Enforcing the minimum wage

MH Thu 12 Feb 2009 - 0:50

This is a slightly edited copy of something I wrote in the Wales Online Forum last July:

To be fair to Labour at Westminster, one of the best things they introduced was the minimum wage. Unless we want to take the draconian step of starving people into work by cutting benefits, measures like this serve as by far the better incentive to get people back to work.

Others include better childcare, better public transport, more flexible working hours and the now scrapped 10p starter rate of tax, but the most important of all is a fair minimum wage.

In the news recently we have seen the government move to end the scam of restaurants using tips to "top up" below minimum wage earnings. But we have a far more serious situation here in Wales (although it is not confined to Wales). The small team of inspectors operating in Wales has found 774 business who have broken the law over the past six years ... but not a single one has been prosecuted for doing so.

Firms avoid paying the minimum wage

This is not the fault of the Assembly. It is a matter for HM Revenue and Customs, a UK department. And the decision whether to prosecute will be taken by their own Prosecutions Office. Because justice is not a devolved matter, we in Wales can do nothing to remedy the situation.

How serious is this? You might think that 774 cases of non compliance in six years is not so very bad, but there is a more disturbing statistic in the service's annual report:

The incidence of non-compliance found in minimum wage investigations
continues to remain high, at 32% in 2005-06.

http://www.berr.gov.uk/files/file35198.pdf
In other words nearly one third of the companies investigated are found to be breaking the law. Now of course the investigations they concentrate on will be intelligence led, the result of tip-offs, so they will focus their limited resources on those who are likely to be breaking the law. But one third of companies is scandalous.

We in Wales would do well if we were allowed to radically change the way we enforce the minimum wage. We could be given some of the HMRC's budget to have inspection teams based all over Wales, not just in Cardiff. We could insist that any company doing business with any public body be required to demonstrate that they are complying with the law. We could ban companies who have broken the law from entering any contract with a public body for a year or two.

... but the bottom line is that when we catch them, they need to be prosecuted, fined and, if the offences persist or if the same directors just set up a new company, we need to personally punish those directors.

Yes, people who commit benefit fraud should be punished too. That goes without saying. But what's sauce for the goose ...

If you follow the link to the original Wales Online article, you will read that Leanne Wood was the one who pursued this under the Freedom of Information Act. My reason for bringing it up again now is that she's just written more about it on her blog:

Minimum wage avoidance in Wales

I complained to the Information Commissioner after HMRC refused to provide information under the Freedom of Information Act. I asked for the locations of employers in Wales who were failing to pay the minimum wage. I've already blogged on previous investigations into minimum wage avoidance in Wales.

HMRC have now indicated that they have reconsidered their position. I have a summary of businesses breaking the minimum wage in the post-code areas covering Wales. According to HMRC between 2002-03 and 2007-08, 294 employers in the Cardiff postcode area were found not to be paying the minimum wage. In the Swansea postcode area it was 206, Newport 112 and Llandudno 81.

HMRC's U-turn is to be welcomed, but the information provided is still not detailed enough. Dodgy firms failing to pay their employees the minimum wage should be named and shamed. They are undercutting honest employers and exploiting workers - firms who comply with the law will want to see action taken. There have been no prosecutions in Wales for minimum wage avoidance, these companies have effectively got away with it! I can't understand the reluctance of the Westminster Government to prosecute companies who break the law or to make the details public. If naming and shaming is good enough for young people, why is it not good enough for criminal companies?

Leanne Wood's blog, 4 Feb 2009

This is essentially the same information as before, except that we now have a very rough geographical breakdown. It's taken seven months to get even that much. Still no names and, more depressingly, still no prosecutions in Wales.

In the UK as a whole there have only been four prosecutions, as detailed here:

HMRC News Distribution Service, 3 July 2008