National Minimum Wage Legislation

Lord Offord of Garvel Excerpts

Thursday 21st March 2024 Lords Chamber

[Lord Sahota]

To ask His Majesty’s Government what steps they are taking to improve the enforcement of national minimum wage legislation.

[The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)]

My Lords, the Government take enforcing the minimum wage extremely seriously. We are clear that anyone entitled to be paid the minimum wage should receive it. Robust enforcement action is taken against employers who do not pay their staff correctly. Since the introduction of the national minimum wage in 1999, the Government have overseen the repayment of more than £173 million to 1.4 million workers, issued nearly £86 million in financial penalties and completed more than 87,000 investigations.

[Lord Sahota (Lab)]

I thank the Minister. The International Labour Organization recommends that there should be one inspector for every 10,000 workers to check that employees are being paid the minimum wage. The UK ratio is 0.4% for every 10,000 workers; that way, UK employers can expect an inspection every 500 years. That is not good enough. You only have to talk to overseas students and workers in minority communities to see how widespread the problem is. In order to stop paying the minimum wage to some employees, employers make them work 20 hours, but on the books they are paying them for only 10 hours—this is one way they get round it. We need stronger and tougher sanctions against rogue employers, so we can get on with it.

[Lord Offord of Garvel (Con)]

The Government remain totally committed to the effective enforcement of employment rights and provide a lot of funding, including over £35 million this year to the existing dedicated labour market enforcement bodies. That is a 121% increase in funding since 2010, so a lot of money has gone into this area. On top of that, we provide funding of over £50 million per annum to ACAS, to support employment tribunals. We have had great success in reducing the number of companies not paying the national minimum wage.

[Lord Fox (LD)]

My Lords, we heard about in-work poverty in the previous Question. One reason there is so much in-work poverty is that too many workers are slipping through the national minimum wage net. One of the key areas in this is food delivery apps. Uber justifies its treatment of its employees as so-called self-employed as balancing flexibility and protection. Does the Minister agree that it is the food delivery apps that get all the flexibility, while the workers get no protection at all?

[Lord Offord of Garvel (Con)]

In the recent Supreme Court judgment on Uber, it was made clear that those who qualify as workers under existing employment law are entitled to core employment rights and that all gig economy businesses must ensure that they fulfil their legal responsibilities. We now have a situation in which the national minimum wage is two-thirds of hourly median pay, and under OECD rules that means it is no longer classified as low pay. We know that 5% of our workforce is on national minimum wage, which is a great success.

[Lord Sikka (Lab)]

Currys, EasyJet and Greggs are part of a parade of companies that never forget to pay bosses but somehow forget to pay the minimum wage to workers. Their memory can be improved by effective sanctions requiring that the fine for not paying the minimum wage must equal remuneration of the entire board, of which at least 50% must be paid personally by directors. When will the Minister introduce this sanction?

[Lord Offord of Garvel (Con)]

One of the sanctions available to the Government is the naming and shaming scheme, which is very successful. We have a large number of companies which have been subject to that, and we have therefore increased greatly the number of companies complying as a result. When HMRC finds employers which breach this, it can impose a penalty of up to 200%; the penalties are severe for companies which do not comply.

[Lord Bellingham (Con)]

My Lords, the Minister pointed out the work by the HMRC national minimum wage enforcement team, and the general consensus is that it is doing an effective and professional job. Does it concern him that 95% of the 65,000 HMRC staff are working from home at least one day a week? Can he tell the House whether this is hampering effectiveness?

[Lord Offord of Garvel (Con)]

I thank my noble friend for his question. There are a number of bodies that enforce our employment laws in the UK. Obviously, HMRC is the body that oversees the national minimum wage; my department, DBT, ensures that agency workers are well protected; and within the Home Office, we have the Gangmasters and Labour Abuse Authority. So we have three very effective regulators, which are well funded, and we continue to pursue, name and shame, and impose penalties on companies that do not respect the law.

[Lord Leong (Lab)]

My Lords, this year we celebrate 25 years of the national minimum wage, which was brought in by the Labour Government. It has played a vital role in protecting the UK’s lowest-paid workers. Some 524 employers were recently named and shamed for underpaying around 172,000 national minimum wage employees by nearly £16 million. Can the Minister confirm that these underpaid employees have now received all the pay that they have earned and how often sanctions beyond the standard fines are applied to repeat offenders?

[Lord Offord of Garvel (Con)]

Since the introduction of the national minimum wage in 1999, the Government have ordered employers to repay over £173 million to 1.4 million workers. It is far more effective that the employers are made to pay the workers than be dragged through courts, which delays payments to workers and does not provide any respite. I am interested in the fact that this is the 25th anniversary of the national minimum wage. When this Government came to power in 2010, the number of employees on low hourly pay was 21% of the workforce; today, that is 8.9%. I also point out that, when this Government took over from Labour in 2010, benefits were the largest source of income for the poorest working-age households, but under the Conservatives it is now their wages.

[Lord Watts (Lab)]

Is it not the case that far too many employers still find it to their own advantage to pay below the living wage and below the basic wage? Is it not time that we made this a criminal act, so that we can hold the directors of those companies accountable for their actions?

[Lord Offord of Garvel (Con)]

As we have said before, our labour market in the UK is one of the most sophisticated and best-working in the world. Out of a population of 66 million people, 33 million are working, and only 5% of that workforce is on the minimum wage. In the meantime, 30% of the population do not pay any tax and the 1% highest earners pay 30% income tax. I think noble Lords would agree that our workforce is in good shape. Instead of criminalising employers, we need to spread the education required to make sure that everyone has higher wages.

[The Earl of Clancarty (CB)]

My Lords, some of the examples that have been given are technically people who are self-employed. Does the Minister not believe that the whole area of self-employment needs to be looked at very carefully in this respect?

--- Later in debate ---

[Lord Offord of Garvel (Con)]

Of the 33 million workers in the country, there are 27 million employees; that means that we have a proportion of the workforce which is self-employed. You might say they are the unsung heroes—the ones who put their laptop on at 8 am and close it down at 10 pm—and they deserve our respect.

[Lord Harris of Haringey (Lab)]

My Lords, is it not the case that, two years ago, the Government undertook to close the loophole which enabled P&O Ferries to pay way below the minimum wage? Has the Minister seen the reports in yesterday’s newspapers that many of its employees are currently being paid half the minimum wage? What are the Government doing about this?

[Lord Offord of Garvel (Con)]

Obviously, that case is well known, and P&O was rightly named and shamed. I saw the article but I am not aware of the details of the case. However, I am very clear that we will check to make sure that P&O continues to act within the law.

[Baroness Blower (Lab)]

My Lords, in its day, the national minimum wage was indeed an achievement. However, does the Minister agree with me, and with the OECD and the ILO, that the best way to ensure that workers have sustainable good pay and conditions is through sectoral collective bargaining—for example, in the care sector?

[Lord Offord of Garvel (Con)]

I am sure we all agree on one thing: that we want our workforce in this country to be well paid and to increase their training and skills. Surely the best form of welfare we can give anybody is a good job.