Skip to main content

National Minimum Wage: Sports Direct

Volume 603: debated on Monday 14 December 2015

(Urgent Question): To ask the relevant Minister if he will make a statement on Sports Direct plc and its compliance with the national minimum wage legislation.

Thank you, Mr Speaker.

I share the hon. Gentleman’s concern that working people are paid the full amount that the law requires for every hour that they work, and I welcome his urgent question. We take the enforcement of minimum wage laws very seriously. That is why we have increased the enforcement budget from £8.1 million in 2010 to £13.2 million in 2015-16. While I am not able to comment on enforcement action in relation to individual employers, I can assure the House that Her Majesty’s Revenue and Customs follows up every complaint it receives in relation to breaches of the national minimum wage. I encourage any employer or worker who is concerned that these laws are not being complied with in their workplace to contact HMRC or ACAS, through its confidential hotline. HMRC undertakes targeted enforcement activity in the most high-risk sectors of the economy.

As the Prime Minister announced in September, the Government are taking a number of further steps to crack down on employers who are not paying workers the minimum wage. We have already increased the penalty for breaches of minimum wage legislation to 100% of arrears, up to £20,000 per worker, and from April 2016 the Government will double the maximum penalty from 100% to 200% of arrears so that employers comply with the law and working people receive the money they are due. Furthermore, a new team of compliance officers will be established within HMRC to investigate the most serious cases of employers not paying the relevant minimum wage. The team will have the power to use all available sanctions, including penalties and criminal investigation. We will also continue to name and shame employers who do not pay their workers what they are entitled to.

As a Government, our message to employers is straightforward. We will work to reduce burdens on business by cutting regulation and corporation tax. In return, we expect employers to pay working people at least a decent legal minimum—the national minimum wage and, from next April, the national living wage for workers aged 25 and over. I can assure the House that we will not hesitate to crack down hard on employers, large and small, who break this social contract by failing to pay the wage that the law requires.

I thank the Minister for his reply. I am proud that the last Labour Government, in the face of the then Conservative Opposition, introduced the national minimum wage in the first place, when people in our country were earning as little as £1 an hour. I am also proud —the Minister mentioned this—that the overwhelming majority of British businesses, notwithstanding any legal requirements, seek to treat their workers with dignity and respect.

We know enough about the practices at Sports Direct plc, which has a branch in my constituency, to conclude that this company is a bad advert for British business and one with a culture of fear in the workplace, which we would not wish to see repeated elsewhere. As the Institute of Directors has said, it is

“a scar on British business.”

I appreciate what the Minister said about not necessarily being able to respond in specific instances, but may I ask him this question? HMRC enforces the national minimum wage. A complaint has been made by Unite the union, of which I am a member, against Sports Direct, accusing it of being in breach of the legislation. HMRC says it cannot act without evidence being provided by workers in that workplace, but, of course, all of them are refusing to come forward in the warehouses concerned, for fear of the repercussions that will follow. Why cannot HMRC go ahead and carry out an investigation in this case, which surely will render other evidence without workers being required to put their necks on the line?

Secondly, may I ask the Minister a generic question? An issue has come up whereby employees are required to go through body searches to check for potential theft. The time they spend going through body searches is not time for which they are paid. The law is unclear in this area. Can the Minister give industry an indication of whether, in the Government’s view, time spent going through body searches would count as working time for the purposes of the legislation?

Thirdly, employees face having 15 minutes of working time deducted if they clock-in just one minute late. The law is not entirely clear about that situation, either. Do the Government believe that if an employer is engaged in those kinds of practices, they are not in keeping with the spirit of the legislation?

Fourthly, the enforcement of national minimum wage legislation is carried out not by the Minister’s Department, but by HMRC. How can we expect HMRC to do the work that we require of it if the Government are pushing through an 18% real-terms cut in HMRC’s funding over the course of the spending review period?

Finally, I have no doubt that the reaction of the employer concerned will be to say, “We comply with the law,” but surely what it needs to understand is that the British public expect a lot more from it. We often do not do things that the law allows us to do, because we do not think that that is the right way to treat our fellow citizens. Surely that should apply to the company in this case.

The hon. Gentleman asked a series of very important and good questions. The first point I would like to make is that, if any employee of any company has any fear of repercussions, I can reassure them that the ACAS hotline is genuinely confidential. I am sure the hon. Gentleman would be willing to endorse the fact that ACAS is an absolutely, resolutely independent organisation, so people should have no fear of calling that hotline out of hours and reporting a practice.

I did say in my brief response that HMRC enforcement is entitled to conduct targeted enforcement activity in sectors of concern, so it is entirely open to HMRC to investigate proactively in sectors where it feels that breaches may be in evidence. In that sense, it does not necessarily need to wait for a specific complaint to be able to investigate breaches.

I have read the article that revealed some of the allegations being made about Sports Direct. The hon. Gentleman asked about the search and whether the time it takes is working time or not. This is an intensely vexed legal question and he will know, as a former employment law practitioner, how much of his former colleagues’ time it is taking up. I cannot give an absolute pronouncement, but what I can say is that anything that counts as work as part of somebody’s employment contract must be compensated at least at the level of minimum wage. The question is whether such a search counts as work under their employment contract, and that question can be explored legally.

The hon. Gentleman mentioned the second claim that was made—about employees being docked 15 minutes for being one minute late. Although it is legally permissible for time to be docked for late arrival, it is important for every hon. Member to understand that the minimum wage legislation will apply to the 14 minutes as well as to the rest of the time that people work, so employees cannot not be compensated for those 14 minutes if that would bring their overall wage rate down below the national minimum wage. I hope that that goes some way to reassure him.

The hon. Gentleman made a general point about the cut in funding for HMRC of 18% over the spending review period. I will have to take his word for it because I do not have the global figures to hand. I pointed out to him the very significant and dedicated increase in funding for the minimum wage enforcement team. It has gone up by more than 50% since 2010 and will go up £3 million this year alone. I can therefore reassure him that, whatever else is going on in HMRC, this is a priority in which we are investing and on which we will beef up activity.

The hon. Gentleman is absolutely right to make the general point that obeying the law is the minimum we expect of employers. We expect employers to behave responsibly and to be good citizens. We hope they would not be satisfied with just obeying the law, but would want to go a great deal further, and in a sense, our expectations about the behaviour of large and profitable employers are even greater than those for others.

Order. I am glad that the Minister graciously welcomed the urgent question. Unfortunately, the Treasury wrote to me this morning to say that the matter was not urgent and should not be aired. Upon examination, I concluded that it was and should. We look very much forward to the exchanges.

Mr Peter Lilley was standing, but the right hon. Gentleman has thought better of it. Never mind—fair enough. I call Mr Marcus Fysh.

My constituents have approached me with concerns about Sports Direct on several occasions since the election. It appears that Sports Direct can sometimes make somewhat aggressive use of and have a somewhat aggressive attitude towards flexible working. Flexible working can suit some people, but does not always suit others. When it comes to such employment laws, has my hon. Friend given any thought to a general anti-avoidance rule, such as the one we are considering in the tax sphere?

Mr Speaker, you know that it would be a career-limiting move for me to depart in any way from the script laid down by my colleagues at the Treasury, but may I just repeat that I welcome the urgent question and was glad to have the opportunity to answer it?

I thank my hon. Friend for his suggestion. I am not going to pretend that we had given thought to that, but he has now triggered such a thought. I would be happy to discuss with him how it might work.

The allegations against Sports Direct are extremely concerning, and we echo the calls of Unite the union for an HMRC investigation into the reported breaches of the national minimum wage legislation at the Shirebrook warehouse. We stand in unity with the employees, because such practices do nothing to engage them and make them feel positive about the place in which they work.

Allegations of such a serious nature must be taken very seriously by the UK Government, and they must do much more to support the accreditation of living wage employers. The Scottish Government have led the way in encouraging more than 400 living wage employers in Scotland. We have the second highest proportion of employees paid the living wage—80.5%—across the countries and regions of the UK.

Scottish National party Members want the Government to commit wholeheartedly to supporting an HMRC investigation into these business practices. What lessons can be learned from this case, especially when the UK Government are gearing up to implement the new minimum wage premium, which is not a living wage? If they cannot enforce the current minimum wage, how on earth will they manage to enforce such increases?

I welcome the contribution from the hon. Lady who represents the Scottish National party. Of course it is the job of the enforcement team in HMRC to follow up any concerns that they have in relation to specific complaints or sectors where they feel that abuse of the minimum wage legislation and other employment legislation is rife. However, I am sure she will understand that I cannot comment on a particular case.

In general, I do not often welcome investigations by The Guardian newspaper, but it is vital that media organisations investigate these matters. The Government will never be able proactively to investigate every employer in the country. If the media can uncover things, I promise that the Government will review their findings and enforce the law, where necessary.

I echo the Minister’s comments on the ACAS hotline. I called the hotline with a constituent who came to my surgery believing that he had been paid below the minimum wage. I found ACAS extremely professional during that phone call and would recommend the service to any hon. Member who had a case in their constituency.

May I question the Minister on the upcoming change to the minimum wage, with the introduction of the living wage? I read that in a recent Department for Business, Innovation and Skills survey of 1,000 employers, nine out of 10 employers strongly welcomed the introduction of the living wage and said that it would boost productivity and the morale of their employees. However, it was concerning that four out of 10 employers said that they had not communicated with their staff regarding the upcoming potential rises in pay, and that eight out of 10 still had not updated their payroll or created new procedures to implement the living wage. Will the Minister comment on that, so we can be sure that legitimate businesses are ready and do not get into a similar situation?

I was going to recommend that the hon. Gentleman conducted an Adjournment debate on the subject until I realised that he had just done so.

I thank my hon. Friend for pointing out, from direct experience, how good the ACAS hotline is. On the national living wage, which is coming in next April, a substantial Government communication campaign will start in the new year. We feel that it is in the months leading up to its introduction that communication will be most effective in making sure that employees and employers know that it is coming in, know what is required and begin to work out how to implement it in their systems.

The Sports Direct scandal has occurred even though the national minimum wage has become a national treasure. Everyone supports it now, but, like all great social reforms, it had to be fought for in the teeth of bitter, all-night opposition in this House. Even when great social reforms become part of the political consensus, they still have to be fought for. The battle to sustain and enforce the minimum wage must be continuous and, frankly, requires more than just warm words from Ministers.

The TUC estimates that at least 250,000 workers are not being paid the minimum wage. What is the Minister’s estimate? Have the Government even made one? In the last Parliament, it was revealed that just nine firms had been charged for non-compliance with the minimum wage. Will he update the House on how many legal proceedings are under way against firms for non-compliance? Can he even tell us how many workers have received the money that they are owed after a notice of underpayment has been issued by HMRC, because up to now the Government have failed to provide those data? Will he order an urgent investigation into Sports Direct concerning the alleged abuses, which have led the Institute of Directors to label it

“a scar on British business”?

The Minister says that he is acting, but where are the results? How will he get results with the closure of so many HMRC offices? It is easy to talk the talk on low pay, but it means nothing to millions of low-paid workers, whose labour employers feel they can turn on and off like a tap, unless Ministers walk the walk on the minimum wage. When will we see real action to enforce it?

I am happy to acknowledge that the national minimum wage was one of the great achievements of the Government led by Tony Blair. I note simply that there are more supporters of that Government’s achievements on this side of the House than on the hon. Gentleman’s side. I look forward to receiving the same acknowledgement from Opposition Members when, next April, we introduce the national living wage, which is significantly higher than any increase in the national minimum wage he and his colleagues proposed during the last election campaign.

The hon. Gentleman asked some good and proper questions about enforcement, but he glided over the fact that the budget for enforcement has gone up by more than 50% since his party was in government and that we have increased the arrears penalties, increased the powers and stepped up the programme of naming and shaming companies, large and small.

In 2014-15, 705 employers received penalties, totalling more than £934,000. We are setting up a new dedicated team to focus on tackling the most serious breaches, and to consider whether directors of employers that persistently breach legislation should be disqualified. In 2014-15 we identified £3.29 million arrears for 26,318 workers, we conducted 735 successful investigations, and we charged 705 penalties, worth £934,000. We successfully defended 17 of the 23 appeals against enforcement notices. If, from the luxury of opposition, the hon. Member for Cardiff West wants to suggest further activity that we could carry out, I am always happy to hear about it. Fortunately, we are doing a lot more than the Government he was part of to defend one of the only achievements that Labour Members are still willing to talk about.

There are reports that some large retail businesses have already increased their hourly salary for employees to a level above the national living wage, following the Government’s announcement. Will the Minister update the House on his understanding of that?

I have heard such reports, and while I do not have the list of major retailers that have announced that measure on the tip of my tongue, that extremely welcome news underlines the point made earlier: we expect more than just obedience to the law; we expect social responsibility and for employers to see benefits from the improved morale and retention that come from paying people better wages.

The Minister should not expect social responsibility from the man who controls Sports Direct in my constituency, at the warehouse at Shirebrook on a pit site. That man has not made £6 billion because he is a considerate employer; he is a monster of a man who does not even reply to MPs’ letters—I have sent him many. He has £6 billion and is on The Sunday Times rich list, because he is the type of man that will not take any notice of HMRC unless the Government really mean business. This man, Mike Ashley, would fit very nicely on millionaires’ row, along with his pals. This will be a test of the Minister’s mettle—get stuck in.

I have never had the pleasure of being encouraged to get stuck in by the hon. Gentleman before, but I promise to follow up on that. Let me be clear: I do not care how famous or well connected employers are, and I frankly do not care how much money they have made. They must obey the law, and if they do not, we will enforce it. We will fine them and disqualify directors if necessary.

As well as strong enforcement by the Government, it should be possible for those who are employed by bad businesses to vote with their feet and move to better employers. What is being done to help to create more and better jobs for those employed by Sports Direct, and to communicate the availability of those jobs?

I thank my hon. Friend for bringing us back to the important and constant theme of this Government, which is an economy that is creating new jobs at an unprecedented rate. Most of those jobs are now full time, and most not only pay more than the minimum wage, but pay more than the national living wage that will be introduced in April. It is ultimately through a dynamic economy that we will create opportunity for anyone who does not feel that they are getting a square deal from their current employer.

When Sports Direct announced that it would build its factory at Shirebrook, people in north Derbyshire were delighted. It is a tragedy that an organisation that employs nearly 3,000 people should have such a terrible reputation. What steps can the Minister take to communicate with that company and try to ensure that its future success does not come at the expense of my constituents and those of my hon. Friend the Member for Bolsover (Mr Skinner)?

I am delighted that the hon. Gentleman has pointed out how important that organisation is as an employer in his constituency. It is important we acknowledge that Sports Direct employs a great many people, and I am sure a great many people are very happy to work there. I reinforce the point, however, that no company director and no company owner will want the House of Commons to be discussing, in the terms we are discussing, the kind of breach that was alleged in the newspaper article. I am absolutely certain that, when faced with the kind of enforcement action I have set out, any employers, including those in his constituency, will want to sort themselves out.

What message of Christmas cheer does my hon. Friend have for all those people who are self-employed and earning far less than the minimum wage, but are faced with having to submit quarterly returns to HMRC instead of annual ones?

I am full of admiration for anyone who is self-employed. It brings many rewards, but money is not always one of them. I am absolutely clear that the Government must do everything they possibly can to reduce the burden of regulation on those who are self-employed.

Does the Minister recognise that what is so disturbing about the newspaper report is the fear among many people working there? In some instances, women are apparently not willing to stay away from work, even if their child is sick for a day, simply because they may lose their job. Is it not totally unacceptable to have such fear and exploitation in a company? Does it not remind one of the early years of the last century when workers were treated in such a contemptible way? Finally, why was the advice given to Mr Speaker that this was not an urgent question? If the Minister is so keen on coming to the House and welcoming The Guardian investigation, why did he try to stop the question being asked in the first place?

Mr Speaker, it is always for you to judge whether a question is urgent. I simply acknowledge that this question is important, which is why I am so delighted to answer it. On the hon. Gentleman’s broader points, while the Government believe in deregulation and reducing the burden on business, we have made it clear that certain laws are absolute and must be adhered to: minimum wage legislation is one, along with health and safety legislation and a whole slew of other employee protections. We intend to enforce those protections robustly.

According to the Office for National Statistics, a quarter of million people are not paid the minimum wage. According to the Minister, HMRC has found 26,000 of them. What is the Minister going to do to bridge the gap? If the Minister does not have any ideas—it does not look as though he has a plan—may I suggest something? To not pay the minimum wage is a criminal offence. Why have there not been any prosecutions taken out against directors who are not paying the minimum wage? The department in the Attorney General’s office responsible for taking out prosecutions has been cut for the past three years and there has not been a single prosecution during that time.

The hon. Lady always comes to this House knowing the complete answer to every question, but it might help her sometimes if she would actually listen to the list of measures we have introduced that go significantly further than any enforcement activity the Government she supported ever brought forward to defend their minimum wage. When the set of enforcement measures is working as well as it currently is, I see no reason to take any instruction, however helpfully phrased, from the hon. Lady.

This is an extremely important matter but we have other important business to follow, so I am looking for pithy questions and answers.

On the facts, the case in The Guardian is disturbing. Does the Minister agree that one good piece of news is that, whatever else happens, in April next year Sports Direct will have to pay these people 11% more than they are getting now?

That is absolutely right. That has happened because the majority Conservative Government have run the economy sufficiently well that we can expect employers to do that and still prosper.

The Minister has pointed out that HMRC conducts risk-based enforcement in sectors where there is a high risk of workers not getting paid the legal minimum wage. Is the sector in which Sports Direct operates a high-risk sector? If so, how many proactive initiatives has HMRC launched in it?

The targeted sectors are those where low pay is prevalent and where many employers are therefore close to the minimum wage boundary and those where there have been significant breaches in the past and where there is therefore good reason to expect other such breaches in the future. I cannot tell the right hon. Gentleman how many such investigations there have been, but I am happy to write to him and place a copy in the Library.

The Minister wrote to me on 14 October about the care sector—one of the sectors he just referred to—saying that HMRC was investigating several companies in the sector, but he could not confirm which companies or comment on the progress of the investigations. Given what he said about being strident with the owners, managers and directors of these companies, will he be strident with MiHomecare and Mitie—previously run by the new Tory Baroness McGregor-Smith—about whose conduct significant concerns have been raised?

It is not the job of a Minister of the Crown to lay down the law on individual cases and companies that have not been found definitely to have breached the law. I have been as clear as possible about any employer, large or small, that does breach the law, and I hope the hon. Gentleman can apply that to any particular case.

In our area, everyone knows that English native speakers cannot get a job at the Sports Direct warehouse, despite 3,000 people working there, and there was a baby born in the toilets there. Why were there 80 ambulance visits to Sports Direct in two years? Is it because employees are too scared and not allowed time off to see the doctor, and there is therefore a misdirection of NHS resources? Might there also be tied housing, meaning that people are too scared to speak because they are provided with a house to live in, the rent and the transport they have to pay for to get to work? We need a full investigation not just into Sports Direct but into the plethora of agencies it used to employ.

If the hon. Gentleman or any other hon. Member has allegations and evidence of bad practice in relation to minimum wage, or any other, legislation they would like to bring to my attention, I would welcome it. The hon. Member for Streatham (Mr Umunna) mentioned that a trade union had raised concerns about this particular employer. If employees do not trust the Government phone line, despite the ACAS hotline being genuinely confidential and independent, and if they would like to submit their evidence through the union, they can, but I am sure hon. Members will understand that they need to be willing to engage with enforcement officers to provide evidence. The Government have to act on the basis of evidence; however well researched the Guardian article was, it is not enough on its own.

Is it not time the Government considered introducing a specific criminal offence of exploitation, which they refused to do in the Modern Slavery Bill in the last Parliament?

We have enough criminal offences; what we need is effective enforcement, and that is exactly what the 50% increase in the enforcement budget and the new powers we are giving to the HMRC enforcement team will achieve.

My understanding is that the trade unions have made representations on behalf of staff who, for good reasons, want to remain anonymous. Should HMRC continue to ignore representations on behalf of legitimate trade unions, or should it act now and search the offices of Sports Direct?

I have made it clear that if any individual complaint is to be assessed for its validity, HMRC needs to be able to follow it up. I have also made it clear that in sectors of concern, HMRC undertakes targeted enforcement activity that does not wait for a complaint. It will be listening to this debate.

The Minister said that it is ultimately a growing, dynamic economy that should give people confidence about being able to find well paid jobs, but good employment practices and legislation also give them confidence. One issue that is greatly worrying a number of residents in my constituency is the use of tips and service charges to top up wages and the murky world of requirements used by employers such as Turtle Bay, a local restaurant. Will the Minister meet me and some of the campaigners from the GMB union to look into these practices further? I know he has recently conducted an investigation, but it would be incredibly beneficial to those on low wages in my local community to look at how these practices are used to top up wages or otherwise, especially ahead of the new higher minimum wage that he has talked about.

In my experience the hon. Lady is often on to things before the rest of us, so I would be delighted to meet her.

What a perceptive fellow the Minister is. We are most grateful to him, and I thank him for engaging with the urgent question so comprehensively.