Enforcing rights

Have you ever planned a walk along a public footpath only to find the farmer has left a thicket of thistles in your way? If so, you don’t need to be told: rights with no bite aren’t rights at all. When it comes to the labour market, however, the UK has been wont to forget this. The minimum wage has been greatly increased in recent years, and now – under the banner of what Keir Starmer calls “the biggest upgrade to workers’ rights in a generation” – the principle of stronger protection is being extended to new aspects of working life with, for example, new entitlements to reliable shifts. But unless shoddy surveillance and anaemic enforcement are tackled in tandem, these potentially crucial advances could be more theoretical than real.

An awful lot rides on the Government’s welcome commitment to complement its package of labour market reforms with a new single body – So what are its chances? And what is the scale of the problem it faces?

Rule-breaking is by its nature partially hidden from view: there can be no exhaustive data on non-compliance. Sadly, we know enough to know that it is common. The grey zone where rules aren’t followed sprawls way beyond the underground economy: many otherwise-reputable companies, including care providers and supermarkets have been found to be in breach. Efforts to tally up specific breaches point to problems on a breath-taking, and under-addressed, scale. According to the Government’s own estimates, 365,000 workers were paid less than the minimum wage to which they are entitled – and yet HMRC only uncovers around a third as many individual cases, and imposes penalties in fewer still. Many other supposedly well-established ‘day one’ rights turn out to be hard to cash in: 900,000 workers report receiving no paid holiday; 600,000 who were meant to be automatically enrolled in a pension that the employer chips into, had not in fact been so; and an astonishing 1.8 million don’t get the payslip they are entitled to, in order to check they are getting what they’re due.

The effects of non-compliance are all the more serious because they are concentrated on the most vulnerable. This is true almost by definition when it comes to the minimum wage. But those at the bottom of the pay-scale are also, for example, six times more likely to be missing out on paid holiday than those at the top. The youngest, oldest and minority ethnic workers are all at special risk. So, too, are those with less secure contractual arrangements: 22 per cent of temps, for instance, report missing out on paid leave, as do 29 per cent of workers on a zero-hours contract. Seeing as the new Government is – quite rightly – making a push to strengthen rights for exactly these sorts of workers, the question of enforcement is becoming even more critical.

On this front there is good news. The proposed looks like it will have the comprehensive remit it needs, addressing all those co-ordination questions by – as the Government puts it — creating “a single place where workers and employers can turn for help,” while improving “efficiency” through “unified” oversight. This includes not only bringing together existing bodies that enforce laws like the minimum wage and agency workers’ rights, but also bringing into scope rights like holiday pay and Statutory Sick Pay that until now have not been covered by any enforcement agency. There is heartening clarity, too, about where the buck stops, with the Business Secretary empowered to enforce employment rights, both directly and by appointing relevant officers, and indeed to create certain new regulations to the same end. A balanced advisory panel, with “equal representation from businesses, trade unions, and independent experts” should maximise the chance that such powers will be deployed with awareness of their effects on both sides of industry, and the economy as a whole.

There is nonetheless one important outstanding question on data sharing. Proper recognition of its potential needs to be balanced by awareness of circumstances in which it could be seen to turn a trusted friend of the worker into a spy. In particular, we need to hear more from the Government about making sure the Fair Work Agency does not share data with the Home Office, in ways that could create problems for individuals with their immigration status. This really matters. Migrant workers are among the most vulnerable to having their rights ignored. They will be fearful of reporting rogue employers if they fear this could result in details that could be damaging to their case being passed to Immigration Enforcement. The existing bodies can do so. If we’re serious about an environment where work is always respected, there should be a commitment that the new agency will not.

Overall, though, it does sound like the Government is creating a creature with the right shape. The remaining question is whether this new animal will have sufficiently keen eyes and sharp teeth. As things stand, many breaches are simply not seen by the system because it does not deploy enough people to look out for them. Against international benchmarks, Britain’s current performance is poor: the International Labour Organization standard is one inspector for every 10,000 workers in the economy; the UK has less than a third of that, with only one for every 34,500 workers.

Turning from eyes to teeth, as things stand the financial consequences for non-compliance are too low to act as a meaningful deterrent. The maximum penalty for under-payment of the minimum wage is twice the arrears owed. Regulators in other countries, such as Norway and Australia, have the option to impose a fine many times greater than this. The pressure on rogue firms to comply obviously depends not only on the risk of being caught, but also the consequences when they are. So fines need to rise: for rights that are easily quantified in pounds and pence, such as paid leave and the minimum wage, we suggest to at least four times the value of the shortfall. There must be action, too, to ensure that both fines and tribunal awards are indeed paid as ordered (and not, as past government-commissioned research has suggested, being under-paid or unpaid half of the time).

Upgraded workers’ rights in the UK are certainly necessary. But until and unless the promised new protections are accompanied by commensurate action on enforcement, for many of the most vulnerable workers those new rights will remain in the realm of rhetoric rather than reality.