Far too many companies are getting away with breaking the law over the wages they pay, the government’s adviser on employment abuses, Sir David Metcalf, has said. He said he wanted to look at high-street companies being jointly responsible if abuses were found among their suppliers, and suggested he could recommend that any goods made by an offending supplier could be seized, leaving empty shelves in shops and discouraging big companies from continuing to work with them.
He wanted tougher action against employers who underpay, and more resources to catch those breaching the law. In an interview with the Observer, he said action against offenders was “rather patchy” and he would look at measures that could lead to more people banned from being company directors if they breach the law. He said there was an issue with so-called “phoenix companies”, formed out of the collapse of a previous firm through insolvency. “This is an area we will be looking at during the consultation and probably commenting on in the [forthcoming] strategy.”
HM Revenue and Customs (HMRC) would need additional resources, he said, to ensure that workers were paid the new living wage. Its workload would triple, with the proportion of the workforce covered by the minimum wage set to rise from 5% to 14% by 2020.
Metcalf oversees the remit of HMRC’s national minimum wage enforcement team, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate. He said the government’s decision to impose fees on bringing cases to employment tribunals had “been a problem” in the fight against bad employers. Ministers have been forced to ditch the fees after a supreme court judgment against them.
“It’s good that the people who were not able to take their cases to the tribunals will now be able to,” he said. “There is a problem about [unpaid] holiday pay … it’s a particular problem with employment agencies. The only way you could get holiday pay back was going to a tribunal. Say you were talking about a couple of hundred pounds – well, no one is going to pay £300 [in fees] to get a couple of hundred pounds back. So that may be helpful.”
He explained, “I have been told the garment trade is riddled with noncompliance among the subcontractors,” he said. “In America, if the equivalent of HMRC goes in and finds a subcontractor that is non-compliant, it embargoes the goods.” Leading high-street brands “will say ‘well gosh, where are our clothes, we need them next week’ – and they then put pressure on the contractor to make sure they comply with the minimum wage. So I am quite attracted to that.”
He also said that he was concerned that some employment agencies were finding ways to dodge a law that is designed to ensure any employee has to be paid the same as their contracted colleagues after 12 weeks in work.
Metcalf suggested there would not be a big increase in wages as a result of leaving the EU. “During my previous work on the migration advisory committee, it did seem the influx from [eastern European countries in 2004] did dampen down wages at the lower end of the pay distribution, but not by very much,” he said. “And therefore by implication, if we had fewer – depending on what the MAC recommended – people coming in, the wages would go up a bit, but again by implication not by very much. So I don’t think Brexit is going to suddenly mysteriously raise wages just like that, and cause, perhaps alas, me to be out of a job. There will still be plenty going on.”
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