News

Let’s enforce existing labour market laws before we write new ones

For every problem in the world of work, it’s usually possible to dream up a policy solution. Zero-hour contracts create insecurity? Let’s ban them. People are burnt out? Let’s create a “right to disconnect”. The British public should expect lots of proposals like these in the run-up to the next election, given the main political parties don’t want to promise anything that involves hefty public spending. But every time I hear ideas like these I want to interject: can we start by just enforcing the laws we’ve already got?

A study of UK labour market enforcement by the Resolution Foundation think-tank reveals the scale of the problem: almost a third of workers paid at or around the wage floor were underpaid the minimum wage last year; 900,000 workers say they don’t get holiday pay, even though it’s a right from day one; 1.8mn say they don’t get a payslip; and about 600,000 haven’t been enrolled in a pension scheme by their employer when they should have been. Meanwhile, the employment tribunal system is plagued with delays and backlogs. With admirable honesty, the government’s director of labour market enforcement said recently that workers rarely approached her office directly as “they probably haven’t the foggiest who we are”.

What’s going wrong? Unlike in other countries such as Ireland, the Netherlands, Norway and Australia, which have one prominent organisation to enforce most employment rights, in the UK the role is spread across six different bodies managed by six different government departments. This means workers don’t know where to go when they have a problem, and the various regulators don’t share information as well as they could. They are also under-resourced: the UK has just 0.29 labour market inspectors per 10,000 workers, less than a third of the International Labour Organization’s minimum standard benchmark of one per 10,000 workers. On this measure, it ranks 27th out of 33 comparable OECD countries.

The approach the regulators tend to take has also been shaped by successive UK governments’ desire not to hurt employers or economic growth with excessive “red tape”. The foreword to the 2014 UK Regulators’ Code states that regulators are expected to “design their service and enforcement policies in a manner that best suits the needs of businesses and other regulated entities”.

There is something to be said for this. Most employers want to follow the rules and regulators can help them to do that. As a health and safety inspector explained to me once: “Most of the time I’m problem solving, I’ll stand with a director going, ‘I’m not happy with it, how are we going to fix it, how about if you do this?’”

But it isn’t anti-business to acknowledge that some employers do break the law deliberately. In fact, decent businesses are desperate for the government to crack down on their unscrupulous competitors. Neil Carberry, chief executive of the Recruitment & Employment Confederation, a trade body for employment agencies, says his members suffer margin compression and lost business because of an underbelly of rule-breaking competitors.

“What happens is these businesses set the reference rates for things, and they drive market pricing,” he told me. “We see this in clients who ask for charge rates for temporary workers that are patently not deliverable if the person delivering them is fully compliant.” The lack of regulation of umbrella companies, a type of employment intermediary, is a particular problem.

This isn’t just a concern for big businesses. The Federation of Small Businesses has also said the current system “needs reform” to “support workers and ensure a level playing field for employers”.

Nor is it obvious that a softly-softly approach to enforcing the rules is good for economic growth. Two big policy interventions in the past decade were explicitly portrayed by the government as an attempt to force employers of low-paid workers to invest in technology and boost the country’s woeful productivity: sharply increasing the minimum wage, and putting a stop to low-paid migration after Brexit. Boris Johnson, prime minister at the time, argued the latter would force employers away from their “broken model” of low wages, low growth, inadequate skills and low productivity.

But there is no point in trying to put the economy in a pressure cooker if you’ve left a lot of holes in the bottom through which all the steam can escape. Have all the hand car washes been replaced by gleamingly efficient machines since Brexit? There is only one machine near where I live. Whenever I try to use it, there’s a sign saying it has broken down.

sarah.oconnor@ft.com

Articles You May Like

Lynton Crosby’s CT Group accused of supplying forged records in court disputes
Russia unleashes war propaganda offensive in Italy
Your home sale may leave you in a tax shock. Here’s how to reduce your capital gains tax bill
America’s booming year from hell
First Solar jumps on strong quarter, record backlog in rare bright spot for beaten-down renewable sector