would go a step further by creating a specific requirement to advertise jobs in Great Britain and in English.
The proposed change to the conduct regulations would require agencies to ensure that if they want to advertise vacancies elsewhere in the EEA, they must also advertise in Great Britain and in English. The new regulations would apply to all employment agencies and employment businesses in Great Britain that find permanent and temporary work for people. It will apply only to vacancies advertised in European Economic Area countries; UK Immigration Rules already favour native workers over non-EEA workers. Each position has to undergo a resident labour market test before it can be advertised outside the EEA. We are not proposing to stop agencies from advertising jobs overseas or in additional languages. They will still be free to do so if they wish, as long as the vacancy is also advertised in Great Britain.
In addition, in the rare circumstances where it would make little sense to advertise a vacancy in English in Great Britain—for example, if there is a genuine requirement for a native foreign language speaker for a particular role—a defence will be available. However, in general, if agencies choose to advertise jobs overseas, they would need to ensure that those jobs are also advertised in Great Britain, either at the same time or in the period of 28 days prior to advertising the vacancy overseas.
We believe that this will expand the range of job opportunities open to people in Great Britain and will also expand the range of people from which businesses can choose. The new regulations would be enforced by the Employment Agency Standards Inspectorate, which enforces the conduct regulations. Agencies would need to demonstrate, through record-keeping, that they have complied with the requirements to advertise the vacancy, or vacancies, in Great Britain and in English.
Subject to the proper parliamentary process and necessary scrutiny, it is our intention that this change will come into force by the end of this year. I hope that the Committee will therefore support this statutory instrument.
Baroness Donaghy (Lab)
My Lords, I shall be brief. On a quick glance, these seem to be sensible suggestions. I know how unpopular this is when it is blown up in the newspapers that British jobs are being advertised in Polish in Poland. I suspect that it is not as big a problem as newspaper controversies suggest. I am not convinced that the order will make much difference but, nevertheless, its spirit and intentions are good.
I have two questions. First, will the Employment Agency Standards Inspectorate be sufficiently well staffed to undertake the job required of it? Secondly, given the internet and the fact that people can pick up jobs wherever they are in the world, how much difference will this make in restricting the ability of employment agencies and businesses from getting their own way by the back door?
Lord Young of Norwood Green (Lab)
My Lords, I, too, welcome the measures brought forward by the Government today. It is important that jobs in the UK are advertised and made available to the people who live and want to work here. Indeed, we have already called on the Government to ban agencies from recruiting solely from abroad. However, Ministers are failing to go further to tackle the real problems in the employment agency sector and to halt the exploitation of Britain’s 1 million agency workers.
Agency working can provide flexibility that works for employers and employees, but the main recruitment industry body has warned that the number of rogue agencies has increased over the past three years. These agencies are associated with the worst elements of insecurity in our labour market, including the undercutting of wages and non-payment of the minimum wage. There is evidence that they are marketing agency workers to employers as a way to undercut wages of permanent staff, exploiting agency workers with unfair and illegal charges for travel, accommodation and taxes, in some cases leading to non-payment of the minimum wage, and engaging in tax avoidance schemes.
To reiterate, it is not only us who are saying this. The main industry body for the recruitment sector has warned that the problem of rogue agencies associated with non-payment of the minimum wage is getting worse. Regulatory bodies, including the Employment Agency Standards Inspectorate and HMRC, have also found evidence of non-payment of wages and of tax avoidance schemes. I would obviously welcome the Minister’s comments on that.
If we are in government after next May, we will crack down on employment agencies to tackle the worst elements of insecurity in our labour market. The next Labour Government will close loopholes which allow employment agencies to undercut the wages of permanent staff, ban employment agencies from recruiting only from abroad and force rogue agencies illegally exploiting their workers to clean up their act through measures such as the introduction of a licensing system.
We will not tolerate a world of work that is becoming more brutal because of the way in which cowboy employment agencies have been allowed to operate. They are undermining dignity at work, driving down standards and creating greater insecurity for families. I endorse the comments of my noble friend Lady Donaghy in relation to the internet and so on. I apologise for not being in my place at the start of the debate. I had not anticipated that we would get through the previous statutory instruments quite so quickly.
National Minimum Wage (Amendment) (No. 2) Regulations 2014
Debate between Lord Popat and Baroness Donaghy
Lord Popat (Con)
My Lords, in moving the first Motion standing in the name of my noble friend Lady Neville-Rolfe on the Order Paper, I will speak to both Motions. The purpose of these regulations is twofold. The first set of regulations uprates the national minimum wage rates for all workers and increases the maximum amount for living accommodation that counts towards minimum wage pay in line with recommendations from the Low Pay Commission. The second set extends the apprentice rate to cover apprentices on trailblazer apprenticeship programmes—pilots trialling the Government’s apprenticeship reforms—so that apprentices on these pilot programmes are treated in the same way as apprentices on other government apprenticeship programmes.
First, I turn to the national minimum wage rates. The national minimum wage is designed to protect low-income workers and provide an incentive to work by ensuring that all workers receive at least the hourly minimum rates set. The minimum wage also helps businesses by ensuring that competition is based on the quality of goods and services provided and not on low prices based on low rates of pay.
Following advice from the Low Pay Commission, the Government are uprating the minimum wage from 1 October 2014 so that the adult rate will be £6.50 per hour. For young people aged between 18 and 20 years-old, it will be £5.13, and those between 16 and 17 years-old will have a minimum wage rate of £3.79 per hour. Finally, the rate for apprentices will be £2.73 per hour. This is an increase of 3% for the adult rate and 2% for the other rates. This 3% rise in the adult rate will mean that low-paid workers will enjoy the biggest cash increases in their pay packets since 2008. These rate increases will benefit more than 1 million low-paid workers on the national minimum wage and will mean full-time workers on the adult rate receive an additional £355 a year in their pay packet.
The Low Pay Commission has said that the rise—the first real-terms cash increase since 2008—is manageable for employers and will support full employment. Since its introduction, the national minimum wage has increased faster than average wages and inflation without an adverse effect on employment. It has continued to rise each year despite the worst recession in living memory. The Low Pay Commission has proved that a rising minimum wage can go hand in hand with rising employment.
Every year, the Government set the remit for the Low Pay Commission. Last year, we asked the commission to monitor, evaluate and review the national minimum wage and its impact and to review the levels of each of the different minimum wage rates. As part of its remit, the Government also asked the independent body to review the contribution that the national minimum wage could make to the employment prospects of young people.
The Low Pay Commission has consulted with academics, businesses and workers’ representatives, and undertakes extensive research and analysis to respond to this remit. The Low Pay Commission consists of three commissioners from employer backgrounds, three from employee representative backgrounds and three independents. Its recommendations reflect the objectives of both employers and unions, and are unanimous. The aim is that the rate should be affordable for business and that as many workers as possible should benefit from as generous an NMW as possible. The Government believe that the rates set out in the SI meet this objective.
I now turn to the inclusion of trailblazer apprentice programmes under the apprentice national minimum wage. Apprenticeships in England already offer great opportunities for business and young people. Some 96% of employers who take on an apprentice think that their business has benefited. We want to make all apprenticeships world class, so that the programme is rigorous and responsive and meets the changing needs of employers and the future economy. We want the new norm to be two equally prestigious routes to a great career—university or an apprenticeship.
Our reforms of apprenticeships will put employers in the driving seat, enabling them to lead on the design of apprenticeships to make them easy to access and understand. Long complex frameworks will be replaced by short, simple standards describing the skills and knowledge that an individual needs to be fully competent in an occupation. The reforms will increase quality through higher expectations of English and maths with more end-point assessment to ensure that the apprentice is fully competent. We will also raise aspiration for apprentices by introducing grading.
These are significant reforms so we are testing them with trailblazers. Trailblazers, led by small and large employers and professional bodies, are designing apprenticeships for occupations within their sector to make them world class. Trailblazer activity will help to create a sustainable employer model for future apprenticeship development. The first trailblazers were announced in October 2013 with a second phase in March this year.
The first trailblazers were in eight sectors: aerospace, automotive, digital industries, electrotechnical, energy and utilities, financial services, food and drink manufacturing, and life and industrial sciences. They have successfully produced the first apprenticeship standards and most are planning for apprentices to start on them in the next academic year. We want apprentices on these trailblazer apprenticeships to be treated in the same way for minimum wage purposes as other apprentices on government apprenticeship programmes. These regulations therefore add trailblazer apprenticeships to the list of government apprenticeship programmes covered by the apprentice rate.
I remind the Committee of the key benefits of the regulations. First, they uprate the national minimum wage rates in line with recommendations from the Low Pay Commission and, secondly, they add trailblazer apprenticeships to the list of government apprenticeship programmes covered by the apprentice minimum wage rate. I commend the regulations to the Committee.
Baroness Donaghy (Lab)
My Lords, I declare an interest as one of the members of the Low Pay Commission when it was first established in 1999. We established the first minimum wage and apprentice rate so I have kept a working knowledge of this subject throughout. The Minister said that the national minimum wage has not only kept up with average earnings but has surpassed them, and I acknowledge that. However, we have to accept that it is still a very low rate and all parties acknowledge that when the economy can afford it these figures should be substantially increased. I also acknowledge that the Government have done their best by accepting the recommendations of the Low Pay Commission. I hope that that will be the case with all future Governments and that the independent Low Pay Commission will continue and all parties will honour its recommendations.
My first point is on the impact of the minimum wage and there is an excellent sentence in the Explanatory Note, which says:
“The Commission’s recommendations are shared judgements rather than the mechanistic products of an economic model. They are strongly based in evidence and involve careful assessments of, among other things the NMW relative to median earnings and the number of jobs covered by the minimum wage”.
I emphasise this because I want to ask the Minister what further steps are being taken so that this impact is fully implemented by making sure that the minimum wage is honoured by employers. What resources are available to check up on the minimum wage implementation? Are we satisfied that we have sufficient staff to carry out the inspections and the check-in? That would be my first question, because, obviously, there will not be any real impact if employers think that they can get away without paying the minimum wage or can fiddle the hours so that there are some on the books and some off the books. We witnessed that in many employment situations, where all the books looked perfect but the workers themselves informed us that they did an extra six hours off the books for a lower rate, which took it below the minimum wage. What steps are the Government taking to make sure that that is fully followed up?
My other point concerns the Low Pay Commission itself, which said that the new Government website was insufficient to give information to people who were seeking information on low pay and the statutory national minimum wage. As we have all acknowledged, this is an independent body that we all respect. If it is saying that the revised website is insufficient and inadequate, are the Government taking steps to consult the Low Pay Commission to see whether that information can be improved, to maximise the impact of the minimum wage?
Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013
Debate between Lord Popat and Baroness Donaghy
Lord Popat
My Lords, as I said earlier, 0.25% of cases at the tribunal for unfair dismissal have resulted in compensation of £74,200, but 90% of the cases that have gone to the tribunal have resulted in compensation of just under £5,000. Therefore, even somebody on the minimum wage will probably be able to get the right level of compensation. All parties recognise the need for a cap. As I said earlier, the median award is £4,560, which is below the median salary. Therefore, for 99.75% it is quite reasonable for low-paid people to have this cap or the maximum of £74,200.
Baroness Donaghy
I was making a general point about the Government allowing, if you like, propaganda about excessive amounts of money to simmer around in the pot, whereas we all know that the reality is that the award figure is very low. I should have mentioned earlier that, even when the minority of the minority of the minority are awarded compensation, 40% of them do not receive it. They have to either accept nothing or go through the civil courts to chase the employer for the award. Therefore, the talk about caps and limits and about putting employers off employing people goes along with the propaganda about large amounts of money, when the reality is that those amounts are small and 40% of them do not get paid. Does the Minister not feel that he could at least put forward a consistent point of view about this and not put a cap on the pay-based awards?
Lord Popat
The noble Baroness raises a very important issue. This large amount of £74,200 has been in place for some time. We are trying to clarify matters, and the most reasonable or most equitable way of doing this and of speeding up the tribunal process or the agreement between employers and employees is to bring in a cap of either 12 months’ salary—which is quite reasonable because it gives the employee 12 months to find an alternative job—or £74,200. As I mentioned earlier, 95% of the awards given in the past have been settled for less than the median of £4,560. We have put information on median awards on ET1 claim forms to help to address issues of perception. We are also improving the guidance to help employers and employees to have better information.
The Government have given due regard to the comments of the Secondary Legislation Scrutiny Committee and have concluded that the order meets the requirements of the Act. I commend it to the Committee.