1. Citizens Advice is the national co-ordinating body for the 450 Citizens Advice Bureaux (CABx) in England, Wales and Northern Ireland.[1] In the financial year 2004-05, these CABx advised their clients on some 440,000 employment-related problems, and submitted more than 3,000 employment-related social policy reports to Citizens Advice.
2. Citizens Advice welcomes the opportunity to respond to the Low Pay Commission consultation on the National Minimum Wage (NMW) issued on 8 July 2005. As noted in our response to the Commission’s consultation on the NMW in 2004, the evidence from the advice work of CABx suggests a significant and quite possibly growing level of non-compliance with the NMW in relation to the employment of migrant workers. And two key themes of this advice work are: (1) the making of excessive and unlawful deductions from pay in respect of accommodation provided by the employer, much of it of poor quality and/or overcrowded; and (2) the intense reluctance of the workers in question to assert their rights or initiate enforcement action for fear of victimisation and/or dismissal.
3. At the same time, the evidence from CABx suggests a continuing degree of non-compliance with the NMW more generally, by employers large and small throughout the UK economy and especially in some low-profitability sectors such as agriculture; food processing and packaging; contract cleaning; hotels and restaurants; and care homes.
4. Accordingly, and mindful of the terms of reference of the Commission’s consultation, in this submission we address the following issues: the 16-17 year old rate; the accommodation offset; enforcement of the NMW (as well as other statutory rights); and the non-payment of Employment Tribunal awards made in respect of non-compliance with the NMW.
The 16-17 year old rate
5. Citizens Advice strongly supported the introduction of a NMW rate for 16 and 17 year olds from October 2004. As early as our November 2000 submission to the Low Pay Commission, we noted our concern about “the lack of entitlement to a statutory minimum wage of 16 and 17 year old workers” and the “associated apparent exploitation of some young workers by employers”, and urged the Commission to “give careful consideration to the case for a minimum wage (at an appropriate rate) for such young workers”. And, in October 2003, in our response to the Commission’s consultation on the issue, we strongly recommended “the introduction of a NMW for 16 and 17 year old workers, at a rate equal to or only slightly below the NMW rate for 18-21 year olds”.
6. Given the advice-giving function of CABx, Citizens Advice is simply not in a position to comment meaningfully on whether the introduction of the 16-17 year old rate has affected the supply of, or the demand for, labour from this age group; the provision of workplace training; or the participation of 16-17 year olds in education and training. What the evidence from CABx does show, however, is that many employers remain ignorant of their obligation to pay at least the 16-17 year old NMW rate to qualifying young workers, or are deliberately not complying with this obligation. The following case examples are drawn from those reported to Citizens Advice by CABx since 1 October 2004:
A 17 year old woman who sought advice from a CAB in Manchester was working full-time in a local garden centre and being paid just £2.16 per hour.
A 16 year old man who sought advice from a CAB in Kent was working from 7.30 am to 6.00 pm, six days per week, in a riding school and earning £90 per week – an hourly rate of just £1.89. Apart from an unpaid, one-hour lunch break, the client was not receiving any rest breaks, and had been told that he was entitled to only two weeks’ paid holiday per year.
A 17 year old woman who sought advice from a CAB in Bedfordshire was working in a hairdressers and earning £55 for a 40-hour week – an hourly rate of just £1.37. Apart from an unpaid lunch-break, the client was not getting any rest breaks, and when she had recently asked her employer for a payslip she had been told that she “did not need one”.
A CAB in Cornwall, in an area of high unemployment, reports being approached by the mother of a 17 year old woman who had recently resigned from her job in a local restaurant, after just one month in the job. The client’s daughter had been expected to work from 7 am to 11 pm without a break, and had been paid £2.80 per hour; she had not received any pay slips and it appeared that no deductions had been made for tax and National Insurance. When she had complained to her manager, she had been told that if she did not like the hours then “there were plenty of other people who would like your job”. In its report to Citizens Advice, the bureau suggests “this company is taking advantage of the need of young people in the area to earn money any way they can”.
A 17 year old woman who sought advice from a CAB in Kent was working full-time (39 hours per week) in a beauty salon and being paid just £2.56 per hour. In its report to Citizens Advice, the bureau notes “the client feels angry at working so hard and not being treated fairly”.
7. Although it might be said that it is still early days in terms of the 16-17 year old rate, which of course has been in force for less than 12 months, cases such as these suggest to us that more could and should be done both to raise employers’ awareness of the rate and to take enforcement action against those employers who deliberately and/or persistently fail to comply with it.
The accommodation offset
8. In our March 2004 report, Nowhere to turn: CAB evidence on the exploitation of migrant workers, enclosed with our response to the Commission’s consultation on the NMW in 2004, we identified the making of excessive deductions from low but often NMW-compliant rates of gross pay in respect of (frequently substandard) accommodation as one of several key themes to emerge from the rapidly growing number of advice enquiries made to CABx by migrant workers.
9. Anecdotal evidence from CAB managers suggests that, since 2004, the number of employment-related advice enquiries being made to CABx by migrant workers has continued to increase, to the point where, for example, migrant workers now account for more than 25 per cent of all the advice enquiries made to some CABx in East Anglia. And the making of excessive (and in most cases patently unlawful) deductions in respect of poor standard and/or overcrowded accommodation remains a key theme of this strand of advice work. In most such cases, it would appear that the employer (or employment agency) has simply ignored the NMW offset rules. The following case examples are drawn from those reported to Citizens Advice by CABx since 1 November 2004:
A Czech woman who sought advice from a CAB in Sussex was working on a farm (via an employment agency) and living in accommodation provided by the agency. Although her gross rate of pay (£4.85 per hour) was NMW-compliant, the agency was deducting £65 per week from her wages in respect of accommodation, so bringing her wages below the NMW.
A 22 year old German woman who sought advice from a CAB in Cheshire was working full-time (44 hours per week) as an office assistant and living in accommodation provided by the employer (a small manufacturer). Although her gross rate of pay (£4.85 per hour) was NMW-compliant, her employer was deducting £450 per month in respect of the accommodation (and also utility bills), so bringing her wages well below the NMW.
A CAB in Hampshire reports being approached by a South African man working approximately 70 hours per week as a waiter in a local restaurant, and living in accommodation provided by the employer. Although his gross rate of pay (4.85 per hour) was NMW-compliant, his employer was deducting £500 per month in respect of the accommodation (a three-bedroom house that he shared with seven co-workers), so bringing his wages well below the NMW. The client reported that he and other workers had asked the employer if they could find their own accommodation, and had been told that they could but that the £500 would still be deducted from their wages.
A Portuguese man who sought advice from a CAB in Wiltshire had recently left his job of two months working as a cleaner in a local motorway service station (obtained via an employment agency). As well as paying him only £4.60 per hour (when the appropriate NMW rate was £4.85), the agency had deducted £230 per month from his wages in respect of his accommodation – a house that he had been sharing with seven other workers. Having resigned from the job (after being asked to move to another service station some distance from the accommodation, and to work night shifts rather than day shifts), the client had been told to leave the accommodation immediately, and was now “unemployed and homeless”. He had also not received any of the holiday pay owed to him.
Similarly, a CAB in East Anglia reports being approached by a Portuguese couple who had, in the early hours of the morning, been evicted from the accommodation previously provided to them by the employment agency via which they had been working between 24 and 32 hours per week in a food processing factory. The agency had been making weekly deductions from their wages of £55 for rent, and £10 for ‘administration’. The clients showed the bureau adviser their most recent pay slips, which gave their ‘wages payable’ (i.e. after tax and National Insurance) as £80.13 and £103.69, and ‘money paid’ as £11.03 and £13.04 respectively.
A Slovakian man who sought advice from a CAB in Somerset had recently completed a three-month contract working (via an employment agency) 60-hours per week as a welder. As well as paying him only £4.71 per hour (when the appropriate NMW rate was £4.85), the agency had deducted £180 per month from his wages in respect of his accommodation – a house shared with no fewer than 16 other workers. The client described the house as “unfit to live in, with very little furniture”. The agency had refused to provide the client with a contract of employment, and as a result he had not yet been able to register with the Home Office under the Worker Registration Scheme or obtain a National Insurance number.
A Hungarian couple and their adult son who sought advice from a CAB in East Anglia were all working (via an employment agency) for a local food processing and packaging company. Although all three clients were being paid at the appropriate NMW rate, the agency was deducting £75 per week from each of their wages in respect of their accommodation – two rooms in a flat shared with other workers.
A CAB in Bristol reports being approached by four young Latvian women, all working (via an employment agency) as cleaners in a local hotel. As well as paying the women on what appeared to the bureau adviser to be an unreasonable ‘piece rate’ basis, with the result that their gross wages were invariably below the NMW, the agency was also deducting £52.50 per week from their wages in respect of their (hotel) accommodation. In its report to Citizens Advice, the bureau suggests “this agency is clearly exploiting foreign workers and relying on them being too scared to complain”.
10. Such evidence suggests to us that the NMW accommodation offset is frequently disregarded or abused by employers (and employment agencies). Indeed, excessive and unlawful deductions in respect of tied accommodation, as well as deductions for e.g. ‘utilities’ and ‘administration of accommodation’, appear to be used routinely by some employers (and employment agencies) as a means of circumventing the NMW, especially when employing migrant workers and/or in relation to jobs in areas in which affordable rented accommodation is scarce. And such malpractice appears to be especially common in the following sectors: agriculture; food processing and packaging; hotels and restaurants; and cleaning.
11. It is also evident from the advice work of CABx that the provision of tied accommodation can act to make an exploited worker even more unwilling to assert his or her rights, as he or she knows that this might result not only in summary dismissal from the job, but also in immediate eviction from the accommodation, leaving him or her both jobless and homeless. Such increased vulnerability to prolonged exploitation is especially acute in the case of recently arrived workers from the so-called EU accession states, who have no access to the ‘safety net’ of welfare benefits during their first 12 months in the UK.
Enforcement of the NMW (and other statutory rights)
12. Following on from this last point, the evidence from CABx strongly suggests that the number of migrant workers who seek advice from a CAB in relation to such exploitation merely represents the ‘tip of the iceberg’, as the majority of migrant (as well as indigenous) workers employed in such exploitative circumstances are simply too fearful of victimisation or dismissal even to seek advice, let alone assert their rights. Indeed, CABx have reported a number of cases in which the worker (together with his or her fellow workers) has been specifically warned by the employer (or agency) not even to approach a CAB for advice.
13. Furthermore, the evidence from CABx indicates that, such is the level of fear of victimisation and dismissal amongst some such workers, even the making an anonymous or third party complaint to the NMW Helpline of HM Revenue & Customs is not an attractive option. The following case examples are drawn from those submitted to Citizens Advice by CABx since 1 November 2004:
A Polish man who sought advice from a CAB in Devon was registered with the Home Office under the Workers Registration Scheme and working some 80-90 hours per week at a local food-processing centre. He was being paid just £2.20 per hour and, together with his wife and seven year old daughter, was living in a caravan provided by his employer. In its report to Citizens Advice, the bureau notes that “the employer is clearly in breach of employment law but the client fears that if any action is taken he will lose his job and the family will have nowhere to live. Until they have been here for 12 months they have no recourse to public funds, or to statutory housing. Therefore, until such time as they can find alternative work, there is nothing they can do but continue to be exploited.”
A British woman who sought advice from a CAB in Lancashire was working 45 hours per week for a small clothing manufacturer. A single mother with four children, she was being paid (in cash) just £3.00 per hour and told the CAB adviser that she had “no idea” whether she was paying tax and National Insurance. In its report to Citizens Advice, the bureau notes that it advised the client about her statutory rights, including the right to be paid the NMW, but she was “unwilling to take any action to enforce her rights due to fear of losing the job. This also meant that she could not claim any Tax Credit entitlement, as she was unwilling to take the risk that the Inland Revenue might contact the employer for verification of earnings etc.”
A CAB in Gloucestershire reports being approached by a Slovakian man, registered with the Home Office under the Workers Registration Scheme and working full-time at a local catering firm. According to the bureau’s report, the client’s contract of employment “included terms which set the hourly rate at less than the NMW and offered only two weeks’ paid holiday after two years of employment”. However, the client was “very frightened of making trouble and did not want the bureau to take any action on his behalf”.
A British man who sought advice from another CAB in Lancashire was working as a baker. Despite having worked at the same company for 17 years, he had no contract of employment. He had not signed the 48-hour opt out, but was regularly required to work in excess of 60 hours per week and received only one, 15-minute break during his ten-hour plus shift. It appeared to the CAB adviser that, due to the number of unpaid hours of overtime worked, the client was being paid below the NMW. In its report to Citizens Advice, the bureau notes “the client does not want to work such long hours, but he is intimidated by his employers by being told that if he does not work the hours they demand they will close the business and he will be left without a job.”
An Iraqi man with refugee status who sought advice from a CAB in Greater London was working 16 hours per week as a waiter in a local restaurant and being paid just £3.17 per hour (when the appropriate rate was £4.85 per hour). The bureau advised the client on his rights and in particular on how to make a telephone complaint to the NMW enforcement division of HM Revenue & Customs, but “he was reluctant even to call the NMW Helpline for fear of being sacked”. The bureau further notes that “the NMW is all well and good but still employers are not complying with it, and this particularly affects vulnerable clients like this one”.
A British woman who sought advice from a CAB in Cheshire had been working as a receptionist at a motor vehicle repair garage. After becoming aware that her rate of pay was 15 pence per hour below the appropriate NMW rate, she had challenged her employer, only to be summarily dismissed.
14. Such evidence suggests to us that there is a considerable need for more pro-active enforcement of the NMW by HM Revenue & Customs – and, indeed, by the Department for the Environment, Food & Rural Affairs, and the agricultural agencies in Scotland and Northern Ireland, in relation to the agricultural sector – through the identification and inspection of workplaces from which there has not actually been an individual complaint.
15. In saying this, we do not intend any criticism of the NMW enforcement division of HM Revenue & Customs, which in our view has achieved impressive results since 1999 whilst making strenuous and imaginative efforts to reach out to geographical areas, communities and groups of workers in which awareness of and compliance with the NMW are especially low. Rather, we simply wish to make the point that, with a staff complement of just 100 or so, the division appears to be somewhat under-resourced to deal with the evident scale (and complexity) of non-compliance by employers of both migrant and indigenous workers in the informal economy in particular, but also in some low-profitability sectors of the more formal economy.
16. It is of course in everyone’s interest that such non-compliance is addressed and, so far as is possible, eradicated. Accordingly, we hope that the Low Pay Commission will, in preparing its further report to the Government, give consideration to the case for a substantial, rather than incremental, increase in the human and other resources of the NMW enforcement division of HM Revenue & Customs.
17. At the same time, we hope that the Commission will give consideration to the case for extending the more pro-active compliance and enforcement regime associated with the NMW to some of the other basic, statutory workplace rights. As in some of the above case examples, the evidence from CABx indicates that non-compliance with the NMW is frequently associated with denial of other statutory rights, such as those to paid holiday, statutory sick pay, and (paid) maternity leave. We believe that efforts to tackle such non-compliance and exploitation would be more effective if there were a compliance and enforcement agency capable of taking a more holistic view of a worker’s treatment by an employer.
18. We believe that there is now overwhelming evidence that, faced with a deliberately exploitative employer, using the Employment Tribunal system to enforce their rights is simply not a credible option for many low paid and non-unionised or otherwise especially vulnerable workers. Along with other organisations, we have repeatedly suggested that there should be an alternative remedy for those workers who are too afraid of victimisation or dismissal to even raise the matter with their employer, or who know only too well that they will simply be ignored and yet are daunted by the prospect of a lengthy, stressful, legalistic and quite possibly fruitless confrontation with their employer.
19. And, to our mind, the simplest and most practical way to create such an alternative remedy would be to extend the more accessible and pro-active compliance regime associated with the NMW to many of the other basic, statutory workplace rights through the establishment of a broad-based Fair Employment Commission.
20. Working closely with ACAS, the Small Business Service, the Health & Safety Executive (HSE), the forthcoming Commission for Equality and Human Rights (CEHR) and other governmental agencies, such a Fair Employment Commission could ensure a more joined-up system of advice, guidance and practical business support for small employers, as well as a more pro-active (but educational rather than punitive) approach to compliance and, where necessary, enforcement.
21. The Government has repeatedly stated that it established such an accessible and pro-active approach to compliance with the NMW because it did not want workers “to have to rely on taking action against their employer themselves, as intimidation or fear of losing their job could prevent a worker from making a complaint”.[2] To our mind, this argument applies as much to many other statutory workplace rights as it does to the NMW. As the Commission will be aware, in their oral evidence to a recent enquiry by the Trade & Industry Committee of MPs, both the TUC and CBI characterised the NMW enforcement machinery as “a huge success story as an example of regulation”. And the Committee itself concluded that the NMW enforcement regime “would seem a model that might be extended beyond enforcement of the NMW to other areas of regulation”.[3]
22. As with the NMW, a more broadly-based Fair Employment Commission, charged with ensuring compliance with a range of statutory workplace rights, would help ensure that good employers – that is, the vast majority – are not unfairly undercut by rogue employers, able to offer a cheaper product to their customers only by neglecting their legal obligations to their workforce. As noted by the Hampton Review of regulatory inspection of employers, “the elimination from gain from law-breaking is essential if businesses are to be allowed to operate on a level playing-field”.[4]
23. In short, we believe that a ‘joining up’ of the various mechanisms for the enforcement of the NMW and other statutory workplace rights is essential to making a reality of the assertion by the Chancellor of the Exchequer, Gordon Brown MP, that “the modern route to prosperity is not exploitation in the workplace, but fairness in the workplace”.[5]
Non-payment of Employment Tribunal awards
24. In two recent reports – Empty justice: the non-payment of Employment Tribunal awards (September 2004) and Hollow victories: an update on the non-payment of Employment Tribunal awards (March 2005) – we have highlighted the apparently significant degree of non-compliance by employers with Employment Tribunal judgments and awards. Based on survey responses from a broadly representative sample of CABx, Hollow victories suggested that, each year, the CAB Service in England and Wales deals with some 650-700 cases of such non-compliance with an Employment Tribunal award. This amounts to one in 20 of the some 13,000 awards made annually by Employment Tribunals in England and Wales. And it is evident that, in some of these cases, the Employment Tribunal award was made in respect of non-compliance with the NMW. For example:
A CAB in Essex reports advising a young British woman who had won an Employment Tribunal award of some £1,200 in respect of non-compliance with the NMW by her former employer (a local hairdresser) several months previously. The client had not yet received any of the award, and had recently heard that her former employer had gone (or applied to become) bankrupt. The bureau notes in its report to Citizens Advice that “the client’s Employment Tribunal award has turned out to be worthless. She now faces having to make complicated investigations to establish whether her former employer is indeed bankrupt, and possibly start action in the County Court at further financial cost and at a time when she is unemployed and in debt”.
25. Currently, Employment Tribunals have no power to enforce their awards and, where an employer fails to comply with an award, the claimant must seek enforcement through the County Court. Apart from being dauntingly legalistic, this process is both costly (in terms of court fees and, in many cases, the need to obtain specialist legal advice) and time consuming. Moreover, there is no guarantee that the initiation of enforcement action (such as a Warrant of Execution) will result in payment of the award, not least because many rogue employers seem adept at evading the attentions of the bailiffs.
26. In Empty justice and Hollow victories, we urged the Government to use its forthcoming Courts & Tribunals Bill to establish a new enforcement regime, with unpaid Employment Tribunal awards (and also unpaid ACAS-conciliated settlements of a Tribunal claim) being directly enforced by the State. In short, we suggested, where an employer fails to pay an award within a reasonable period, the State should pay the award to the claimant and then pursue the employer for that amount (plus the associated costs of enforcement). And we suggested that such State-led enforcement could be conducted, as now, through the civil courts but might be better (and more cost effectively) conducted through more direct action, such as adding the amount of the award (plus costs) to the employer’s owed tax.
Social Policy contact: Richard Dunstan Richard.dunstan@citizensadvice.org.uk
[1] Citizens Advice Bureaux in Scotland belong to a separate organisation, Citizens Advice Scotland (CAS).
[2] National Minimum Wage Annual Report 2003/04, DTI/Inland Revenue, January 2005.
[3] Paragraph 36 of UK Employment Regulation, Seventh Report of Session 2004-05, House of Commons Trade & Industry Committee, HC 90-1, March 2005.
[4] Hampton, P., Reducing administrative burdens: effective inspection and enforcement, HM Treasury, March 2005.
[5] Rt Hon Gordon Brown, MP: speech to Labour Party conference, 27 September 2004.
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