National Minimum Wage: Care Sector

Debate between George Freeman and Christina Rees

Wednesday 23rd March 2016 Westminster Hall

[George Freeman]

I will deal with the right hon. Gentleman’s points, with which I have a lot of sympathy, if I am given time to crack on.

Hon. Members have rightly raised the issue of non-compliance with the minimum wage in this sector. I want first to set out the measures that we are putting in place now and that we have put in place already, before touching on some things that we may go on to do in due course. HMRC responds to every complaint made by workers through the ACAS helpline. When a third party reports suspected non-compliance, HMRC evaluates the report and investigates the employer when there are grounds to do so.

Since HMRC began enforcing the minimum wage in ’99, it has identified more than £65 million in arrears. Between April and November 2015, HMRC took action against 557 businesses, clawing back over £8 million for 46,000 workers who had been illegally underpaid. That is already the largest amount of arrears identified in any single year since the national minimum wage was introduced and is possible as a result of the increased investment and extra measures we have put in place to support enforcement.

We are going further. The Prime Minister has committed to a package of measures that are currently being implemented that will build on Government action to date and strengthen the enforcement of the national minimum and living wage. First, we are increasing the enforcement budget from April 2016, demonstrating our ongoing commitment to ensuring that the hardest-working and lowest-paid people receive the pay that they are entitled to. HMRC will also continue to promote compliance with the law and respond when employers have got things wrong.

Secondly, the Government are further increasing the penalties that employers will have to pay when they break the law. From 1 April, the calculation will increase further, to 200% of the arrears that an employer owes. By increasing the penalties for underpayment of the national minimum wage, we intend that employers who would otherwise be tempted to underpay comply with the law and that working people receive the money they are legally due.

Furthermore, under changes being implemented through the Immigration Bill, we are creating a statutory director of labour market enforcement, who will set out a single set of priorities for the enforcement bodies across the spectrum of non-compliance. That should ensure a targeted approach that addresses problems and best helps victims.

Under the Immigration Bill, we are also creating a new type of enforcement order. That labour market enforcement undertaking will be supported by a criminal offence for non-compliance. We want to tackle employers who deliberately, persistently and brazenly commit breaches of labour law and fail to take remedial action. That cannot always be done satisfactorily through the repeated use of existing penalties or offences, which may lead to the continued exploitation of workers.

[Christina Rees]

I am grateful to the Minister for giving way. Will he provide examples of where that happens in the care sector? He is quoting a lot of statistics overall about the national minimum wage and recovery, but they are not specific to the care sector.

[George Freeman]

Perhaps I can come back to the hon. Lady on specific cases—I do not have them to hand. I just want to talk about what we are doing to deal with the issues that have been raised, but she makes an interesting point.

In the care sector, we have a particularly high incidence of workers who have not been paid the national minimum wage in the right way. Other sectors are hairdressing and retail, and there is some dispute about where the worst practice exists, but the care sector clearly has a major historical problem. That is in part attributable to the fact that many of the more complex rules on calculating working time are prevalent in the sector—for example, the calculation of travel and sleeping time. On those points, although I am sure that Members will appreciate that I cannot comment on individual cases, I want to restate the Government’s position: when workers are performing work under their contracts, they must be paid the minimum wage.

It is also worth noting that there is no perfect measure of non-compliance within the sector, and there is a possibility that current estimates of non-compliance overestimate work time and underestimate pay, because the information is reported by workers themselves. That is why we are continuing to work with the Low Pay Commission, the Office for National Statistics and others in order to improve our estimates and better understand the scale of the problem.

On the point that was mentioned by the right hon. Member for Oxford East (Mr Smith) and others, the Low Pay Commission’s proposals on transparency merit serious consideration, and we are looking at those and a number of its other recommendations. We are determined to continue to drive forward and send the very clearest signal to companies and employers that we are becoming less tolerant of non-compliance, and we want them to recognise that.

None the less, increasing compliance with the minimum wage in the sector remains a top priority for us and we are taking a number of steps to promote compliance and take stronger action against those who break the law. First, HMRC continues to focus on tackling non-compliance, but that activity is no longer reliant on worker complaints and instead targets employers with the highest risk of non-compliance, based on a range of intelligence and information. HMRC can now analyse information from, for example, other Departments, trade union representatives and the Low Pay Commission, and the evidence indicates that this targeted approach in the care sector is working. From April 2013 to January 2016, HMRC opened 443 cases in the social care sector and closed 308 of those. Of the 308 closed cases, underpayment of the national minimum wage was found in 32% of investigations—for total arrears of £442,000 to 3,000 workers, with penalties issued for a total value of £100,000.

Members have also raised the important issue of affordability within the sector, given the introduction of the national living wage. That pay rise for the lowest paid could be seen to be a threat in terms of increasing non-compliance. That is partly why we are taking steps to signal strongly our commitment to clamp down on it.

With an ageing society, social care funding is a major strategic issue for the country and this Government. We are engaging closely with all the relevant stakeholders on that issue to ensure that councils recognise the need to increase the price that they pay for care in order to cover costs and to reflect rising costs and, not least, the national living wage. That is partly why we are giving local authorities access to an extra £3.5 billion of new support for social care by 2020, to be included in the better care fund. Councils will also be able to introduce a new social care precept, allowing them to increase council tax by 2% above the existing threshold. Taken together, the new precept and the additional better care fund contribution mean local government has access to the extra funding that it will need to increase social care spending in real terms by the end of this Parliament.

Oral Answers to Questions

Debate between George Freeman and Christina Rees

Tuesday 13th October 2015 Commons Chamber

[George Freeman]

I will happily look into that specific issue, discuss it with the right hon. Gentleman and see whether there is anything we need to do.

[Christina Rees (Neath) (Lab)]

11. What steps he is taking to improve support for carers.