Margaret Beels, the Director of Labour Market Enforcement has recently called for evidence to help inform the Labour Market Enforcement Strategy for 2023/24.  The main topics she is focusing on include the evidence of the scale and nature of the labour non-compliance threat, including whether it varies across the UK, along with the challenges in terms of compliance and enforcement for the 3 enforcement bodies under the labour market enforcement remit of HMRC National Minimum Wage/National Living Wage (NMW/NLW), Gangmasters and Labour Abuse Authority (GLAA) and Employment Agency Standards (EAS).  Crawford Temple is CEO of Professional Passport, the UK’s largest independent assessor of payment intermediary compliance and he shares his views on what Ms Beels should focus on…….

We have seen a proliferation of regulation and legislation over the last forty years as policymakers seek to catch up with the fast-moving pace of the modern working landscape.  It means that a catalogue of legislation has resulted in a series of unintended consequences that have not served the contracting sector and the whole supply chain well.  Government has ignored advice from experts so that legislation continues to fail to address the underlying issues and challenges that our industry faces, namely non-compliance, transparency and enforcement.

Just recently we have heard an increasing number of calls to regulate the industry in response to widely reported non-compliance and malpractice.  It is of course vitally important for the reputation of the entire sector that we call out any bad practice, but I don’t believe that regulation is the answer.  Proactive enforcement is but it is simply not happening.  As a result, non-compliance and illegal practices are being allowed to thrive which is costing the Treasury some £1bn per year in lost revenue.

As compliance moves up the agenda, it has never been more important that everyone in the supply chain works together to develop good working practices. We know that there are cases of bad practice amongst a minority of businesses which have grabbed the headlines but there are also a large number of highly compliant organisations working ethically and correctly to provide a high-level quality service for clients and contractors.

Visible Enforcement
Whilst enforcement is expensive, without it there is little incentive to play by the rules and arguably the lack of enforcement to date has fuelled the incentive that has allowed non-compliant providers to flourish.  And, with the introduction of a single enforcement body comprising the Gang Masters Labour Abuse Authority, the Employment Agency Standards Inspectorate and HMRC Ms Beels must ensure that enforcement does not become more diluted as the departments work out how best to navigate the issues together. The current enforcement strategies do not work. They serve to incentivise non-compliant offerings and fail to support the compliant parts of the sector. The lack of visible enforcement, the lengthy delays in taking any action, and targeting the workers for recovery all serve the interests of those seeking to circumvent, or disregard, the rules.

Coupled with a series of ongoing rule changes such as the Off-Payroll legislation that extended its reach in April 2021 to the private sector, the incentives for abuse have become even greater and the issues that have made the headlines recently around holiday pay, skimming, mini umbrellas, and disguised remuneration schemes are the end result.

Act on existing data
HMRC holds the appropriate information that would make it easy to clearly identify non-compliant schemes and close them down faster.  Real Time Information (RTI) reporting that was introduced in 2013 along with the 2014 Intermediary Reporting provides HMRC with two sets of data that gives a unique insight into the market and the supply chain.  Matching that data should raise an alert and help HMRC to identify a dubious provider and take the appropriate and swift action.

Collegiate approach
We need joined up thinking and all the appropriate government departments should seek to develop closer relationships with compliance bodies and the wider sector bodies.

Compliance bodies in particular set their own compliance standards and developing a more structured approach would allow the departments to inform and, as importantly, be informed on pressure points in the market.

The nature of the compliance accreditations allows faster reactions to market distortions and would help limit and restrict market access to those who apply these ‘have I got a good idea for you’ arrangements.

Including the wider sector bodies provides the broadest reach for messaging across the sector and provides a benefit to policymakers to design and then implement an agreed compliance standard that works for all.  Transparency is the strongest weapon against non-compliance.  A collegiate approach is the best course of action and I urge Margaret Beels to listen to the evidence and take steps to devise a strategy that will work well for all those throughout the supply chain who work hard to raise standards and get rid of those who seek to perpetually break the rules, behave unethically and do untold harm.

Crawford Temple is the CEO of Professional Passport, the UK’s largest independent assessor of payment intermediary compliance.  In 2021, he published a report entitled The Good, The Bad and The Ugly – Addressing the issues of non-compliance in the umbrella and payment intermediary sector  which outlines a number of short-term and longer-terms plans that must be put in place to help build a more open, compliant and orderly marketplace without the need for more legislation and regulation.