Director of Labour Market Enforcement publishes first Labour Market Enforcement Strategy

The department for Business, Energy and Industrial Strategy has published the Labour Market Enforcement Strategy for 2018/19 (‘the Strategy’) which is the Director of Labour Market Enforcement, Sir David Metcalf’s, first full annual Strategy since his appointment in January 2017.

Many of the Strategy’s recommendations are similar to those outlined in the Taylor Review of Modern Working Practices and Government’s response to the Taylor Review. This is unsurprising as Sir David Metcalf was invited to provide evidence on the Taylor Review.

The clear message from the Strategy is that attention is concentrated on ensuring that workers have the worker/employment rights they are entitled to and punishing employers who fall foul of meeting their statutory obligations.

Supply chains

The Strategy details that; “One of the most prominent manifestations of the fissured workplace over recent decades has been the growth of supply chains”. Usually the driver for a long supply chain is to reduce costs which means standards may be compromised.

The Strategy recommends making leading brands jointly responsible for non-compliance in supply chains. If the issue isn’t addressed, both companies will be named and shamed. This may result in end users who use temporary workers undertaking much more vigilant due diligence on their supply chain and on an ongoing basis.

The Strategy wants to improve transparency throughout the supply chain, ensuring workers are aware who they are employed by and that they understand their payslips.

Remit of Employment Agency Standards (EAS) and umbrella companies

The Strategy recommends increasing the budget for the Employment Agency Standards Inspectorate to extend their reach to umbrella companies and intermediaries.

Contracts and payslips

In accordance with the Taylor review, the Strategy recommends a statement of rights should be made mandatory for all workers within one week of employment commencing. Government should develop a template for the written statement of employment to ensure transparency in information provided, and to reduce the burden on business.

Another recommendation is that the right to a payslip should be extended to all workers.

The Strategy recommends that Swedish Derogation contracts should either be properly enforced or abolished and as part of regulating this, EAS remit should be extended to cover the enforcement of compliance with the Agency Worker Regulations 2010 (including the Swedish Derogation), with the additional necessary resource to do this.

National Minimum Wage (‘NMW’)

Resourcing for HMRC’s NMW team has increased in recent years which reflects the increase in the NMW rates which inevitably results in a greater number of complaints and cases of non-compliance to be investigated.

In 2016/17 the NMW team issued 821 penalties to a total value of £3.9m and identified pay arrears in excess of £10.9m for over 98,000 workers. The NMW team also completed four successful prosecutions – only the most serious and persistent cases of non-compliance - to the Crown Prosecution Services for criminal prosecution.

The Strategy recommends that NMW penalties are based on a percentage of their turnover up to £10m, similar to General Data Protection Regulation penalties.

Gangmaster and Labour Abuse Authority

Resourcing for the GLAA has also increased in recent years to enable them to carry out their extended remit to tackle labour exploitation.

Under the Gangmasters (Licensing) Act 2004 the GLAA licences gangmasters in agriculture, horticulture, food processing and the shellfish industry sectors and investigates the activities of unlicensed gangmasters. Since the introduction of the Immigration Act 2016 the GLAA also has a broader role in addressing labour exploitation across the entire labour market.

The Strategy recommends that the GLAA pilot the licencing of nail bars and car washes, on a geographically limited basis, to protect the most vulnerable workers.

Holiday pay and tribunals

There is currently no state body instructed to enforce holiday pay therefore there is little proactive activity. The Strategy recommends thats HMRC should be granted powers to enforce holiday pay and recover arrears where appropriate.

The Strategy recommends tacking the practice of ‘phoenixing’, which is commonly undertaken whereby directors dissolve their companies to avoid paying workers tribunal awards and other enforcement penalties.

Next steps

Sir David Metcalf is keen that those elements of the Strategy accepted by Government are accepted and implemented in a timely fashion. Some will require primary or secondary legislation however some should be simpler to take forward.

To prepare for the next Strategy, due by the end of 2018/19 financial year, another public consultation will be undertaken in summer/autumn 2018.

To view the full report and recommendations click here.