Who’s afraid of the compliance officer?
Alan Sealy checks the record of those charged with enforcing the national minimum wage
Eleven years after its introduction, the National Minimum Wage (NMW) was trumpeted as a success by the minister for business, innovation and skills.
In a strategic paper on compliance, issued last year, the minister said: ‘… more than £38m arrears for over 130,000 workers has been identified. In the financial year 2008/9 nearly £4.5m of arrears for over 23,000 workers. This is no small achievement, but we can’t afford to be complacent.’
The minister did not have the opportunity to become complacent as he lost his job in the May 2010 general election. He had finished his statement with a pledge: ‘We will continue to consider new and innovative ways of working and pilot working methods; employing different strategies to reach those who want to comply and those who deliberately flout the law. We will make it clear that underpayment is not an option.’
But in the teeth of a recession, who is looking? I checked the track record of those charged with policing national minimum wage (nmw) legislation and found a disturbing picture. Breaches have received little publicity, mainly because there have been so few. In the decade since the legislation was introduced there have been only seven prosecutions! Total fines levied amounted to just £14,246 with costs of £12,825 – that’s only £27,072 representing the work of more than 100 compliance officers attached to HM Revenue and Customs. These officers are responsible for policing NMW legislation. Their budget for enforcement increased by £2.9m per year since 2007. Some £3.8m arrears per year has been identified (the word recovered was not used) so it is clear that the annual costs of enforcement are far in excess of the arrears identified.
The Low Pay Commission report (2010) gave a picture of the so-called ‘achievement’ over a three year period (2006-2009) quoting HMRC statistics:
• fewer than 2,000 cases of non-compliance identified per year;
• fewer than one hundred enforcement notices issued per year;
• fewer than fifty penalty notices issued per year.
The Commission presses the need for firm action. Its 2010 report (p 165 7.1) asserts – ‘we have always held the view that a rigorous compliance and enforcement strategy is essential to the success of the minimum wage. This continues to be our view.’
But when the claims of success are put in the context of a total UK workforce of 29m it is difficult to avoid the conclusion that there is a failure to deal with the problem.
The Labour government introduced the NMW and so is not in a position to attack the coalition on current performance. The present government will be anxious to preserve the fig-leaf the legislation provides.
The inescapable conclusion is that unemployment will continue to rise and average wages in the low paid sector will fall behind inflation. The gap between the haves and have-nots will continue to widen. The student riots over the tripling of tuition fees and the withdrawal of the Education Maintenance Allowance are a foretaste of things to come. What will happen when those students try to get jobs?
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