Workers across Britain have a multitude of rights at work – from the minimum wage to maximum hours. But, despite receiving far too little attention, it is labour market enforcement that is essential to turn those rights into a reality. How effective is Britain’s labour market enforcement regime? What breaches of labour standards are most common? Does Britain have the right infrastructure and resources to enforce the rules? And is the current regime equipped to cope as our labour market changes? To get to the bottom of these questions, the Resolution Foundation is launching a three-year investigation into labour market enforcement in Britain, supported by Unbound Philanthropy. At an event to mark its launch, the former Director of Labour Market Enforcement David Metcalf (and advisor to the investigation) will offer his take on the state of enforcement in the UK, before other leaders in the field respond and set out priorities for change. Speakers: Professor David Metcalf, Former Director of Labour Market Enforcement at BEIS Jennifer Beckwith, Principal Policy Advisor at the CBI Tim Butcher, Chief Economist at the Low Pay Commission Nye Cominetti, Economic Analyst at the Resolution Foundation Torsten Bell, Chief Executive of the Resolution Foundation

1. Tough enough
Enforcing Britain’s labour market rules
Professor David Metcalf
Former Director, Labour Market
Enforcement, BEIS
Jennifer Beckwith
Principal Policy Advisor at the CBI
Tim Butcher
Chief Economist at the Low Pay
Commission
Nye Cominetti
Economic Analyst at the
Resolution Foundation
9:30 am, Monday 16th September
LIVE
@resfoundation
#EnforcingTheRules
Chair: Torsten Bell Chief Executive, Resolution Foundation

2. www.resolutionfoundation.org/events/
Thank you for watching
For more events like this, please visit

3. #EnforcingTheRules
Wifi
2QAG_Guest
Welcome_Guests September 19@resfoundation
Tough enough?
Enforcing Britain’s labour market rules
Professor David Metcalf Outgoing Director, Labour Market Enforcement, BEIS
Jennifer Beckwith Principal Policy Advisor at the CBI
Tim Butcher Chief Economist at the Low Pay Commission
Nye Cominetti Economic Analyst at the Resolution Foundation
Torsten Bell Chief Executive of the Resolution Foundation

4. 1. Paid holiday
2. Minimum wage
3. Provision of a
payslip
4
We have data on three types of violations
@resfoundation
Applies to all workers
Day 1 right
Unlawful to ‘roll up’ into pay
Applies to all workers
Some exceptions, e.g.
accommodation allowance
Applies to employees

5. Personal
characteristics
Job type
Firm
characteristics
5
And we look for associations with three groups of variables
@resfoundation
Age, sex, education, ethnicity,
whether studying, migrant/native.
Contract type, hours, occupation.
Industry, firm size.

6. Job type > Firm characteristics > Personal characteristics
6
We find that job type and firm characteristics are more important
factors than personal characteristics
@resfoundation
1. Paid holiday
2. Minimum wage
3. Payslips Firm characteristics > Personal characteristics > Job type
Job type > Firm characteristics > Personal characteristics
Note: based on logistic regressions, with variables grouped using ‘sheaf’ coefficients method.
Minimum wage analysis using Labour Force Survey.

7. 7
Percentage of employees that report
having zero paid holiday: 2016-18
Source: RF analysis of ONS, Labour Force Survey.
Note: average of all 12 LFS quarters from 2016 to
2018.
@resfoundation
Violations most affect those on the fringes of the labour market
1. No paid holiday
2. Minimum wage
underpayment
3. No payslip
provided

8. 8
Percentage of workers ‘covered’ by min. wage (paid < min
wage +5p) that are paid below minimum: 2018
Source: Low Pay Commission, analysis of ONS, Annual Survey of Hours and Earnings, 2018.
@resfoundation
Violations most affect those on the fringes of the labour market
1. No paid holiday
2. Minimum wage
underpayment
3. No payslip
provided

9. 9
Percentage of workers not provided a
payslip: 2016-17 & 2017-18
Source: RF analysis of ONS, Family Resources
Survey. Note: average of survey years 2016-17 and
2017-18.
@resfoundation
Violations most affect those on the fringes of the labour market
1. No paid holiday
2. Minimum wage
underpayment
3. No payslip
provided

10. 10@resfoundation
The groups experiencing the violations aren’t those bringing
Employment Tribunal cases… in terms of age
Employment tribunal cases No paid holiday
0 1 2 3
Under 25
25-44
45-64
65 and
Over
Employment tribunal cases per 10,000 workers: 2012
0% 5% 10% 15% 20%
Under 25
25-44
45-64
65 and Over
% workers reporting no holiday pay: 2016-18
Source: Survey of employment tribunal applications (BEIS); RF analysis of ONS, Labour Force Survey.

11. 11@resfoundation
The groups experiencing the violations aren’t those bringing
Employment Tribunal cases… in terms of occupation
Employment tribunal cases No paid holiday
Source: Survey of employment tribunal applications (BEIS);
RF analysis of ONS, Labour Force Survey.

12. 12
Source: Survey of employment tribunal applications (BEIS); RF analysis of ONS, Labour Force Survey.
@resfoundation
The groups experiencing the violations aren’t those bringing
Employment Tribunal cases
Employment tribunal cases No paid holiday
… and in terms of job type

13. • Workers on the fringes of the labour market are most
affected by violations of labour market rules
• Where you work (and who you work for) matters more
than who you are
• The people using the Employment Tribunal system
are not the groups most affected by labour market
violations
• This issue presents inherent measurement problems!
13
Conclusions
@resfoundation

14. #EnforcingTheRules
Wifi
2QAG_Guest
Welcome_Guests September 19@resfoundation
Tough enough?
Enforcing Britain’s labour market rules
Professor David Metcalf Outgoing Director, Labour Market Enforcement, BEIS
Jennifer Beckwith Principal Policy Advisor at the CBI
Tim Butcher Chief Economist at the Low Pay Commission
Nye Cominetti Economic Analyst at the Resolution Foundation
Torsten Bell Chief Executive of the Resolution Foundation

15. *with much input from the excellent DLME secretariat 15

16. 1. How we got here
2. The enforcement bodies
3. Some evidence on wage underpayment
4. The DLME Strategies 2018/19 and 2019/20
Sector-based analysis
Compliance
Investigations and penalties
Joint working
Supply Chains etc.
Current gaps
5. Single enforcement body
16

17.  Fissuring of the labour market (Weil)
‒ The relationship between workers and employers is increasingly complex.
Employers have contracted out, franchised and devolved many functions
once done in-house (see next Slide)
 Changing composition of workforce
‒ Part Time working, self-employment and gig economy have all increased
‒ Hollowing out of the labour market
Late 1970s 2016
Employees covered by
collective bargaining
9-in-10 <3-in-10
Workplace size: sample
workplaces with 20 + e’es
≥ 50 workers (% if all
workplaces)
50 38
Labour’s share of the national
income (%)
68 53
Working age population born
abroad (%)
7 16
17

18. Prepared
by HMRC
18

19. Enforcement body
(Responsible
department)
Funding
(£m)
2018/19
FTE staff
Scope Geographic
locations covered
2016/17 cases
HMRC NMW/NLW
(BEIS)
2018/19: 26.3
2017/18: 25.3
2016/17: 20
400+ Covers all sectors.
All employers and workers
in scope, covering around
2m workers in low-paid
jobs*
UK 2674 closed
2,665 opened
GLAA
(Home Office)
2018/19: 122
2017/18: 7.2
2016/17: 4.8
122 Licenses labour providers
in horticulture, shellfish
gathering for food
processing and packaging.
Over 1,000 licensed labour
providers, supplying around
0.5m workers.
England, Scotland,
Wales and by
order in Northern
Ireland
247 licensing cases
EAS
(BEIS)
2018/19: 0.725
2017/18: 0.725*
2016/17: 0.5
15 Covers employment
agencies:
30,000 Employment
Agencies, covering 1.1m
workers
England, Wales,
Scotland
142 targeted
inspections;
750 complaints
cleared,
828 complaints
received
The 2016 Immigration Act gave GLAA a much broader role addressing labour exploitation across the entire labour market. The new activity is carried
out by Labour Abuse Prevention Officers (LAPOs). LAPOs have powers to: investigate labour market offences; arrest suspects; enter premises; search
and seize evidence.
*includes one-off amount of £0.25m for IT
19

20.  Recent published statistics
(a) NLW, aged 25+
- ASHE 1.2% (282,000) paid below NLW (2017)
- LFS LPC put underpayment in range 300,000 – 580,000 (2016/17)
- House of Commons Library incorporates estimates of unpaid hours:
range 1-2 million workers, some 4% to 9% of employees (2016)
- LPC defines low paid job as being paid up to 5p above NLW. On this
basis 22% of all low paid jobs are paid below the NLW (2016)
(b) Apprentices: 18% not paid correct MW (2016), especially
hairdressing and child care
(c) HMRC 2017/18 investigators identified almost 202,000 workers who
had been underpaid £15.6 million (= £77 per worker)
Overall, as percentage of the wage bill (2016):
- £1.8 billion (holiday pay) + £1.3 billion (other) = £3.1 billion
- Equivalent to around 3.5% of wage bill of bottom 3 deciles in wage
distribution
20

21. 21
UK LME Introductory Report UK LME 2018/19 Strategy UK LME 2019/20 Strategy
Assess of the Enforcement
landscape.
Scoping exercise to inform the
DLME’s first full LME Strategy.
The Scale and Nature of non
compliance
Deterrence Approach to
Enforcement
Compliance Approach to
Enforcement
Improving Enforcement including
addressing enforcement gaps
Use of Resources: Assessing the
prioritisation of resources in light
of the scale and nature of non-
compliance
Compliance Approach: to have a
sustainable impact on employers
behaviours.
Joint Working: to improve
enforcement and address
enforcement gaps.
Key principles of enforcement:
• Prioritisation: the scale and nature of non-compliance and allocation of enforcement activity
• Deterrence: to proactively encourage employer compliance
• Sustainability: to have a long-term effect on behaviour
• System wide effects: each layer of an industry must be affected by enforcement activity

22.  Supporting employers (especially on NMW)
‒ working with stakeholder to update regulations and guidance at national and sector
‒ interact with firm enquiring whether proposal is compliant
‒ naming and shaming to be less of a blunt instrument
‒ develop case studies to show good/bad practice
‒ Improve consistency of caseworkers interpretation of technical NMW regulations
 Supporting employees
‒ 3 bodies, Acas and wider Govt should improve communication on employment
rights and how to complain, including developing a web portal
‒ Statement of rights for all workers within one week of employment
‒ Payslips: extend right to all workers, include total hours worked and hourly rate of
pay for those hourly paid workers
◦ Review and consult on:
◦ Promote compliance:
22

23. Both probability of inspection and penalties are too low. Business models take into account low
chance of enforcement and phoenixing of companies reduces impact on non-compliant
individuals/businesses.
 Resources: EAS requires more (others need to show what they are doing with already
expanded budget)
 Increase penalties
‒NMW penalty multiplier should be increased
‒charge a fee for inspections
‒additional revenue should be used for enforcement system
‒consider giving EAS power to impose civil penalties
 Naming and shaming: scheme needs to be reviewed to maximise effectiveness
 Prosecutions: greater use and publicity required, and Labour Market Undertakings
and Orders need to be trialled
 Proactive (intelligence led) enforcement: including more joint working between
3 bodies and other agencies; e.g. working with Insolvency Service to tackle phoenixing.
Continue to develop the Information hub, intel sharing networks and SCG.
 Partnership working: trial different models to tackle problem areas/ sectors e.g. in
Newham and Leicester
23

24. Accountability and leverage is needed throughout supply chains to
help ensure compliance.
 Joint responsibility: the brand name bears joint responsibility for any
non-compliance found further down its supply chain. Follow-up action should
be undertaken in private to provide opportunity to correct the infringements,
with failure to correct the non-compliance leading to, for instance, public
naming of both the brand and the supplier.
 Hot goods: Provisions should be made to enable temporary embargo of
‘hot goods’
 Public Procurement: templates should be amended to explicitly compel
compliance with labour market regulations in public contracts
 Licensing: pilot schemes in car washes and nail bars
 Evidence based practice: need to embed continual assessment and run
an independent evaluation of 3 bodies.
24

25.  Holiday pay: should be enforced by HMRC or another state body, with EAS and
GLAA using their existing powers to investigate holiday pay in the interim.
 Intermediaries/umbrella companies: need to develop greater enforcement
but unclear how at the moment, initially EAS should enforce where possible and
work with HMRC.
 Swedish derogation/AWR: should be enforced by EAS or abolished
 Standalone non-record keeping offences: more prosecutions should be
sought by HMRC
25

26. (a) Resources: protect the vulnerable
 The right level and distribution of resources is essential for an effective approach to labour market
enforcement. The Director has a statutory duty to assess and provide strategic direction on how
funding should be allocated
• Threats: e.g. – on-line and app-based recruitment – scale and nature of non-compliance
• Evaluations: impact of bodies work
• GLAA: licence fees; activity of LAPOs
• EAS: resources re. on-line activity etc
• Awareness: importance of third-party complaints
• Deterrent: impact of penalty multiplier (2018 recommendation rejected)
26

27. (b) Helping Employers Get it Right
• Review guidance national and sector level Evaluate Naming and Shaming
• Improve consistency of caseworkers interpretation of NMW
• Review/Consult re:
- record keeping
- deductions for the benefit of workers
- pay averaging
- uniform payments; working time and time recording; salary
sacrifice; pension schemes
• Promote Compliance: awareness and education eg
- all changes to be promoted/advertised
- cf Pension Regulator
27

28. (c) Joint Working
Aim: to tackle the more serious and persistent non-compliance in the labour market
Facilitating a multi-agency approach: exploring ways in which the bodies can work more
closely in partnership, including wide state actors (i.e. local authorities; tax HSE)
The three enforcement bodies and sponsor Departments should work with my Office to
align activity within the DLME defined priority sectors. And consider how best to use
shared powers and improve strategic understanding of threat, risk and harm
Addressing intelligence gaps: using third parties to help bolster information and
intelligence held by the bodies
Directing joint working efforts: identifying any problem issues, sectors, regions etc.
which would benefit from a more joined-up approach
28

29. - Evolution of employment models: what changes have occurred within these
sectors in recent decades and what impact has this had on labour market
enforcement? i.e. nature of employment relationships, outsourcing, franchising,
supply chains
- Recruitment methods: what are the key compliance issues/scams within these
sectors?
- Presence and impact of enforcement bodies: how effectively are the bodies
addressing non-compliance in these sectors?
- Joint working opportunities: how can wider state regulators collaborate to tackle
these issues using a multi-agency approach? (e.g. tax; Insolvency Service, HSE etc.)
d. Sector-based analysis
‘Top 10’ at risk sectors are: car washes; agriculture; care; nail bars; shellfish
gathering; hospitality; construction; poultry and eggs; factories and warehousing
- Car washes, nail bars discussed in 2018 Strategy
- Agriculture, poultry, shellfish 2018-19 via GLAA evaluation
- Hotels, Restaurants & Food services, and Warehousing focus for 2018-19
- This leaves care and construction for later iteration
29

30. Considerations for a Single Enforcement Body (SEB)
a) What are the potential benefits of a SEB?
Key question: what would a SEB need to achieve to improve the system and represent value
for money?
1) Simplification of ‘user journey’ for:
Workers
Employers
Enforcement officers (embedded joint working)
2) Modernisation and closing enforcement gaps
3) More Strategic approach: balance between compliance approach and deterrence
effect
-To best achieve these aims, Govt’ should look to create a new body rather than simply
amalgamating the three bodies under one banner. This is an opportunity to refine approach,
powers, tools etc.
- Opportunity cost: change must go beyond the superficial, as otherwise investment may be
best placed elsewhere (i.e. improved joint working)
30

31. b) Approach, Structure and Remit
 Strategic Approach:
A proactive enforcement model which achieves a deterrence effect, while also identifying and
addressing emerging trends and causes of non-compliance, in collaboration with employers and wider
stakeholders, through the use of effective compliance tools.
 Structure: Merger (3 into 1) vs. creating new legal entity (closing down old bodies).
Preferred option, in the longer-term, is for the creation of a new legal entity. This would:
have advantages for design (forge new approach and identity; set up and refine logistics before
operational launch)
help to avoid continued silo working within SEB
 Remit: What to include in scope for effective state enforcement?
Holiday pay; Working time issues (HSE); Statutory Sick Pay
Acas helpline – for simplification of the customer journey
Defining worker status (i.e. enforcing any new statutory definitions following future Govt’ response on
Taylor)
Modern Slavery: does this sit best within a SEB (i.e. a high-harm unit) or with the NCA/Police?
31

32. c) Powers and tools for a SEB
 Simplification:
Review and join up existing remits and powers (i.e. should employment agencies and gangmasters be
considered together as Labour Providers; should high-level harm such as Modern Slavery sit within a SEB
or Police/NCA)
Consolidate the legislation into one overarching Act (for simplicity and to prevent ongoing siloed working)
Harmonise powers of officers to address non-compliance across labour market (generalists by default,
specialisms in house?)
 Modernisation and closing gaps:
o Address enforcement gaps (i.e. extend the scope of legislation to regulate online/app-based
recruitment; umbrella companies)
o Review inspection powers (i.e. to consider strengthening powers of entry; thresholds of actionable
intelligence)
 Strategic approach:
Bolster deterrence measures (i.e. initiatives such as hot goods/reforming penalty regimes)
Develop compliance tools: softer-touch mechanisms (i.e. awareness raising campaigns, guidance, case
studies)
Non-legislative policy initiatives (i.e. Joint Responsibility; Naming and Shaming)
Discretion in approach taken - consider how best to recognise varying levels of culpability
32

33. d) Joint working and intelligence sharing
Current assessment:
o Marked improvement recently but efforts still not as joined up as they should be
o Value added so far seems to be largely the result of information sharing, rather than joint
operations
o Current lack of evaluation around joint working often makes it difficult to assess its effectiveness
o Each individual body holds less intelligence than one might think
Key question: What would a SEB need to achieve to improve the current system of joint working and
intel sharing?
o Create a central and open pool of intelligence across the SEB’s remit to streamline process
o Establish effective and uninhibited data sharing agreements with key partners such as
HMRC Tax, Insolvency Service, IE, HSE, DWP (essential to overcome restrictions such as
limited case-by-case basis sharing)
o Embed a multi-faceted approach into the process which considers employment law and
obligations as a package
o Use streamlined case-management system which allows officers to take a more holistic
approach (i.e. automatic key word referrals to other internal/external teams)
o A more consistent strategic approach to target enforcement efforts (i.e. serious or emerging
issues; greater sector focus)
33

34. e) Role of the DLME
 Key question: Should the DLME be embedded within the SEB (i.e. Strategy function) or an
independent entity (i.e. accountability function)
• An effective SEB will have an internal strategy team to set enforcement objectives and priorities.
This is something the DLME could play a part in.
• Any Strategy team (DLME?) within the SEB should have a clearly defined mandate and be
afforded the necessary weight in directing the priorities of the SEB.
• DLME’s role and focus could potentially differ depending on how the SEB is implemented (i.e.
transition requirements of a merger as opposed to new body)
• Independent oversight important to publicly hold SEB to account. If DLME were to move ‘in-
house’, this function could be overseen by National Audit Office (NAO).
34

35. #EnforcingTheRules
Wifi
2QAG_Guest
Welcome_Guests September 19@resfoundation
Tough enough?
Enforcing Britain’s labour market rules
Professor David Metcalf Former Director, Labour Market Enforcement, BEIS
Jennifer Beckwith Principal Policy Advisor at the CBI
Tim Butcher Chief Economist at the Low Pay Commission
Nye Cominetti Economic Analyst at the Resolution Foundation
Torsten Bell Chief Executive of the Resolution Foundation