The National Minimum Wage Bill: What it is, why it’s needed, and how it could be strengthened

A new Labour Bill would require employers to demonstrate they are complying with National Minimum Wage rules.

Commentary icon29 Oct 2020|Comment

Kate Ewing

Pompeu Fabra University, Barcelona

On 6 November 2020 Paula Barker MP will present her National Minimum Wage Bill to Parliament. This private member’s bill is raising an important issue for employees paid the minimum wage – pay transparency. The Bill seeks to strengthen their rights in relation to requirements for the records their employers are obliged to keep in order to demonstrate compliance with the wage floor.

During the first wave of the pandemic many people in the UK will have stepped outside on a Thursday to ‘clap for carers’ and express their gratitude to key workers who, it was widely acknowledged, faced (and continue to face) the front line of the global health emergency and carried out vital work in challenging and often unsafe conditions. It is something of a bitter pill that many of these workers – home care workers, care home workers – are frequently employed at or close to the minimum wage and often face significant struggles to enforce their rights in relation to this pay minimum. Take for instance the recent case of the Haringey home care workers who finally obtained an outcome in an Employment Tribunal case that lasted for over four years.

According to unions working with workers in this sector a fundamental issue is their ability to evidence their employers’ non-compliance – work is fragmented, pay systems complex and opaque, time recording inaccurate and record-keeping poor. Added to this may be frequent TUPE transfers in which due diligence and transfers of records may be lacking. UNISON, in particular, has been raising this issue before the Low Pay Commission for a number of years.

The Low Pay Commission recommended in their 2020 Non-compliance Report that regulations be reviewed and key minimum requirements for adequate record-keeping be set out. This is also the view taken by the Director of Labour Market Enforcement in his 2019/20 Strategy Report where he noted that “there are inherent barriers within the NMW regulations that prescribe record-keeping requirements which may be preventing HMRC NMW officers from assiduously enforcing against record-keeping offences……Concerns have been raised that these regulations are not detailed enough and as a result cannot be reinforced.”

This recognition of the barriers, not only for workers, but also for state agencies to enforcement of a key minimum labour standard is similar to that noted by the ECJ in the case of Federación de Servicios de Comisiones Obreras v Deutsche Bank SAE C-55/18. While that case may well have related to working time, and the UK may now no longer be part of the EU, it nevertheless serves to underline the importance of accurate and accessible record-keeping by employers to protecting minimum labour standards and in preventing unnecessary barriers to their enforcement. This is why the focus of the National Minimum Wage Bill on this issue is important.

Workers without records struggle to articulate their cases – despite a reverse burden of proof.

Key strengths of the National Minimum Wage Bill

The strength of Paula Barker MP’s timely Bill is in the two-pronged approach it takes. It places responsibility at the door of both the employer and public bodies who procure the services of private companies. This is particularly important to tackle the scourge of underpayment in the care sector where care is frequently commissioned by local authorities from private companies.

There are three particularly noteworthy aspects to the Bill. Firstly, the proposed record-keeping requirements wisely mirror existing requirements on employers in current minimum wage legislation. This means that typical arguments about red tape and added demands on employers would hold little weight. Employers who are complying with their legal obligations should already be taking steps to maintain records and calculating compliance. What this Bill does is simply codifies those steps and tries to provide needed clarity and uniformity to record maintenance. Improved record-keeping should in turn improve minimum wage compliance and enforcement.

Secondly, the Bill requires the employer to state the hourly rate they confirm they are paying a worker. Effectively, this amounts to a compliance statement: the employer must expressly show the actual hourly rate paid when subject to national minimum wage requirements. It follows that in order to be lawful the employer will have to demonstrate that such an hourly rate meets the legal minimum. It may perhaps appear unnecessary to those unfamiliar with the realities faced by those seeking to enforce the minimum wage in the care sector that such a measure should not only be required, but also be a key strength of this Bill.

In reality, however all too frequently employers, particularly in the home care sector, advertise rates for the job which are ostensibly above the minimum wage – but for contact or caring time only. When the requirements of the minimum wage legislation are applied to the actual tasks and duties of the job (including travel time and waiting time) this rate can frequently fall below compliance levels. Complex rotas, work fragmentation, shift allowances and opaque records contribute to this being difficult for workers to check for themselves in practice. Requiring employers to set out the true hourly rate paid and how it has been calculated would be a critical step forward – ideally towards a right for workers to be provided with this figure at the point of payment.

Thirdly, the Bill requires responsibility to be taken by local authorities who contract out care to private companies. There is an express requirement that they ensure that workers providing the care are being paid lawfully. The Bill proposes that mandatory contractual terms are included in contracts for services which require the service provider to demonstrate minimum wage compliance and record-keeping. In turn this places responsibility on local authorities to monitor this, requiring them to serve notice on any employer who does not furnish the necessary evidence. Mandating that local authorities actively engage with the employment practices of companies – who are frequently providing statutory care services – puts in place an additional safeguard. No longer would local authorities be able to take an arms-length approach.

Workers, who are undertaking some of the most important work in our communities - now more than ever - should not have to jump through excessive hoops and engage in complex, expensive litigation lasting years in order to enforce their right to the legal pay minimum.

Further steps to strengthen minimum wage rights

There are three areas where the Bill could perhaps be strengthened or go further. Firstly, extending the duty on employers’ record-keeping requirements to workers rather than employees would protect a wider class of working people. It would also avoid the need to establish employee status. All too often working people’s rights can be infringed not by express denial but by placing excessive hurdles to enforcement in their way. Furthermore, the The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No.2) Order 2018 has extended the duty on employers to provide pay slips to workers and so an extension of this Bill to workers would be consistent with that.

Secondly, express inclusion of the requirement to document travel time and waiting time is as important as start times, break times and total working time for each pay reference period. For home care workers, minimum wage breaches are typically linked to the omission or under calculation of this time. It is disclosure of the employer’s accounting for these categories of time which permits the worker to assess, for themselves, the employer’s compliance. The concept of ‘working time’ is frequently blurred and obscured. What is relevant is the time which is subject to minimum wage regulation and whether it has all been accounted for in a verifiable way. There is a risk without express provision and simply relying on the calculation of working time in accordance with Part 5 of the 2015 Regulations (as set out in s1(3)(c) of the Bill) that this key information will continue to be obscured from workers in a way which prevents its verification or makes it unnecessarily arduous to do so.

Thirdly, consequences for employers who do not comply with the requirement to maintain records could be strengthened beyond termination of contracts with local authorities, so that workers’ rights are also further protected. Although a right exists to request minimum wage records under Section 10 of the National Minimum Wage Act 1998 this does not appear to be sufficient. It may be that the modest financial penalty for failure to produce records is in practice viewed as a tax by employers who seek to avoid the true risk – a finding of national minimum wage non-compliance. Workers without records struggle to articulate their cases – despite a reverse burden of proof. Furthermore, too frequently it appears that the absence of records is seen as an unfortunate but understandable situation in a sector with complex pay systems. A cynic might note however, that the complexity has been developed by employers who currently conveniently appear to benefit from it.

With this in mind perhaps a rebuttable presumption of non-compliance with the national minimum wage should be included. That is to say, an employer who fails to maintain records and document the hourly rate as calculated in accordance with Section 1(3)(g) of the Bill must be assumed to be non-compliant with the wage floor in the absence of clear evidence to the contrary and an explanation as to why the records have not been maintained in accordance with the provision. A rebuttable presumption of this nature would be consistent with existing legislation. There should also be a penalty for failing to maintain the records as prescribed even if the employer succeeds in rebutting the presumption of non-compliance.

A note of caution should also be added here in relation to the Bill’s proposed withdrawal of services for failure to comply with a notice to produce minimum wage records or evidence of compliance. On the face of it this appears to be a good and strong proposal. However, were this Bill to progress, further serious and careful thought needs to be given to this from the perspective of how workers in such a scenario can be protected. The way in which TUPE operates in the care service sector can be problematic and workers may be left more vulnerable by the rapid termination of contracts. These are the lessons learnt from the four-year legal battle of the Haringey workers and other cases such as Mears Homecare Limited v Bradburn & Others [2019] UKEAT 170_18_0205 which specifically concerns workers’ post-transfer rights to access minimum wage records.

The National Minimum Wage Bill highlights the need to develop greater protections for workers receiving the minimum wage and also provides scope for further refinement of the protections. In many ways the proposals in the Bill constitute a very modest ask. Workers, who are undertaking some of the most important work in our communities – now more than ever – should not have to jump through excessive hoops and engage in complex, expensive litigation lasting years in order to enforce their right to the legal pay minimum. They should and must be entitled to information about how their pay is calculated. Employers should and must be required to provide this and demonstrate ongoing compliance with the wage floor. It is the very minimum that workers should be entitled to expect.

Kate Ewing

With many thanks to Matthew Egan at UNISON for his suggestions and comments on an initial draft of this blog.

Kate Ewing

Kate Ewing is a PhD student at Pompeu Fabra University in Barcelona, the focus of her work is the minimum... Read more »