by GK Strategy 3rd August, 2018
3 min read

Enforcement doesn’t get headlines so companies need to step up

Politicians like announcing new policies: it’s headline worthy and can appeal to voters. Announcing new enforcement action isn’t. Nobody won an election by promising more trading standards officers.

Which is why last month’s important Call for Evidence on how to improve employment law enforcement and guidance barely got any attention. If the primary noble goal of governments is to make the world a better place, then they should focus more resource on enforcing existing rules and regulations, not devising new ones. The global labour market is a case in point.

Non-compliance with regulations, rather than their absence, was the main cause of the collapse of the Rana Plaza factory in Bangladesh, which killed over 1,100 people. In more developed countries, modern slavery – whereby typically migrant workers work without pay or the ability to return home – occurs largely because enforcement and monitoring is weak.

Last year’s Taylor Review of Modern Working Practices – and the Government’s responses – have rightly (and mainly) attracted headlines for the recommended changes to employment and tax law.

But one of the biggest impacts of the Review will be new enforcement efforts to help stop the exploitation of the lowest paid. The Director of Labour Market Enforcement, Sir David Metcalf, announced a series of recommendations for the Government (they will respond later this year) in his independent strategy in May, including:

  • higher financial penalties for employers who exploit their workers
  • enforcing holiday pay and making it the law that employers must provide a statement of rights for employees and a payslip for all workers. £4.5 billion is misappropriated from agency workers annually – over half due to unpaid holiday pay.
  • more resources to the Employment Agency Standards Inspectorate to enforce current regulations and expanding their remit to cover umbrella companies and intermediaries
  • making leading brands jointly responsible for non-compliance in their supply chains.
    The last point is crucial for companies. Where governments lack the resource to ensure compliance, companies need to step up.

The Modern Slavery Act – and similar legislation in other countries – has driven many companies to achieve much higher visibility of their supply chains and to understand the risks in suppliers at several steps removed, especially for subcontracted construction and cleaning. This principle of supply chain visibility and understanding and addressing supply chain risks is now well established and many companies report on this in their annual Modern Slavery Statements.

Responsible companies should extend this approach to other labour market issues, such as those identified in Metcalf’s report, and ensure that they know their supply chains. At a time when the Government is undertaking a range of initiatives to improve workers and employers’ understanding of their rights and obligations, responsible companies should do the same, using proposed government changes, such as the IR35 tax reforms for contractors, as a hook to ensure that their workers and their suppliers’ workers are clear about their rights, tax situation and employment status.

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