· News

Labour market enforcement needs a single body, report finds

A four-year study of labour market enforcement has recommended the introduction of a single enforcement body to tackle widespread non-compliance.

The report, by think tank Resolution Foundation, found that almost a third (32%) of workers paid at or around the wage floor were underpaid the minimum wage. 

Low paid workers were the victim of the most labour market violations, with 14% of low paid workers receiving no paid holiday and 11% not receiving a payslip. 

To help combat these violations the report recommended the UK government introduce a single enforcement body (SEB). 

More on the labour market:

Employers filling rising job demand with temps

'Bleak' outlook on workforce inactivity

Budget must get all ages involved in work, CIPD warns

Currently the UK labour market enforcement system comprises six core bodies including Gangmasters and Labour Abuse Authority, Employment Agency Standards Inspectorate, HMRC National Minimum Wage and National Living Wage team, plus local authorities overseen and funded by seven different government departments.  

In countries such as Ireland, France, Norway and Australia all aspects are enforced by one body (with some minor exceptions). 

Zofia Bajorek, research fellow the Institute for Employment Studies, said a SEB could create a less fragmented approach to enforcement. 

Speaking to HR magazine, she said: “A SEB could signal to employers that compliance really does matter and that the risk of non-compliance is significant. 

“This could also lead to improved information and support provision to employers and employees, raising the awareness of employment rights, breaches, and how these should be approached.” 

Kate Shoesmith, deputy chief executive at the Recruitment and Employment Confederation, said the creation of a SEB should be a priority. 

Speaking to HR magazine, she said: “SEB is not a magic bullet, but it gives us a fair shot at improving clarity for workers and employers, and better addressing non-compliance.  

“Recruiters want a robust and fair labour market where workers rights are protected, and compliant businesses can thrive.” 

In 2018, the government did announce similar plans to consolidate existing labour market enforcement bodies into one. 

The proposed group formed part of the Conservative manifesto and was a component of proposed revisions to the Employment Bill.  

However, in 2022 business secretary Grant Shapps told the Commons that the plans have been put to one side. 

Shoesmith said: “The lack of reason for the delay in introducing the Employment Bill and a SEB is particularly frustrating.  

“We are keen to work with government using our insight and experience of the labour market.”  

Bajorek warned a SEB will only work if the new organisation is adequately resourced, and does not lead to dilution of specialist expertise. 

“It is also argued that there would need to be close and effective coordination between other enforcement bodies,” she added.  

“For example, with the Health and Safety Executive to ensure that health, safety and wellbeing measures are also being enforced correctly, as well as statutory sick pay, and the equalities act.” 

The report also recommended worker and firm representatives have a place on the board of the SEB to ensure labour market enforcement is a true social partnership.  

It proposed these representatives would be able to bring a ‘super-complaint’ to the SEB to highlight systemic issues. 

Other recommendations include doubling the number of labour market inspectors. 

There are currently 0.29 labour market inspectors per 10,000 workers.  

The International Labour Organisation (ILO) minimum standard benchmark is one labour inspector per 10,000 workers. 

Shoesmith said labour market enforcement bodies have been hindered by limited resources. 

She said: “It is far too sweeping to say labour market enforcement has been lax – the enforcement bodies are doing what they can with limited resources, in the face of changing labour market structures, and where regulation doesn’t keep pace with the rate of change.”  

The study also proposed introducing a financial penalty up to four-times any arrears owed for rights of a binary nature. 

They recommended strengthening the employment tribunal system by extending application times to six months, enforcing awards adequately and allowing the new SEB to refer cases and intervene where appropriate. 

Shoesmith said these stronger measures are necessary to guide businesses and protect workers. 

She added: “When you have businesses asking for better enforcement of the regulations they are obliged to follow, something obviously needs to change. 

“The vast majority of businesses want to do the right thing but to do that, they need better guidance, especially on holiday pay and statutory sick pay issues which are often more complex for people who do not work in a full-time, permanent contract.”