Evidenceto the
Low PayCommissions
fourthreview of the
National MinimumWage
October 2002
Evidenceto the
Low PayCommissions
fourthreview of the
National MinimumWage
October 2002
Conclusions
For further information please contact Helga Pile, ResearchDepartment, tel 020 8971 4249
GMB regions report that the introduction of the new NMWrates in October 2001 and 2002 has had a positive effect on the earnings ofsome members in certain low-paying sectors, with little effect on theiremployment or on the competitiveness of their employers.
In discussing the impact of the 2001 and 2002 upratings, weconfine our remarks to the low paying sectors where GMB has substantialmembership.
The industry continues to suffer from massive redundanciesand closures. But the GMB clothing and textile section reports that it has notdealt with a single instance where a company has cited the NMW as acontributory factor. Globalisation and competition from the developing worldare the dominant forces inflicting damage on this sector.
GMB firmly believes that any future for the industry mustlie in innovative, design-led, high quality goods with shorter production runsdelivered through high skill, modern employment practices. To that end, we haveembarked on an initiative to explore public procurement opportunities, startingwith a major conference last November bringing together manufacturers andpublic procurement agencies. Every year 1billion is spent by the public sectoron clothing and textile products and according to the Textile and ClothingStrategy Group, this has often gone overseas. This is partly becauseprocurement has been driven by lowest price, rather than value for moneycriteria. But UK suppliers have also failed to pursue public sector contracts,often blaming what they see as complicated procurement procedures.
Our biggest agreement and indeed the largest agreement inthe industry is with the British Clothing Industry Association which affectsthe pay of 70-80,000 workers. Average earnings for workers under the agreementare running at around 250pw. This leads us to conclude that a 5 an hourminimum wage could easily be sustained and would support our push for a changeof direction in the sector.
Below we examine some of the changes to bargaining andpayment systems which successive rises in the NMW are helping to bring about.
Review date
The agreement has traditionally had a January review date.Recently, October increases in the NMW have been implemented mid-agreement andbecome the minimum basic rate. We are currently in discussions over alignmentwith the NMW process by moving to an October annual review date.
Minimum time rates
Traditionally minimum time rates have been used in theindustry to pay for periods of waiting time or machine breakdown. GMB has longcampaigned against these as inequitable on the grounds that workers sufferdepressed earnings through no fault of their own.
Since the introduction of the NMW, there has been increasingdissatisfaction at the fact that workers can be paid for long periods at hourlyrates well below the NMW (3.63 in the BCIA agreement) as long as pay is madeup to NMW compliance by the end of the weekly reference period. Our negotiatingobjective has been for the abolition of MTR and payment at average earnings.
This year we have achieved a significant breakthrough withthe BCIA in agreeing a phasing out of the MTR in three stages up to October2003 . The NMW has provided a welcome impetus for this as it was becoming too
However, elsewhere in the industry workers are receivingvery low minimum time rates and in unorganised workplaces no pay at all duringperiods of waiting time. Highproductivity during the hours where they can work is unrewarded
The high visibility of the NMW rests on the assumption thatbecause it is an hourly rate, workers expect to receive at least that for eachhour worked. It often comes as a shock for them to find that is not the case.
Move away from piecerates
GMB has always arguedthat piece rates are an antiquated way of enhancing productivity, and weare pleased to report further moves to modern payment systems. Where higherguaranteed earnings have been introduced,it is our experience that any dip in productivity is very short-livedand is followed by much higher levels going forward. Many employers have alsointroduced team working and bonus schemes.
Among the key drivers has been the need for successfulmanufacturers to work to much shorter response times with frequent stylechanges which require higher skills and provide greater variety of work.
In our discussionswith employers about moving away from piecework their main concerns centre onhow to maintain work incentives. A higher NMW will aid the process of moving tomodern payment systems with new forms of incentive which match the future ofthe industry.
What we have said above reflects our experience in thecompanies where we organise. We continue to be aware of a section of theindustry which operates very differently including widespread flouting ofemployment rights and other legislation (see page 19). We therefore considerthat there should continue to be enforcement targeted at non-unionised firmsand those employing workers who do not speak English as a first language.
The increase inthe NMW has not had any measurable impact on employment in the securityindustry but the sector continues to suffer high staff turnover mainly due tolow wages and long working hours.Vacancies at NMW level or just above are widely advertised.
The decisiveinfluences on the sector in 2003-4 will be the impending implementation of theSecurity Industry Act (SIA) 2001 and the provisions in the Police Reform Actwhich allow new Accredited Community Safety Officers (ACSOs) to becontracted out to private security companies.The SIA will require all contracted security workers to obtain a licenseat a cost of
Enforcement needs to be targeted at this sector,particularly at non-unionised firms, firms contracting to facilities managementcompanies, and those employing people who do not speak English as a firstlanguage.
GMB continues to enjoy increasing membership amongindependent sector providers in this area. We have full negotiating rights witha number of providers of varying sizes, and we continue to work in partnershipwith them to improve pay and conditions.
We very much welcomed theLPCs renewed attention in its last reportto the problem of underfunding in the sector and its recommendation thatthe Strategic Commissioning Groups concordat should incorporate commissioningpolicies which reflect the full costs of provision.
Since our last evidence we have made common cause with boththe independent sector and local authorities, in drawing attention tocontinuing problems associated with chronic underfunding of personal socialservices. This has precipitated further transfers of care provision fromcouncils to the independent sector andcontinued to hamper the independents ability to deliver substantialimprovements to pay, training and working conditions.
Budget 2002 saw increases of 6% a year in personal socialservices pledged until 2005/6. While this provision is more generous than inprevious years, GMB is sceptical that it will be enough to address core fundingissues. The gap between council spending on social services and their fundingallocation is running at 200m a year, and Laing & Buisson, the care sectoranalysts have calculated that the care home sector is under-funded by 1.04billion.
The Governments Cash for Change package, aimed at alleviatingthe bed-blocking crisis, has provided some short-term relief enabling somecouncils to increase fees to independent sector providers, some by as much as50 a week. But increases of this size have mainly affected hotspots wherethere are severe capacity problems and market instability. Elsewhere there hasbeen movement as a result of the general shortage of care beds with councilsincreasing fees by an average of 10%, but with wide variations. Laing &Buisson found that despite these increases, fees are 75-85 a week per residenttoo low.
Over the last year, we are confident that home closures havenot translated into net job losses. Staff shortages in the sector have meantthat staff have easily found alternative employment. We have also been involvedin a number of acquisitions where companies with which we negotiate haveacquired homes, and staff have transferred. On most occasions we have been ableto secure them immediate improvements in terms and conditions.
The introduction of the National Care Standards is the maininfluence on employment and competitiveness in this sector, rather than therises in the NMW. The standards on staffing require that staffing levelsexisting at 31 March 2002 may not be reduced in the 12 months to March 2003. NationalCare Standards Commission (NCSC) inspectors will then assess residents needs,and may require providers to employ additional staff. New applications forregistration must meet standards set by the NCSCs staffing model.
Therefore a higher minimum wage in 2003 will not translateinto substantial job losses. Depending on the level it could be a factor infurther restructuring of the industry, but the rolling implementation of theCare Standards is likely to be the key driver.
Another component ofthe Care Standards is the requirement that employers must ensure that 50% oftheir staff are trained to at least NVQ II level by 2005. Staff will also haveto be individually registered and abide by codes of conduct and practice. Webelieve that a 5 NMW can be sustained, with the proviso that it is takenaccount of in fees to providers. This is because it will provide an essentialplatform for the implementation of these important measures by reducing severestaff turnover and recruitment difficulties. As long as staff continue to leavefor better paying, more flexible, family-friendly jobs with employers such assupermarkets, employers will be reluctant to make the necessary investment intraining. Furthermore, with local government staff accelerating clear of the 5mark (see page 11), many providers are being forced to keep pace in order torecruit.
The Commission should be aware that GMB has been indiscussions with the Home Office about how its new migrant work permit schememight be applied in the sector. Employers representatives have pointed out thata short-term/casual migration route would not be suitable in the contest of theneed to invest in skills and qualifications, requirements for staffregistration, employability checks etc. GMB is also concerned that any proposalto lower the existing work permit scheme to cover posts at NVQ level II shouldnot be seen as a way of circumventing the need to deal with the problem of lowpay in the sector.
Effect of the NMW onpay structures
In the companies where we negotiate, the 2001 uprating ofthe NMW delivered welcome pay increases to about 75% of our members. In manycompanies with April pay review dates this was supplemented by a further 10p anhour and this is likely to be the case in April 2003. GMBs negotiating stanceis that all staff should be paid above NMW levels, and most companies areresponsive to this. Being seen as a NMW-payer harms their image and theirability to recruit and retain.
The uprating of the NMW does have a knock-on effect ondifferentials because they are tight and employers must reward higherqualifications and greater responsibility. Staff in the social care sector havehistorically been undervalued, yet they remain highly committed to the workthey do. However, when pay structures flattened in the early days of the NMW,some staff refused to take on more complex and responsible jobs, andrecruitment problems increased. This prompted employers to re-introduce gradedifferentials.
With some of our companies we are discussing the possibilityof two-year deals in order to restructure and link pay to NVQs. And with manywe have made good progress on introducing pension and sick pay schemes for thefirst time.
GMB membership in the childcare sector is growing. We havetraditionally had a large membership in local authority and voluntary sectordaycare, and in school settings, but as more daycare shifts to the privatesector we are making rapid inroads here too.
Pay rates for local authority-employed childcare staff aresignificantly higher than those in the private sector and well above the NMW.Pay in the private sector is notoriously low and this has contributed towidespread shortages of qualified staff, rapid turnover and restrictions on thepotential for growth in the number of outlets. This seriously undermines theGovernments agenda for high quality, affordable childcare which removesbarriers to labour market participation for parents.
The NMW increases have had no impact on employment in thissector. Employment levels continue to grow in response to supply- anddemand-side measures by Government in support of its national childcarestrategy, although not quickly enough to fill staff shortages.
The Governments commitment to fund free early educationplaces for all 3 year olds and establish an extra 900,000 childcare places by2004 means expansion in the sector is set to continue. Free early educationplaces and expansion of after-school play facilities mean private sectorproviders face greater competition from higher-paying local authority providersand schools for qualified staff.
An IDS survey of predominantly private sector nurseriesshowed that under half of respondents had to raise pay rates to comply with the October 2001 NMW uprating. Pay ratesfor qualified nursery nurses typically range from 4.43
The sector must meet new national quality standards fordaycare and education set by OFSTED and a Government drive to ensure that allstaff achieve nationally recognised qualifications. There is universalagreement among providers, Government, parents and staff that low pay and poorprospects are a serious barrier to these objectives.
It is in this contextthat we argue that a further increase in the NMW to around 5 would benefitstaff the vast majority of whom are women employers and the children theylook after. It would address the serious recruitment and retention problem inthe sector by underpinning the current market rate for NNEB staff and nudgingit upwards to maintain differentials with lesser qualified staff. This wouldnarrow the gap in pay rates between private and local authority staff. A higherdevelopment rate could be used to ease the first stage of the transitionbetween NVQII and NNEB equivalent qualifications.
The push for expansion in the sector discussed above wouldensure that employment levels continue to grow alongside a higher NMW. However,it is likely that there would be an increase in costs to the consumer. GMB hasserious concerns about the affordability of high quality childcare, but we donot believe low wages are the answer for jobs which require such a high levelof skills and responsibility and which have such a huge social benefit.
We believe some of the higher costs will be absorbed by thechildcare tax credit and by free early education places. We are also confidentthat provision for longer and better paid maternity leave and the right torequest flexible working under the Employment Act 2002 will allow some parentsto manage work and childcare more flexibly and affordably.
We will continue to lobby Government for further measures toaddress the childcare affordability gap suffered by British parents.
The 2001/02 NMW upratings have caused no particular problemsfor us in the hotels and catering sector, and a large proportion of our membersbenefited from them. Many of the larger hotels have brought their lowest basicrates up to above NMW levels. Our regions report generally smoothimplementation, with just one or two fears among members in smaller independenthotels that the rises might precipitatecuts to hours and increased workloads. We have yet to see whether these fearswill materialise, but we will of course monitor these workplaces closely.
The major impacts on jobs and competitiveness, particularlyin hotels/tourism have of course been foot and mouth and September 11th.Economic uncertainties are the dominant factor governing the volume of demandfrom the business sector, where most of our members are employed. Staffturnover continues to run at very high levels and training provision isgenerally poor. Skills shortages are particularly severe below NVQ III level.The hotel sector and parts of catering are characterised by long and unsocialhours working, which tends to exclude groups such as lone parents or otherswith family commitments. As in thesocial care sector we have been involved in discussions with the Home Officearound a new migrant work permitscheme. While temporary permits for unskilled seasonal workers would appear totie in with the operational requirements of the sector, we are concerned thatthis might entrench poor, short-termist working practices and distract attentionfrom the need to improve pay and skills levels in the industry.
We have found very little use of the development rate, andwe have some concerns about the quality of training provided where it is used,as this is often very little more than a basic induction. We deal with theissue of youth rates in this sector on pages 12-13.
Overall the sector struggles with a poor image as a low pay,low skill, low status employer. There are substantial numbers of seasonal andagency workers in the industry, and employers have reported concerns to usabout the unregulated nature of some agencies which they believe allows sharppractices. In the light of this poor image, some employers have found the NMW ahelpful benchmark by staying just above it they can differentiate themselvesas non-NMW-payers.
We believe a substantial increase in NMW can be borne by thesector. This would improve recruitment and retention, and investment intraining and skills. A higher NMW will generate increased spending power in thewider economy, a large proportion of which will be channelled into the leisuresector. Hotels, caterers and retailers are using more sophisticated methods ofmatching staffing to demand patterns such as annualised hours, variable hourscontracts and rostering matched to EPOS data. Working smarter tends to besupported by higher wage levels and a greater attention to working conditionssuch as family-friendly work practices.
Effect of the NMW onpay structures
Some hotel and catering companies have implemented the newNMW rates by removing probationary rates. For example, Marriott hotels removedits 3.80 induction rate previously paid for the first 90 days, and Roadchefremoved its probationary rate which used to be paid for the first 4 weeks.
There has been some narrowing of differentials as manyhotels sustained the NMW-related increase at the bottom of the structurewithout fully restoring differentials further up. But, more significant thanNMW adjustments has been the development of broadbanded pay structureslinking in with a greater focus on competency and personal performance.
The hotel and catering sector should be targeted forenforcement action, particularly in small, non-unionised companies.
We were disappointed that the LPC decided to increase theaccommodation deductor and by such a large amount. We always welcomed therecognition that it was not intended to reflect the commercial value ofaccommodation provided. There is a balance of advantage which includes thesubstantial benefit to the employer of having people on the premises or nearbyto respond to events, work longer hours later without transport problems etc. Furthermore,in our experience the quality of accommodation varies considerably, but issometimes very poor.
The use of deductions from pay for accommodation hasgenerally declined. Our agreement with Jarvis Hotels is an exception.Negotiations on the deductor now 57 pence an hour are part of the annualpay review.
Our 2001 agreement with the Committee of Registered ClubsAssociation (CORCA) which sets minimum rates for stewards, bar and cateringstaff in 6,000 clubs across the UK also allows an accommodation fee to bededucted the rate is currently 2 a day. But any deduction must not take anemployee below the NMW in other words all employees over 18 earn at least4.10 an hour regardless of whether accommodation is provided. This recognisesthe principle which we believe is widespread, that in some jobs the requirementor desirability of living in is seen more as a benefit to the employer, or anintegral part of the working pattern, than as an employee benefit.
We believe that, certainly for the next few years, theoffset should be frozen at the present level while the NMW is raised.
B.
In 1999 GMB set a negotiating target of a 5 an hour minimumin all our collective agreements and by 2002 we have achieved this in a largenumber of GMB organised workplaces.
One of the latest examples in the private sector wasnegotiated by our Midlands and East Coast region at McCain Foods covering threesites. GMB negotiators set out in their 2002 pay claim to break the 5 barrier.This was achieved when the company agreed to raise the
Summer 2002 also saw a significant breakthrough in thepublic sector. After local government industrial action where low-paid womenwere the dominant force, we achieved a 5 an hour minimum from April 2002. Thisimmediately benefits 280,000 largely part-time women workers. By April 2003 thelowest rate will have been phased up to 5.33 an hour. This will set abenchmark for other public services such as the NHS currently in the midst ofAgenda for change talks on significant restructuring of pay systems. It isalso increasingly likely that any contractors delivering public servicecontracts will no longer be able to undercut these pay rates as the Governmentmoves towards tougher contract compliance measures .
Going forward into 2003 GMBs negotiating target will be fora 6 an hour minimum, a level which we have already achieved in a substantialnumber of workplaces.
As unionised workplaces move on, the NMW must act as asafety net ensuring that others are not left behind. In order to consolidatethe LPCs aspiration for an increase bold enough to make a significant difference to low paidworkers, a substantial increase in October 2003 is required. The October 2002second stage NMW rise was modest at 2.4%, with whole economy earnings currentlyrunning at 4%, forecast to hit 4.5% by the end of 2002 and 4.8% by summer 2003.
We believe the 5 minimum achieved in 2001/2002 forunionised agreements should form the NMW baseline for 2003. We have set out inthe sections above our views on how low-paying sectors could sustain thiswithout significant detrimental impact on employment or competitiveness.
C.
workers
In our dealings with the LPC, GMB has always argued againstage-related rates in the NMW.
We welcome the LPCs recognition in its last report that theyouth rate lacks equity and that people should receive the same pay for thesame work. We also welcome the renewed commitment in the longer term to maketraining the sole focus of the development rate and cease the linkage to age.But as a result of the last review, the divide between the youth and adult ratehas actually widened: the youth rate rose by 12.5% between 2000 and 2002 whilethe adult rate rose by 13.5%. We believe that the time has come for somedecisive action on this particularly as the Government has begun the detailedconsultation process on how to implementage discrimination legislation, prompted by the EC Employment Directive.
We share the LPCs disappointment that the Government againdeclined to bring 21-year olds within the scope of the main NMW.
18-21 year olds
Modern employment practice is for adult rates to be paidfrom no later than the age of 18.Age-related scales are a throw-back to industry-wide collectiveagreements based on age-related apprenticeships for skilled workers. They beganto decline in the early 1970s as apprenticeships shortened, then began todisappear, and young people stayed longer in education. The spread since themid-90s of new systems for pay and reward such as competency and broadbandingis compounding this trend.
In the few cases we have come across where age rates havepersisted, our officers report that they were able to negotiate them away withrelative ease using a combination of moral arguments and evidence ofrecruitment difficulties. These weredeployed, for example, in 2001 negotiations at Kingstown Furniture in Hull,where GMB Midland and East Coast region succeeded in establishing an adult ratefor all employees of 18 or over.
In the clothing and textiles sector we have largelysucceeded in applying adult rates from 18. The situation in which many 18-yearolds were better performers than older workers yet paid less, was provingunsustainable. Our clothing and textiles negotiators also report that age ratesfor 16 & 17 year olds are on their way out.
In hotels and catering, age rates are also in decline. Thisis a young industry where many workers are first line managers or supervisorsbefore they reach 22. Most of our agreements have adult rates from 18 oryounger. IDS research found that a third of hotels paid adult rates from 16,while another half paid them from 18.
A stark example of the inequity that can arise from theyouth rate was reported to us by GMB Yorkshire Region involving membersemployed by a care sector company. The company was employing workers under theage of 22 as senior care assistants and yet paying them 3.50 an hour, whileolder colleagues were receiving 4.10 as care assistants with fewerresponsibilities. This is an unusual case most of our employers in the caresector have scrapped youth rates to alleviate recruitment difficulties but itdoes illustrate the pitfalls of allowing age to be the sole determinant of pay.
With the huge expansion that has occurred in young peoplesparticipation in higher education, the case for age rates has declined evenfurther. Those who are not participating in HE, tend to be participating in thelabour market on an equal basis to their older colleagues doing the same work.Where genuine training is provided this can be catered for via the developmentrate, or the apprenticeship exemption.
We are still unable to report any significant use of thedevelopment rate. We strongly believe that abolition of the youth rate wouldgive it a higher profile and could encourage more employers to invest in propertraining.
16 & 17 year olds
We continue to believe that 16 and 17-year-olds should alsobe entitled to a statutory national minimum wage, again on the grounds ofequity and to halt the exploitation of this vulnerable age group.
We understand the LPCs concerns about doing anything whichmight discourage young people from remaining in full time education andtraining, but there are some 660,000 16-17 year olds in work and 2/3 of themcombine this with education.
We welcome theGovernments decision to roll out its Educational Maintenance Allowance scheme,following successful pilots, and hope that this will reduce the numbers ofyoung people who are forced to work long hours to support themselves, orcontribute to family finances, while they are in full-time education.
However, this scheme is means-tested and the problem of longhours at work impacting on study goes much wider. Furthermore, where 16 &17 year olds are working alongside older workers doing the same work as isoverwhelmingly the case in sectors such as retail there is no justificationfor allowing them to be paid at rates as low as 2 an hour.
Record participation in higher education shows young peopleare more aware than ever of the necessity of getting higher levelqualifications therefore the prospect of a minimum wage job, even at theadult rate, is not likely to tempt many out of education or training. However,there will always be some 16 & 17 year olds who do wish to enter the labourmarket full-time at this age. Those who choose to combine work and study standto gain valuable experience to sit alongside their academic or vocationaltraining. Both groups would benefit from much greater access to work-basedtraining. And both need protection from exploitation. Thats why we believethey should be covered by the NMW, with employers encouraged to providetraining linked to the development rate.
Low pay is still disproportionately a womens issue as wasillustrated in our local government settlement this year. The social careworkforce is 85% female and the childcare workforce 98%, and the stubbornpersistence of low pay is linked to historical undervaluing of what is seen aswomens work. We also see a strong correlation between low pay and part-timework. We fear that the part-time workers regulations have not had much impactbecause job segregation makes it difficult for part-time workers to meet the requirementto find a full-time comparator in the same establishment doing the same work.
At the time of the Kingsmill review we lobbied Governmentfor equal pay audits to become a compulsory requirement for employers. Whilethis was unsuccessful, we welcome the initiative the Government is taking inthis area and we are already have a number of audits underway working inpartnership to identify and address inequalities.
A simple starting point in some workplaces which we havepursued for some years now is to agree to roll up the lowest female dominatedgrade to the level of the lowest male dominated grade. However, the gender paygap persists in non-unionised workplaces and in workplaces which employ all, oralmost all, women which means there are no comparators for equal pay purposes.
We note that the Governments annual report
A substantial increase in the NMW would raise womens payand benefit those women workers who suffer from double disadvantage as a resultof race and disability discrimination (see below). It would also feed into Government work-life balance policies,and its efforts to enable greater labour market participation for lone and veryyoung parents. In our experience much of the work-life balance debate hasappeared to focus on managerial and executive level jobs, whereas those whoface the most acute pressures are women whose low pay leaves them with very fewchoices. Many of our members have to patch together multiple short-hours, lowpaid jobs to fit around their other commitments, and their limited childcareoptions. An increase to a 5 NMW, coupled with the measures to assist workingparents discussed on page 9 would start to give these women more choices abouthow and when they work.
There is a clear link between ethnicity and low pay in thecase of some ethnic groups. The latest analysis by the TUC shows that, forexample, black and Asian male workers earn on average 97 per week less thantheir white counterparts
Precise information about earnings and ethnicity isdifficult to obtain as it relies on Labour Force Survey data, rather than themore comprehensive New Earnings data. We believe that the NMW is effectivein tackling the pay gap for thoseethnic groups which are most disadvantaged in the labour market, and asubstantial increase would accelerate this. But there are issues aroundawareness and enforcement particularly in workplaces where English is not afirst language (see page 19).
GMB has a large membership of disabled workers and supportedemployment schemes play a very important role in ensuring their livelihoods andlabour market participation. We welcomed what the LPC had to say about the needfor Government to continue to make additional funding to facilitate NMWcompliance available for supported employment.
GMB has been working continuously, since the Governmentended the Priority Suppliers Scheme in 1994, for changes to EU legislation toallow public procurement to be used for social objectives, such as protectingsupported employment schemes from unfair competition.
We are pleased to report that we have been successful in getting revisedDirectives agreed and we expect their passage to be complete at European levelby the end of 2002. To that end we have recently been discussing UKimplementation with the Government, particularly how this will be applied inthe context of Best Value.
GMB wants to see public contracting authorities at all levels able to activelypromote the award of contracts to supported employment factories, without fearof breaching EU rules, or coming into conflict with the Best Value regime.
We have had no particular problems with the new NMW rates asapplied to our disabled members. Remploy employs many thousands of disabledworkers of varying levels of disability, and the lowest rate under thatagreement stands at 4.33, which is anintroductory rate going up to 4.96 on the lowest substantive grade.
While a substantial rise in the NMW would not have mucheffect on pay in Remploy, it would help others in more vulnerable positions.
Homeworkers remain vulnerable in the labour market becausethey are isolated, have little bargaining power, and are difficult for tradeunions to reach.
We have ongoing concerns about the operation of the NMW forthis group in relation to regulation 25 fair employment estimates and the four-fifths rule. We are stillreceiving information that some employers are interpreting the requirement fora comparison with an average worker in the same working circumstances as a comparison with factory workers doingsimilar work. It also appears that far from being agreements, many homeworkersare being co-erced into accepting employers estimates, however stringent.
Regulation 25 is clear that an agreement cannot be fair ifit does not meet the four-fifths test, but that test is simply a pre-requisite the question of what is fair is left open both here and in the guidance.GMB believes that employers are interpreting this as the sole criterion, andsqueezing it to suit their purposes.
We believe there are four areas which need to be addressedthrough changes to regulations and/or guidance, and enforcement actions:
GMB is also exploring the possibility of a code of goodpractice on the employment of homeworkers. But this will of course not removethe need for continued efforts to target this group for publicity andenforcement.
Generally underpayment ismore a problem for individuals than for groups which makes it easier foremployers to turn to deception, detriment or dismissal when the NMW is raised.We are still concerned that Inland Revenue enforcement actions do not impact onNMW-associated detriment and dismissal which leaves many workers reluctant toraise complaints for fear of reprisal.
Our concern is heightenedby the dispute resolution measures in prospect under the Employment Act 2002.We have yet to see the detail of these but detriment suffered as a result ofraising an issue relating to the NMW regulations is in the category ofcomplaints that cannot be presented to a tribunal until a worker has initiatedthe first part of the statutory grievance procedure with their employer.Workers who are being underpaid are among the most vulnerable in the labourmarket, and the prospect of having to go through an internal grievanceprocedure before they can go to tribunal is likely to deter even more fromraising the issue. It also adds a new layer of complexity including time limitswith which the worker must comply, and seek to enforce if the employer fails tocomply
We urge the LPC to recommend to Government that allNMW-related complaints should not be subject to S.32 of the Act. We alsocontinue to recommend that the Inland Revenue should do more both throughpublicity, and in its dealings with employers to get the message across thatdetriment and dismissal are unlawful and will be challenged.
GMB has concerns about the vulnerability to underpayment ofmigrant workers, asylum seekers and refugees. Aside from workers from EuropeanEconomic Area states, there are a variety of conditions and restrictionsgoverning rights to work for different categories of migrant, overseas studentand asylum-seeker or refugee. These are matched by a variety of types ofdocumentation. Many migrant workers are admitted to the UK on condition thatthey do not have recourse to public funds. This means they cannot claim in-workbenefits such as Working Families TaxCredit, which top up the incomes of their low-paid colleagues. The situation isoften bewildering for the workers involved, poorly understood by employers and,worst case, exploited by them, or by unscrupulous agencies who target theseworkers.
GMB Midland and East Coast region worked with the NMWenforcement team on a case involving a worker from Portugal who was employed byan agency in his home country to work as a butcher at a food factory.
GMB would like to draw the LPCs attention to an area whichmay be a causal factor in underpayment in some sectors. This is the facilitiesmanagement contracting practices of some large companies.
We suggest that the Inland Revenue ought to target some ofits outreach work to cover the contracting practices of companies who pay theirown workers way above NMW levels, butnevertheless are contributing to underpayment. This should be a key part ofdebates around increasing corporate responsibility. We believe there may bescope for this to be addressed in a facilities management code of practice orguidance which could be promoted by the DTI, industry associations and tradeunions.
Awareness that there is aheadline NMW rate is generally high, although upratings are not always asreadily picked up. Where there are language barriers and isolated workers,awareness of the headline rate drops (see above). Awareness of specificunderpayment can be more difficult especially for workers who have variableelements of pay, or who work variable hours.
We welcome the publicity activities associated with both the2001 and 2002 upratings which we believe have been successful in reaching farand wide. We also welcome the development of the TIGER website and wouldsupport further efforts to give it wider publicity, including ensuring that awide variety of organisations have links to it on their sites. Publicity shouldcontinue to highlight successful enforcement actions as well as the headline rates,and we believe there is much value in targeting particular audiences such aslocal, and ethnic minority radio stations, youth magazines and press andradio aimed at disabled workers.
We have not had any particular problems reported to us inthe way that the NMW is interacting with the benefits system. Members who claimin-work benefits have not necessarily felt much gain in overall income form NMWincreases because of deduction rates, but it is always preferable to reducereliance on benefits through a higher wage. We will monitor the situation as wechange over to the new tax credit system. One concern raised with us is thatthe new system will base calculations on the previous years earnings which maymake referrals to the NMW enforcement team dry up.
GMB has pursued an unmeasured time case
We lost in the EAT but received leave to appeal in the Courtof Appeal and are currently taking advice. Our case was that the applicant wasa time worker, and that even if she fell into the unmeasured work category theemployer could not show that there was a realistic daily average agreementwith our member. The EAT failed to consider whether the daily average was arealistic average.
As with our concerns about the requirement to demonstratethe fairness of fair estimate agreements, there appears to be a problem inenforcing the requirement for a realistic average in the absence ofdefinitions and in the context where agreements are made between parties (theemployer and an individual worker) with unequal bargaining power. The guidancesimply says that the employer mustensure the average is realistic. We were also concerned that the EAT noted,although was not directed by, the fact that it considered paying the NMW forthe hours our member says she worked would price this kind of care out of themarket. Care cannot be based on denying low-paid workers their rights.
We welcome the LPCs decision not to recommend a change tothe treatment of tips. We have had some evidence that where basic pay is madeup to NMW levels via tips distributed via payroll , some workers have receivedtheir sub-NMW basic rate only during periods of paid holiday. Members also feelthat pool systems paid through payroll are unfair where they are spreadthroughout the year in order to subsidise sub-NMW pay rates during quiet times.
F.
The early announcement ofthe LPCs recommendations for 2001 and 2002 was welcomed both by GMB and by theemployers we deal with. October is nowestablished itself in many minds as the NMW review date, and in order tosynchronise with it, many low-paying employers and joint industrial councilsemployers have moved their annual pay reviews.For example, our agreement with the registered clubs body CORCA now hasan October pay review date , and we are in discussions with the BritishClothing Industry Association about a similar move.
We therefore welcome thefact that the LPC recommended future reviews should be complete by February forimplementation in October. Greater certainty and ability to plan are beneficialto all parties, including those of our employers who have a policy of implementingNMW-related rises early and with a differential to keep ahead of thestatutory floor.
We believe it isimportant that the NMW should be uprated every year in order to maintain itsattachment to earnings movements in the wider economy, and that this should beby review rather than an automatic mechanism for the time being. The LPCsrecommendation for biennial reviews is helpful in establishing greatercertainty, but we believe that in the medium term it should move to a formalannual review process. This would fitwith the continued predominance of annual pay reviews in industry and wouldallow sensitivity to economic changes. As the NMW beds down and builds to alevel which really bites on low pay, we believe the workload involved in anannual review would become manageable.