National Minimum Wage law has “fundamental problems” and in urgent need of reform, expert analysis finds

National Minimum Wage law has “fundamental problems” and in urgent need of reform, expert analysis finds

9 Dec 2021| News

The UK’s National Minimum Wage laws are not fit for purpose and are in urgent need of reform, an expert analysis from independent think tank, the Institute of Employment Rights, has found.

In a new report, A Just Share: The case for minimum wage reform, labour lawyer Kate Ewing analyses three important recent employment law cases. These cases and the ongoing pandemic have laid bare some fundamental structural problems within various sectors, and in relation to the NMW framework specifically, which undermine worker protection and dignity.

These concerns are all the more relevant as the Government announces new ‘Plan B’ measures in the face of the Omicron variant. The report notes the vulnerability of low paid workers who have to self-isolate without adequate and reliable support which provides a genuine wage floor and leaves such workers bearing an undue share of the economic risks and consequences of the health crisis. The problem of the lack of proper sick pay and self-isolation protection has also been raised by the TUC.

Using real-life, union backed, case examples the report illustrates key failures of the current legal framework, which is contributing to the exploitation and underpayment of the very workers it was introduced to protect. In the case of Uber BV the issue of employment status being used as a barrier to protection is explored.  Some employers evade National Minimum Wage laws by misclassifying their workers as self-employed – an employment status that denies them access to employment rights, including the minimum wage.

The case of Mencap illustrates the difficulty in determining what counts as work time for the purpose of the NMW.  The issue of what counts as work time and therefore should be paid at least at the rate of the NMW is increasingly complex and can be a way in which employers try to limit their wage bills.

Author Kate Ewing said:

“It is a fundamental and major weakness of the regulatory framework, particularly given that it is supposed to operate as a wage floor, that there can be periods of time when a worker is under the direction and control of their employer, and yet not entitled to receive at least the minimum wage for this time.”

The third case, Harris illustrates how challenging it can be for workers to enforce their right to the minimum wage.  The increasing fragmentation of work time can make it extremely difficult to decipher what monies are owed to workers particularly where there is a failure to maintain and provide wage records to the workers.

Dignity and decent wages

Kate Ewing concludes that urgent reform is required and should centre around:

  • simplifying employment status so that all other than the genuinely self-employed have access to key labour protections;
  • introducing a duty on employers to provide a minimum wage compliance statement at the point of payment;
  • incentivising consistent employment practices and disincentivising the fragmenting of work time and exploitative contractual arrangements by employers;
  • establishing regulations which expressly state that time spent at the disposal of the employer should be treated as work time and be paid as such.
  • better and more aggressive enforcement of the NMW by the statutory body tasked with enforcement: the proposed Single Enforcement Body must have the power to compel compliance with the law.
  • reinstating sectoral collective bargaining so that trade unions have the power to negotiate fair wages for all workers rather than simply relying on legal minimums.

Kate Ewing comments:

” The problems with the existing minimum wage framework are profound and contribute directly to the ongoing vulnerability and exploitation of low paid workers. The way in which the NMW operates in practice and the way in which some employers engage with the NMW, and are permitted to engage with the NMW, are at the heart of the issues. Workers need clear minimum wage protection which exists not simply in theory but in practice, in a way which is enforceable and enforced. Unfortunately this is all too often not the experience of too many low paid workers.”

Kate has written an IER-published blog to go alongside the publication of the report, which you can find here.