The House of Commons committee has published its new report on the Employment Rights Bill, with additional announcements anticipated later today.
The Fair Work Agency, which is set to enforce labour market compliance will need “strong powers to inspect workplaces and take action against exploitation,” as well as the ability to bring civil proceedings to uphold workers’ rights. However, the report finds that current enforcement bodies demonstrate that penalties for non-compliance are insufficient.
One example is HMRC’s enforcement of National Minimum Wage; the maximum financial penalty for businesses that fail to comply with the National Minimum Wage is twice the arrears owed. This penalty can be reduced to 100 percent of the arrears if the employer pays promptly. Analysis by the Resolution Foundation indicates that there is little incentive for businesses to comply with minimum wage obligations unless there is a 200 percent penalty and a significant portion of non-compliant businesses are caught.
Even in severe cases, the strongest powers available to state enforcement bodies are seldom used. Although these bodies can impose criminal sanctions, they are rarely applied. Since 2007, only 21 employers have been prosecuted for underpaying the national minimum wage. The Committee finds that this lack of enforcement highlights the need for stronger measures to ensure compliance and protect workers’ rights.
