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National Minimum Wage Enforcement

Volume 693: debated on Wednesday 28 April 2021

Motion made, and Question proposed, That this House do now adjourn.—(James Morris.)

We are going to have Andrew Selous on the videolink. While you are speaking, Andrew, if you do not mind, we will be sanitising the Government Dispatch Box, and I know Mr Scully has been under strict orders not to go anywhere near it until it has been properly sanitised.

Thank you, Mr Deputy Speaker, and I am very grateful to Mr Speaker for granting me this debate.

I am very proud to support a Government who have committed to the national living wage being equivalent to two thirds of the median income by 2024, in addition to reducing the age for accessing the national living wage to 23 this month and to 21 by April 2024. We want work to be worth while and an effective route out of poverty, so it is important that everyone is entitled to the legal minimum wage.

Unfortunately, the combined impact of the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015, along with the provisions of the Care Act 2014 and the enforcement role of Her Majesty’s Revenue and Customs, have all been completely ineffective in enforcing the law for one of my constituents, a carer who is owed £62,961 of unpaid wages below the minimum wage. Four other carers were in the same position. Who knows how many others across the United Kingdom are in the same position. I will use this case to demonstrate how the law has not worked effectively. I do not expect my hon. Friend the Minister to comment on the individual case, but I would like him to set out the plans the Government have to remedy the flaws in the current legislation, so that an effective remedy can be provided to people such as my constituent where now there is none.

My constituent—I shall call her Mrs Wright; it is not her real name—provided care for seven years to a disabled woman, whom I shall call Mrs Edwards, which is also not her real name. The wages to pay Mrs Wright were provided by Luton Borough Council and paid by a local charity into the account of the person being cared for. Checks were then made by Luton Borough Council to make sure that the money provided was paid over to the carer. Section 33 of the Care Act 2014 enables care to be devolved to the person being cared for, who enters into a contract of employment with her carer.

After seven years of good and faithful work caring for Mrs Edwards, the local charity that had received funding from Luton Borough Council sent the carer a schedule showing that, throughout the entire seven-year period, she had been underpaid a total of nearly £63,000. The local charity also paid the premium for an insurance policy to cover employers’ liability and legal expenses and costs should the carer have cause to sue the person being cared for—her employer, Mrs Edwards.

Mrs Wright, the carer, was never provided with the contract of employment by her employer. Both Luton Borough Council and the local charity say that they are not liable for this massive underpayment of wages because the contract of employment is between the carer and the person being cared for, and has nothing to do with either of them. The legal expenses insurer did not even bother to reply, which is completely shameful. There is no point in suing the person being cared for—the employer—because she lives in a rented flat, has no other assets and all her income comes from state benefits. As Mrs Wright’s solicitor said to me,

“this is a wrong with no remedy.”

The aim of this debate—so that the Minister and I are not wasting our time—is to make sure that a remedy is provided to Mrs Wright and other carers in her position, so that the law requiring the payment of the minimum wage applies to them as well as to everyone else.

This matter was first brought to my attention in the summer of 2018. I did my research and found out that everything I had been told about the inability to secure the payment of wages legally due was true. I contacted Her Majesty’s Revenue and Customs to try to get enforcement action. HMRC said in the letter back to me that it was

“determined that everyone who is entitled to the national minimum wage should receive it.”

That turned out to be a hollow phrase, because no effective enforcement action can be taken against an employer who has no assets and, indeed, never had any in the first place. Luton Borough Council wrote back to me to say:

“any issue regarding alleged historical underpayment of minimum wage will be a matter for the person being cared for and the carer to resolve.”

I should point out that there is no “alleged” underpayment, because the agency employed by Luton Borough Council to check wages paid against wages legally required to be paid came up with a schedule showing the underpayment of nearly £63,000.

Having hit a brick wall with HMRC and Luton Borough Council, which was the local authority responsible for providing the person being cared for with funds to pay for the care provided, I went to see the previous Minister for Small Business, Consumers and Corporate Responsibility, who was very sympathetic and agreed that there was a problem. At that meeting, I was told that local authorities did indeed have a responsibility for direct payments, in that they must be satisfied that personal budget holders are capable of paying the minimum wage, and the local authority should have undertaken a six-month review, after which it should have reviewed the making of direct payment no later than every 12 months.

The Minister’s predecessor then helpfully wrote to the chief executive of Luton Borough Council, pointing out that it should have had an “effective monitoring process” of the direct payments to ensure that the individual fulfils their responsibilities as an employer and that, following the six-month review, the local authority should have reviewed the making of direct payment no later than every 12 months. In its reply, Luton Borough Council said that the carer had been paid a fixed weekly rate based on unmeasured work hours, when in fact the carer had very clear hours that she was expected to work.

The Minister’s predecessor also wrote to the Minister for Care at the Department of Health and Social Care to explain the problem. The previous Minister for Care wrote back to say that Luton Borough Council should have been satisfied that the person being cared for was capable of managing direct payments by herself or with the help of the charity asked to provide that help. As I said, a local charity used by Luton Borough Council has produced a schedule showing an underpayment of wages throughout the entire seven-year period amounting to nearly £63,000.

I have raised this matter before on the Floor of the House with the Leader of the House, who said:

“I am clear that careworkers provide essential support to some of the most vulnerable members of society, and it is essential that they are paid in accordance with the law, including the national minimum wage, for the work they do. This is a responsibility of local authorities, which should ensure that personal budgets are sufficient to deliver a person’s care needs, including making sure that they cover the cost of wages, and local authorities have a duty to monitor how personal budgets are spent. However, the Department of Health and Social Care will take this up with the local authority and ask it to investigate what sounds like a very serious and concerning case.”—[Official Report, 25 July 2019; Vol. 663, c. 1450.]

I have also had a meeting with the Minister who is replying tonight.

In the 2019 Queen’s Speech, the Government announced that they would legislate to create a single enforcement body in an employment Bill. That Bill would give us the opportunity to remedy the very serious loophole that I have outlined. We should also remember the payment of premiums for an insurance policy to cover the employer’s liability and legal expenses and costs, which has been of no assistance whatsoever in this case.

The Minister will agree with me, I am sure, about the importance of people receiving the wages they are legally entitled to. We share a commitment to increasing the minimum wage to make it always worth while to go out to work and to lift more people out of poverty. I urge the Minister to make sure that the single enforcement body in the employment Bill will be up to the task of providing effective remedy in situations such as the one that I have described, and that it has retrospective power to help diligent, hard-working and highly compassionate carers such as my constituent, Mrs Wright.

I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on securing today’s important debate and, indeed, his tenacity in supporting and representing his constituent. I am proud to serve as the Minister responsible for the national minimum wage, the national living wage and workers’ rights, among my other responsibilities. I very much value his generous words on the benefits of the national minimum wage to make sure that we can encourage people, as he rightly says, and ensure that work pays. We must protect people on the lowest pay grades, but make sure that they stay in work and have a fruitful career.

The Government are committed to building an economy that works for everyone. Through the national minimum wage and the national living wage, we continue to ensure that the lowest paid in society are rewarded fairly for their contribution to the economy. In April, we increased the national living wage by 2.2% to £8.91, which is the highest ever UK minimum wage. A full-time worker on the national living wage will see their annual earnings rise by over £345. That amounts to a total increase of more than £4,000 since the national living wage was announced in 2015.

We have lowered the age threshold for the national living wage to 23 and, as a result, 23-year-olds and 24-year-olds will get a 71p increase. We have increased the time for which employers must keep minimum wage records from three to six years. That means that workers will get more of the historical arrears that they are owed. The Government are committed to cracking down on employers who fail to pay the national minimum or national living wage.

I thank hon. Member for South West Bedfordshire (Andrew Selous) for introducing the debate. I am always encouraged by what the Minister says, and it is encouraging to hear the things that have been done. However, there are loopholes that allow the hours of casual workers not to be recorded and an appropriate minimum wage is not enforced, so does he not agree that they must be closed? Do his Government intend to ensure that employers will begin doing the right thing instead of being able to avoid it, as they can at the moment?

The hon. Gentleman makes an important, twofold point. First, on anomalies, ignorance is no defence when it comes to paying the national minimum wage, and secondly, that is where enforcement comes in. I shall expand on that in a second. He is absolutely right to raise these issues, to make sure, as I have said, that companies are not balancing their books on the poorest paid in their workforce and in society.

We relaunched the minimum wage naming scheme on 31 December, naming and shaming 139 employers, including some of the UK’s biggest household names, for failing to pay the minimum wage. We have also more than doubled the budget for minimum wage enforcement and compliance since 2015. There are now over 400 officers in Her Majesty’s Revenue and Customs dedicated to ensuring compliance with the minimum wage.

I should like briefly to share the results of HMRC’s work in the 2020-21 financial year. As we have heard, it was a really challenging year for the whole country. Many of HMRC’s investigations are carried out face to face. Its officers can arrive unannounced at business premises to check minimum wage records or to interview employers and workers. Those face-to-face visits clearly had to be limited in line with covid restrictions, and with many businesses closing their doors. Nevertheless, the Government believe that the pandemic is no excuse for failing to pay staff correctly, especially in sectors such as social care and retail, which have provided invaluable services over the past year. I am pleased that HMRC continued its enforcement and compliance work, prioritising desk work where possible and expanding its educational work with employers and workers.

Despite the pandemic, in 2020-21 HMRC closed over 2,700 cases, securing more than £16.7 million in arrears for more than 155,000 workers. It issued 575 penalties worth over £14 million. HMRC also contacted more than 770,000 employers and workers to improve awareness of the minimum wage. As part of this, it sent over 400,000 texts to apprentices regarding the risks of underpayment from unpaid training time. It wrote to nearly 200,000 employers and workers. HRMC produced a variety of webinars and educational videos that accumulated nearly 20,000 views. One of those webinars is aimed specifically at the social care sector, covering travel time, waiting time and breaks. About 12,000 letters are being sent to Care Quality Commission-registered providers of home care service to highlight that webinar.

The Government acknowledge the particular challenges in enforcing the minimum wage in the care sector. We estimate that approximately 27,000 social care workers were underpaid the national living wage or national minimum wage in 2020. That represents just over 3% of all workers in the sector and is in line with previous years. All workers deserve the wage they are legally entitled to, but particularly key workers in the current context of the coronavirus pandemic. The Government therefore asked HRMC to focus on the sector in its targeted enforcement activity. We have also recently published comprehensive revised minimum wage guidance for all employers. That includes guidance on the recent Supreme Court judgment on sleep-in shifts, where we now have clarity after years of revolving court judgments.

But I am well aware of my hon. Friend’s concerns about social care workers. We met late last year, as he outlined, to discuss the issue of care workers providing care to individuals with direct payment arrangements, also known as personal budget holders. I appreciate that the situation with personal budget holders is particularly tricky as they are vulnerable individuals, but in minimum wage terms they are often the employers of their carers. That means, under minimum wage legislation, that any enforcement action by HMRC for underpayment of their care workers can only be taken against these individuals. I would like to give some assurances on how enforcement works in practice in such cases. Where complaints are received, HMRC works with all parties to ensure that personal budget holders receive the necessary help and support while also continuing to protect the rights of workers. As my hon. Friend said, local authorities have a duty of care under the Care Act 2014 to give personal budget holders clear advice about their responsibilities as an employer. Local authorities must also be satisfied that a personal budget holder is capable of managing direct payments, and should put in place an effective monitoring process related to those direct payments. Crucially, this involves checking to ensure that the individual is fulfilling their responsibilities as an employer. I understand that there are examples of local authorities stepping up to financially assist personal budget holders where minimum wage cases are brought against them. I strongly encourage this, and it is in line with the local authority’s Care Act duties, but ultimately HMRC needs to protect the rights of any underpaid worker.

Where arrears have been repaid to the worker, HMRC has discretion on whether to issue a formal notice of underpayment. HMRC rightly makes limited use of its discretion in practice, but cases brought against personal budget holders are instances where I would expect it to consider using that discretion. I therefore urge workers who care for personal budget holders and who believe them to have been underpaid, such as my hon. Friend’s constituent, to complain to HMRC or contact ACAS for advice. I understand, having spoken to my hon. Friend, that this is clearly an issue—although I cannot comment on his individual case in detail—that is a good few years old. As I say, I admire his tenacity in working with the council as well, pushing the council to do more and also speaking to my predecessor as well as to me. I know that my hon. Friend is calling for HMRC to be able to enforce directly against local authorities in such cases, but HMRC can enforce only against the employer—that is laid out in primary legislation.

It is right that there is a clear line so that employers are always clear about their responsibilities and workers are always clear about their rights. Any change could call into question the other scenarios in which multiple parties are involved in employment, such as in respect of agency workers, umbrella companies or contractors. That could lead to protracted court cases to determine who is responsible for paying the minimum wage, which would only delay workers getting the pay to which they are legally entitled. We therefore have no plans to change the minimum wage legislation.

We are extremely proud of all our health and social care staff and recognise their extraordinary commitment, especially during the covid pandemic. The 1.5 million people who make up the paid social care workforce provide an invaluable service to the nation, especially during the pandemic. Putting social care on a sustainable footing where everybody is treated with dignity and respect is one of the biggest challenges our society faces. There are complex questions to address and we want to give them our full consideration in the light of current circumstances, which is why the Government are committed to the sustainable improvement of the adult social care system. The Department for Health and Social Care will bring forward plans for workforce reform later this year.

We are providing an extra £341 million for adult social care, to pay for infection, prevention and control measures and to support rapid testing to the end of June 2021. That will bring specific funding for adult social care during the pandemic to almost £1.8 billion. We are also providing councils with access to more than £1 billion of additional funding for social care in 2021-22, on top of the significant support provided over the past year to support the sector in dealing with covid-19.

My hon. Friend talked about the single enforcement body, which is indeed something we are consulting on and working through, not least as we move towards the introduction of an employment Bill. We are taking the time to reflect on the lessons that we have learned from the covid-19 situation—the baked-in behaviour changes to work practices in the wider sense of the employment Bill—and the single enforcement body will be a really important part of that. I look forward to my hon. Friend’s contributions to the debate when we introduce forward legislation to bring that new body into existence.

My hon. Friend made some important points and I am really pleased to have had the opportunity to respond. The Government are committed to ensuring that all workers are paid at least the minimum wage, which is their legal entitlement. We also recognise that personal budget holders and individuals who arrange their own care are often among the most vulnerable in society. When complaints are received, HMRC will work with all parties to ensure that individuals receive the help and support that they need, while continuing to protect the rights of workers. I look forward to continuing to work with ministerial colleagues to ensure that all care workers are paid appropriately under the National Minimum Wage Act.

Finally, Mr Deputy Speaker, may I associate myself with your words and wish you a very good Prorogation—or whatever the term is? Members, staff and your team have played an amazing role in allowing us to continue the scrutiny of the Government’s work and our work as a fully functioning democracy.

Thank you, Minister; that is much appreciated and I will ensure that that message gets passed on to the Speaker and the others in the team.

Question put and agreed to.

House adjourned.