As Polly Toynbee argues in the Guardian this morning:
Welfare dependency isn't Britain's gravest economic problem. Pitiful pay is. If the government really wanted to cut its benefit bill, it would ensure that employers give their workers a living wage.
She is right, of course. Her case is glaringly obviously correct. But there is a flaw in it, and that is that HM Revenue & Customs, who have the responsibility for enforcing the national minimum wage do not do that job well even though it is their job to do so on behalf of BIS.
It is true that they have a policy for doing so. But as Fullfact Factcheck have reported, there have quite extraordinarily been less than ten prosecutions for failing to pay the national minimum wage since it was first introduced in 1998.
Now as FactCheck also point out, that is not the only sanction:
The previous Government brought in a system of penalties in 2008 so that exploited workers could claim arrears and employers would face penalties. In the 2010/11 financial year, 937 cases saw a penalty imposed, totalling over £560,000.
That obviously makes the position a little better and yet we know there are tens of thousands of health care workers now not earning the national minimum wage in outsourced social care companies. The inevitable conclusion is that that chance of being penalised for not paying the minimum wage is low.
So what can be done? Firstly, and inevitably, resource needs to be dedicated to this issue. I suspect that this explains a great deal of this problem. We cannot deliver social justice for the low paid in this country without ensuring the resource is available to make those on the lowest in comes get paid the minimum they deserve.
Secondly, we need to remove the cross department responsibility for this issue. Confused reporting lines always undermine effectiveness. HMRC reporting to BIS on this issue just creates confusion. HMRC may well be the right people to enforce this policy - but in that case give the responsibility to a Treasury minister.
Third, increase the penalties. Social security cheating is seeing a lot of attention and high penalties. But low pay cheating is exactly the same crime with the same consequence for us all. So make the penalty match the crime. And then impose it.
We have a social obligation to the lowest paid in our communities. It is time we fulfilled it.
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Living in the South West, I know local wages are low. I know of people doing overtime unpaid to keep their job. Can you clarify, please? If an employer offers a job at less than the National Minimum Wage and the employee accepts and signs a contract, is it legal?
Also, is the onus on an employee to complain or do the HMRC have a duty to detect and enforce non-compliance?
An underpaid contract is illegal
An employee may contact HMRC
HMRC have a duty to investigate – but they don’t have the resources to find cases
many thanks
phone the pay and work rights helpline, 0800 917 2368.
The NMW Act has clauses which makes it illegal to contract out. NMW must be paid regardless of whether the worker agrees to a low pay rate. HMRC will investigate this if you notify them via the help line. It’s far easier for them to catch the employer if a worker within the company has told them where to look and what to expect.
Richard -are there any estimates of the numbers of people being paid below the minimum wage?
According to the Guardian – hundreds of thousands potentially
OK I think you make the right case. But I don’t think HM Revenue & Customs are up to this job as they are presently structured. They have a data base of recorded wages,
but wages paid under the NMW almost by definition are not going to be recorded.
(One favourite trick is to reduce the recorded hours it is said the employee works, so the £ per hour looks higher).
One picks up wages below NMW by complaint or by investigation. HMRC have severely reduced on site PAYE visits for starters. And their prosecution record is lamentable.
Absolutely agree on the need for more resources. But let’s concentrate on increasing the £4 million pa HMRC force employer’s to pay to workers in arrears rather than penalties paid to HMRC or on prosecutions which could eat up huge amounts of resources for little result.
Lets not talk down NMW either, as this is hugely successful legislation that has brought higher pay to millions. Most employers comply, given the pitiful resources HMRC achieve a lot against those who don’t, and HMRC are able to help every worker who is prepared to give evidence about underpayment.
However the disgraceful situation in domiciliary care exposes HMRC’s lack of resources.
Agreed
I’ve been thinking about your 2nd recommendation, which is intriguing. But I really don’t think we should be campaigning for this now. For a start any re-organisation under the current Government will only end up as a cover for cuts.
BIS have been cut so hard that they are hardly fit for purpose to be in charge of NMW policy. HMRC are the right people to enforce because they have a national perspective, a sizable pool of people who know how to investigate employers, and massive potential information gathering possibilities through their PAYE inspections which have yet to be properly harnessed for NMW.
However if HMRC were in sole charge there is a real danger that they might prioritise the extra PAYE that is generated from NMW uplifts and penalties above looking after the interests of the workers.