Bad bosses who exploit their workers should be held to account, facing higher fines and greater threat of prosecution, the government has been told.
These were among nearly 40 other recommendations published today (May 9) by the new Labour Market Enforcement (LME) body, set up last year by the government to crack down on violations of employment laws such as failing to pay the mandatory minimum wage.
LME director Sir David Metcalf found that failure to pay holiday pay was a major problem – it accounted for about half of all instances of ‘wage theft’, which in 2016 totalled over £3bn.
That there is no agency governing enforcement of holiday pay regulations was cited as a major reason the problem exists in the first place – Metcalf called on the HMRC or other government body to be tasked with clawing back unpaid holiday pay.
Workers, too, should be given a mandatory right to a wage slip, which would include total hours worked and hourly rate of pay for hourly workers, and they should all be given a written statement outlining their rights in the first week of employment.
Major companies should also be held jointly responsible if other businesses in the supply chain are not complying with employment law. This would prevent big employers such as Carillion ‘subcontracting’ away their responsibilities to workers.
The public sector can play a major role in raising standards through its procurement process – Metcalf said public procurement contract templates should be “amended to include an emphasis on employment law obligations”.
Umbrella companies – which are now common in the construction industry but are spreading to other sectors as well such as logistics, warehousing and even the NHS – should be reined in, the LME said.
These intermediary firms responsible for paying workers, dubbed umbrella companies, trouser workers’ pay by deducting processing fees and forcing workers to pay for both their own and their employers’ national insurance contributions.
There’s very little oversight of these companies, which Unite has long campaigned to ban – the LME has for now called only for better oversight of umbrella firms by granting greater powers to government bodies to investigate them.
Key among Metcalf’s recommendations is “bigger penalties to put employers off breaking the law.” As it stands now, bosses in minimum wage cases often only end up paying less than £5,000 in fines – little enough for the employer to write off as simply the cost of doing business.
The report points to Health and Safety Executive as a possible model – the body links financial penalties for health and safety violations to the company’s annual turnover, which means large companies can be fined up to £10m in serious cases, creating a strong incentive not to break the law.
Both the TUC and Unite welcomed the LME’s recommendations but said that more needed to be done.
“Toughening up the law is not enough alone,” said TUC general secretary Frances O’Grady. “If enforcement is done on a shoestring, bad bosses will continue getting away with treating staff like dirt.
“The proposal to make leading brands jointly responsible for abuses by their suppliers is welcome,” O’Grady added. “To fully stamp out exploitation, ministers must make every employer at the top of a supply chain jointly and severally liable for abuses.”
Unite assistant general secretary Steve Turner agreed that the recommendations mean little if enforcement agencies aren’t properly funded.
“The government needs to put its money where its mouth is with enough resources to make its threats a reality for bad bosses,” he said.
Turner noted too that the government should go beyond the recommendations and ban some of the most exploitative work practices which are now perfectly legal.
“[The government] needs to proactively tackle bogus self-employment and the use of ‘umbrella’ companies which are fleecing workers out of their hard-earned cash while bosses get away without paying their fair share of tax,” he said.
“Ministers could also show they are serious about standing up for workers by calling time on the insecurity currently endured by around one million working people and ban the use of exploitative zero hours contracts.”