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National living wage crackdown 'window dressing'

Published 01/09/2015

David Cameron said bosses could be barred from acting as directors if they did not pay the new national living wage
David Cameron said bosses could be barred from acting as directors if they did not pay the new national living wage

The Government has been accused of "window dressing" after announcing a crackdown against firms that fail to pay staff the new national living wage.

The Prime Minister said businesses face fines of up to £20,000, while bosses could be barred from acting as company directors for up to 15 years if they did not ensure the wage rise was passed on.

From next April, firms will have to pay all workers aged over 25 at least £7.20 an hour - up from £6.50 now.

The announcement, made in a newspaper article by David Cameron, drew criticism and scepticism from trade unions.

Len McCluskey, leader of Unite said: "Given the record of the Tory party on worker protection, it will take some leap of faith to believe they are now converted to the cause.

"This is the very party that weakened the powers of the Gangmasters Licencing Authority, scrapped the essential body protecting the wages of low paid farm workers and is planning to go into EU treaty negotiations looking to take the UK out of vital protections for workers."

Martin Smith, national officer of the GMB, said: "This is more window dressing by the Tories. There have been few employers taken to court and the level of inspections has been pathetic.

"Unions are not allowed to complain to the enforcement authorities and local councils are also not allowed any role in enforcing the law.

"The Tories realise that allowing employers a free hand to exploit UK and migrant workers will impact on the EU referendum vote. This is why we are seeing a lot of ministerial announcements on migration and pay."

Mr Cameron wrote in the Times that b y the end of the decade, the new wage will reach at least £9 an hour.

"Combine that with an increase in the Personal Allowance to £12,500, and you can see the power of the modern Conservative Party's One Nation message.

"But the National Living Wage will only work if it is properly enforced. Businesses are responsible for making that happen, and today I'm announcing how we will make sure they do."

Currently a firm is fined 100% of arrears for non-payment of the minimum wage but that will double to 200% when the new living wage comes in to force. The maximum is expected to be £20,000.

"We've already doubled the fines for non-payment of the National Minimum Wage - and we will double them again for that and the National Living Wage," he wrote.

"We will significantly increase the enforcement budget, set up a new team in HMRC to take forward criminal prosecutions for those who deliberately don't comply, and, from this autumn, ensure that anyone found guilty will be considered for disqualification from being a company director for 15 years.

"All that will be all overseen by a new Labour Market Enforcement Director. So to unscrupulous employers who think they can get labour on the cheap, the message is clear: underpay your staff, and you will pay the price."

Business Secretary Sajid Javid said a new team of HM Revenue and Customs compliance officers will be established to investigate the most serious cases of failure to pay the minimum wage.

The team will have powers to use sanctions including fines, prosecutions and "naming and shaming" the most exploitative employers, and the budget for enforcement will be increased in 2016/17, he said.

Mr Javid said: "There is no excuse for employers flouting minimum wage rules and these announcements will ensure those who do try and cheat staff out of pay will feel the full force of the law."

The Government will consult on a new offence of aggravated breach of labour market legislation, as well as on extra investigatory powers for the Gangmasters Licensing Authority.

Katja Hall, the CBI's deputy director-general, said: "Businesses back tough action against employers that deliberately fail to pay minimum wage or knowingly flout employment law.

"Action must be firmly focused on areas of concern and avoid burdening the vast majority of firms, which already comply with the law.

"We welcome the appointment of a new Labour Market Enforcement Director, and encourage them to focus on going after abuses rather than creating new licensing or approval processes."

The news came as the first high street retail chain to become a living wage employer was announced.

Oliver Bonas, which has 43 stores across the UK, has committed to pay all its staff and contractors at least the living wage of £7.85 an hour, and £9.15 in London.

The Living Wage Foundation said it was a "significant milestone" for the campaign for higher pay.

Stephen Timms, acting shadow work and pension secretary, said: "On any measure it is clear David Cameron's Government has failed to make work pay. The number of people earning less than a living wage has risen by 45% since 2009.

"The Tory low-wage economy has led to a 50% rise in housing benefit spending for people in work since 2010, and Tory plans to cut tax credits will take money away from people who work hard.

"It is time for David Cameron to make work pay by dropping George Osborne's plan to cut tax credits."

Liberal Democrat leader Tim Farron said: "Cameron may be a former advertising executive, but trying to rebrand the Tories as the 'Workers' Party' is laughable.

"How can his party represent the interests of hard working families when they are happy to hit the young and vulnerable with punishing cuts?"

A spokesperson for Labour leadership contender Jeremy Corbyn said: "This announcement will ring hollow for many trade unions and campaigning organisations which have pushed for greater enforcement and stronger penalties for the minority of employers who exploit workers and undercut legitimate businesses.

"Having starved HMRC of resources and cut the number of workplace inspections, the measures announced today are grossly inadequate. The most effective enforcement of workers' pay and conditions comes from having strong trade unions in the workplace, which is why the Government is wrong to be weakening trade union rights in its Trade Union Bill."

Simon Walker, director general of the Institute of Directors, said: "The business community is as outraged as the Prime Minister at employers who skirt the law and undercut wages.

"Those that do so should be punished and face prosecution. David Cameron is right to focus on enforcement, and businesses will join him in condemning bad behaviour.

"Tough talk about 'unscrupulous employers', however, runs the risk of portraying this as a widespread problem and betrays the fact that this is beyond rare. Since 2013, only 285 employers have been found guilty of not paying staff the national minimum wage. This is of a total of 1.27 million employers in Britain - meaning just 0.02% broke the rules.

"The IoD continues to support the introduction of the new living wage. Nine in 10 IoD members already pay more than the living wage to even their most junior members of staff."

TUC general secretary Frances O'Grady said: "We welcome the Government's pledge to commit more resources for enforcement, increase prosecutions and introduce higher penalties for bosses who underpay the minimum wage.

"At least a quarter of a million workers are currently underpaid the existing national minimum wage - there must be no hiding place for cheating employers.

"But there is still much more to be done to protect low-paid workers. The Government should pay minimum wage arrears when the employer cannot pay, HMRC should enforce statutory holiday pay entitlements and the Gangmasters Licensing Authority licensing scheme should be retained and extended so that the most vulnerable workers are fully protected."

Unison general secretary Dave Prentis said: "It's already against the law not to pay the minimum wage but that hasn't stopped unscrupulous employers from trying their luck and cheating their employees out of their wages.

"Only when the law-breaking bosses know they will be hit hard in their pockets every time they deny their staff a decent wage will things start to change.

"But sadly thousands of home care workers already know what it's like not to get a legal wage because their bosses fail to pay them for the time they spend travelling between the homes of the many people they care for.

"The Prime Minister says 'underpay your staff and you will pay the price', yet only last week the boss of a care company that has admitted to not paying its workers the minimum wage was nominated for a seat in the Lords by his Government."

John Allan, chairman of the Federation of Small Businesses, said:

"The FSB is a long standing supporter of the minimum wage and we've always been very clear that employers must make sure they meet this important legal obligation.

"As well as focusing on enforcement, the Government must clearly and pro-actively communicate the change to employers - ensuring businesses fully understand what they need to do and when."

Green Party leader, Natalie Bennett said: "It's laughable that the Tories are now trying to brand themselves as champions of the cause of workers.

"Not only are they planning to further tighten our already overly restrictive trade union laws that prevent workers from getting together to collectively fight for their rights, but they are failing to enforce even our existing inadequate minimum wage, failing to prosecute support checks on exploitative employers and gutting the strength of the essential Gangmasters Licensing Authority."

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