HMRC has investigated 10,777 firms since 2009 for allegedly breaking the law on low pay, collecting £15.8m in arrears payments and imposing £2.1m in fines. However, only a couple of firms have been prosecuted, and despite ministers' repeated pledges, only one has ever been named and shamed.
A new report from the Centre for London and the Trust for London, which uses unpublished data, says the figures point to a "systemic failure" in the way the national minimum wage is policed. It calls for a more aggressive approach, arguing for town halls to take over from tax inspectors and allowing them to levy unlimited fines on repeat offenders.
The minimum wage, set at £6.31 an hour for those aged 21 and over, has become a major political issue in recent months. At the Labour party conference, Ed Miliband called for the level of fines to be increased by a factor of 10 to deter firms. Last week, David Cameron responded by saying ministers would raise penalties from £5,000 to £20,000. And the Department for Business, Innovation and Skills has said that from October, it had made it easier for firms to be publicised as breaking the law on pay.
However, with HMRC issuing almost 70 "notices of underpayment" a month, Andy Hull, the author of the report and an expert on low pay, said he was surprised that more companies had not been named and shamed by the government. "We have had probably about 150 companies notified by HMRC, but no names put out."
Hull said the HMRC unit that pursues firms costs £8m a year to run, yet "only collects £4m a year in arrears". "The companies who break the law on pay tend to be ones who break the law on trading standards or dodge the environmental requirements which councils look into. It would make sense for councils to look after minimum wage, too. They are closer to the ground."
HMRC defended the apparent low prosecution rates, saying that its inspectors dealt with firms primarily through the civil route – with investigations, notices to pay arrears, and fines for employers – rather than criminal prosecutions. "HMRC works hard to investigate every [national minimum wage] complaint received. Last year, HMRC action successfully resulted in over 26,000 workers getting back a share of £4m in arrears. Following HMRC's investigations, 708 employers received a penalty."
In a series of reforms that would help the low-paid, Hull says that the government should abolish the first-year rate for apprentices – set at just £2.68 – pay carers for travel time, and make it illegal to advertise unpaid internships, although voluntary roles with no set working hours would still be permitted.
The report also says that the Low Pay Commission indentified eight London boroughs – Waltham Forest, Haringey, Hackney, Ealing, Sutton, Lewisham, Newham and Bexley – where 5% of all local workers earn at or below the minimum wage.
The government said it expects to start naming employers under the new naming and shaming scheme in the new year.
AThe business department for Business spokesperson ssaid: "Paying less than the National Minimum Wage (NMW) is illegal. If employers break the law, government will take tough action. Since October any employers who fail to pay NMW will be publicly named and shamed under a revamped scheme to make it easier to crackdown on rogue businesses."
The company named and shamed over breaching pay laws was Treena Professional Hair and Beauty in Leicester, which in 2010 paid a member of staff £342 for 20 weeks' work when she was entitled to £3,703.
Source: theguardian.com
Author: Randeep Ramesh
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