Earl of Courtown
Main Page: Earl of Courtown (Conservative - Excepted Hereditary)National Minimum Wage (Amendment) (No. 2) Regulations 2020
Earl of Courtown Excerpts
The Earl of Courtown
That the Grand Committee do consider the National Minimum Wage (Amendment) (No. 2) Regulations 2020.
Relevant document: 7th Report from the Secondary Legislation Scrutiny Committee
The Earl of Courtown (Con)
My Lords, on behalf of my noble friend Lord Callanan, I beg to move these draft regulations. The Government are committed to making the UK the best place in the world to work and grow a business. At the turn of the decade, we confirmed that 2 million low-paid workers will receive the biggest ever cash increase to the national living wage. We have pledged to take the national living wage further, with a target of two-thirds of median earnings by 2024, making the UK the first major economy to set such an ambition.
We are also committed to ensuring that all those who are entitled to the national living wage or national minimum wage receive it. The Government take tough action against the minority of employers who underpay their workers, and we have doubled the budget for minimum wage compliance and enforcement since 2015; it is now at a record high of £27.4 million. However, we are acutely aware of the burden that the regulations, including the minimum wage, can place upon business. As the level of the national living wage enters new territory, we want to make sure that the rules are as straightforward as possible.
As long as workers are getting the wages that they are entitled to, we want to make it easier for businesses to comply with the law. That is why we are bringing forward these regulations. Their purpose is to amend the national minimum wage rules relating to salaried hours work and pay reductions. We have worked closely with stakeholders to identify the areas of the national minimum wage rules that add complexity for employers without providing clear protections or benefits for workers. Employers, particularly in the retail sector, told us that some aspects of the rules can be unnecessarily difficult to comply with. We have listened to these views. Following a review of evidence from the consultation on salaried workers and salary sacrifice schemes, these changes to the regulations will support businesses which employ salaried hours workers.
The rules on salaried hours work provide a method of calculating minimum wage pay for workers who are paid a salary in equal instalments, including where the hours worked each week or month may vary. For example, this method can be used for some teachers who receive equal pay packets throughout the year, including through the holidays, or for chefs who may receive consistent pay packets throughout the year despite large variations in their working hours before and after the busy Christmas period.
Currently, low-paid salaried workers cannot be paid in fortnightly or four-weekly cycles without the risk of their employer breaching the regulations. Evidence tells us that this is a preferred method of payment for some workers and employers. Similarly, if companies were to pay such salaried staff extra for working a bank holiday shift, there is a risk of breaching the regulations as they stand. Evidence from the consultation and stakeholder engagement found that employers are removing premium payments for workers to reduce the risk of minimum wage non-compliance. These regulations widen the range of pay arrangements that are compatible with workers being treated as salaried hours workers, helping to preserve certain pay arrangements that are valued by many workers. As a result, any fixed payment cycle that is between one week and one month will meet the conditions for salaried hours work. Workers will also be able to be paid a premium in respect of their basic hours while meeting the same conditions.
To help employers monitor their own practices and make sure they are paying above the minimum wage, the regulations will also allow them to take steps to change the “calculation year” for salaried hours workers. The calculation year is the reference point to identify when in a year a salaried worker’s basic hours, for which they are paid their salary, are exceeded. Employers may wish, for instance, to create a uniform calculation year for all their salaried hours workers to align with other annual business cycles.
The regulations also make a small change to the rules on workers making purchases from their employer, such as where a clothing retail worker buys a uniform from their employer. The change ensures that employers get credit for reimbursing the worker, as they currently do when the purchase is from a third party. The new rules will come into force on 6 April 2020.
These regulations provide greater flexibility to employers and show the Government’s commitment to supporting compliance with the minimum wage rules while maintaining our world-leading employment rights. I commend them to the Committee.
Baroness Burt of Solihull (LD)
My Lords, I thank the Minister for his explanations. He has gone some way to answering some of my questions. The amendments seem reasonably straightforward. They are very welcome in so far as they incorporate changing work patterns into the minimum wage regulations. Thinking about the current coronavirus situation that besets us, more and more of us will be working irregular work patterns, including, of course, working from home.
As long as the worker performs to the requirement of the contract, I am not sure why you would not measure the amount of work in total hours, or even, more radically, in outcomes achieved. However, outcomes might be a stretch too far away from what we are talking about today, except for those for whom performance bonuses comprise part of their remuneration. My understanding is that performance bonuses would be excluded from the basic minimum wage calculation. Can the Minister confirm that?
The instrument’s main thrust is to accommodate the changing work payment cycles that people have today—for example, fortnightly or four-weekly—and ensure that their pay is fair and falls within the minimum wage regulations. Basic hours might indeed vary, as the Minister said, but the employer must ensure that when these are divided up by the number of pay periods, the average payment paid each month equals at least the minimum wage. For workers who work on, for example, bank holidays and receive premium payments, the rules currently do not allow for premium payment arrangements in respect of a worker’s basic hours. As I understand it, the regulations rectify this.
Finally, could the Minister elaborate on the relevance of the calculation year? I fully understand the change from the worker’s initial start date as a reference point for calculation to a point where the employer can specify when the year will be calculated from, but does that mean that a worker will need to wait nearly a year to determine whether they have worked any overtime? I am sure this cannot be the case. I would be very grateful if the Minister explained that a little further.
The Earl of Courtown
My Lords, I thank noble Lords for their valuable contributions and for supporting our ambitions in respect of the national minimum wage. I shall respond to the queries in the order in which they were posed. I shall try to answer them as best I can, but if further information becomes available, I will of course write to both the noble Baroness and the noble Lord.
The noble Baroness, Lady Burt, asked whether a worker needs to wait a year to work out whether they have been paid overtime. The answer is no. The flexibility to change the calculation year is technical only. We do not anticipate any detriment to the worker in that area. The noble Baroness also asked whether performance bonuses are excluded from the calculation of minimum wage pay. No, they are included.
I thank the noble Lord, Lord McNicol, for giving me prior notice of some of the questions he was going to pose—it certainly makes my life a little easier. He asked when the UK would surpass other countries’ minimum wage. As he pointed out, we are already in the leading pack internationally on the minimum wage, but the United Kingdom’s ambition to reach 66% of median earnings is unique. The noble Lord will be glad to hear that the increased rates in the living wage will affect more than 2 million workers.
The noble Lord asked whether HMRC would need extra resources to enforce the regulations. As I said earlier, we are committed to cracking down on employers who pay below the national minimum wage or national living wage. The doubling of funding to £27.4 million for 2019-20 for the Government’s minimum wage enforcement compliance centres allows us to do just that, while helping employers to ensure compliance without the need for enforcement. Not only does HMRC follow up on every worker complaint that it receives but it undertakes targeted enforcement for businesses and sectors with a high risk of non-compliance. Such targeting is really important. Additional funding allows HMRC also to undertake activities to educate employers into compliance—from proactively visiting new small businesses to delivering webinars on issues where employers commonly trip up. In 2018-19, HMRC used additional funding to recruit an extra 124 staff deployed on minimum wage enforcement. In the same year, it identified a record £24.4 million in arrears owed to more than 220,000 workers who were underpaid in respect of the national minimum wage or the national living wage and issued £17 million in penalties.
The noble Lord, Lord McNicol, also asked how Her Majesty’s Government are communicating the rule changes to small and medium-sized businesses across the UK, which is important and affects a great many workers. Alongside our annual campaign to raise awareness among employers and workers of the new minimum wage rates, we will continue to engage widely with small and medium-sized businesses. We are offering proactive support to new small businesses through HMRC, which will visit selected employers to educate them on the national minimum wage and help them get their practices right from the start. To improve understanding of the rules still further, we shall soon publish an improved guidance offer through GOV.UK. We have convened a guidance readership panel of employer groups, unions and relevant experts to make sure that we get these products right.
The noble Lord, Lord McNicol, also asked about enforcement. The Government have created a new single enforcement body. Cracking down on employment law breaches will be part of the new employment Bill. The noble Lord asked when this will be brought to Parliament. As announced in the Queen’s Speech, we will bring forward an employment Bill to deliver the greatest reform of workers’ rights in over 20 years. The legislation will make workplaces fairer by providing better support for working families and new protections for those in low-paid work and the gig economy, and by encouraging flexible working. We are making good progress and will lay this measure when parliamentary time allows.
The noble Lord also asked whether the Government will monitor to ensure that workers do not suffer detriments from these rules. The legislative changes have been specifically designed to address business concerns without causing detriment to workers; that is of prime importance. Employers seeking to make changes will have to inform their workers in writing before changing the calculation year. Workers must consent to this change.
We know that in the vast majority of cases, businesses want to do the right thing by their workers, including by paying them all at least a national living wage or national minimum wage. The Government’s consultation on salaried-hours work found evidence that in some areas, regulations have not kept up with modern-day practices. These regulations bring minimum wage rules up to date, reducing the burden on employers trying to adhere to the law. These regulations and additional non-legislative measures announced last month show that we are committed to helping employers get the rules right at the first time of asking, while not reducing worker protections.
We are not changing the regulations relating to salary sacrifice schemes. However, we recognise that in some instances, employers are penalised by offering benefits to workers through these arrangements and by misunderstanding the rules. That is why we have established a helpline for employers who operate pay deduction on salary sacrifice schemes to access support and information directly from HMRC. We are also offering proactive support to new small businesses. HMRC will proactively visit selected employers, as I mentioned before. To further improve understanding of the rules, we will soon publish improved guidance through GOV.UK.
These regulations are just one of the ways in which we are making the UK the best place in the world to work and grow a business.
Baroness Burt of Solihull
In response to one of my questions, the Minister said the performance bonus is included in the minimum wage calculation. If a worker does not earn a bonus, does this mean they could earn less than the minimum wage? Surely the point of a bonus is that it is in addition to the minimum wage.
The Earl of Courtown
No, they could not earn less than the minimum wage.
I commend these regulations to the Committee.