Tackling Exploitation in the Labour Market

Overview

More people are working in the UK than ever before. Over 2 million private sector jobs have been created since 2010, resulting in 600,000 fewer workless households[1].  73.4% of people aged 16 to 64 are now in employment[2] and an increasing proportion of women and older people are participating in the labour market[3].

The UK has a strong statutory framework to ensure that those in work are entitled to work in the UK, are paid at least the National Minimum Wage – and from April 2016 for over 25s, the National Living Wage – and benefit from other employment rights.  Several aspects of this framework are enforced by the state on behalf of workers: the National Minimum Wage by HM Revenue and Customs (HMRC), the regulation of employment agencies and businesses by the Employment Agency Standards Inspectorate and the licensing of labour providers in the fresh produce supply chain by the Gangmasters Licensing Authority – as well as enforcement of immigration rules by the Home Office.

Under the last Government, several steps were taken to strengthen this framework.  These include:

• increasing the budget of the HMRC minimum wage enforcement team from £8.1m in 2010 to £13.2m in 2015/16;
• introducing new ‘naming and shaming’ penalties from 2013 for employers not paying the National Minimum Wage;
• increasing the deterrent for employers from breaking National Minimum Wage legislation by increasing the maximum penalty for under-payment from £5,000 per employer to £20,000 per worker; and
• prohibiting employment agencies from advertising exclusively abroad or in a foreign language when they are advertising jobs located in Great Britain.

Most employers in the UK strive for and achieve compliance within this legal framework.  Where there is uncertainty, a number of organisations provide advice and guidance to employers to assist compliance. Targeted, effective regulatory intervention then tackles criminal non-compliance, ensuring a level playing field for all employers.

However, there has been a change in the nature of non-compliance with labour market regulation over the last ten years, with a shift from abuses of employment regulation towards increasingly organised criminal activity engaged in labour market exploitation.  Feedback from enforcement officers suggests that serious and organised crime gangs are infiltrating legitimate labour supply chains across a number of sectors, and that the incidence of forced labour may be growing at a faster rate than other forms of exploitation.

In addition, as the number of people participating in the workforce continues to increase, it is even more important to ensure that workers receive for example the National Minimum Wage and the National Living Wage when it is brought in.  This will require even more flexibility to target enforcement appropriately.  Labour market enforcement activity also needs to support the Government’s deregulation agenda and the economic benefits that will bring.

All forms of labour market exploitation affect not only the individual victims.  Other businesses struggle to compete against rogue employers, while illegal pay and conditions for some workers can depress or hold back pay and conditions more widely in the sector locally.  Exploited workers are often migrant workers, duped into working in the UK and then exploited by unscrupulous employers. 

Why your views matter

These increases in both the level of participation in the labour market and the reported incidences of exploitation mean that Government needs to consider the effectiveness of the way it tackles non-compliance with labour market regulation across the spectrum.  This consultation therefore examines the ability of the current framework to deal with individuals and businesses that breach this regulation, from serious criminality to low-level non-compliance.  This is vital to protect vulnerable workers and will bring benefits to the UK economy and wider UK labour market.  This consultation also fulfils the statutory requirement under the Modern Slavery Act 2015 for Government to consult on the future of the Gangmasters Licencing Authority.

This consultation sets out the following four proposals to build on the effectiveness of the current regime:

• to establish a statutory Director of Labour Market Enforcement, who will set priorities for the enforcement bodies across the spectrum of non‑compliance, from criminally-minded exploitation to payroll errors;
• to create a new offence of aggravated breach of labour market legislation;
• to increase intelligence and data sharing between the existing enforcement bodies and also other bodies to strengthen the targeting of enforcement; and
• to widen the remit, strengthen the powers and change the name of the Gangmasters Licensing Authority to enable it to tackle serious exploitation.