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Enforcement is key to tackling non-compliance in employment

The publication of the Director of Labour Market Enforcement’s Strategy for 22/23 may have been late, but I am hopeful that Margaret Beels is full of good intentions to tackle the issues that are harming the UK’s labour market and economy and I welcome her plans for 23/24.  She is one of many in a long line of people tasked over the years with devising a strategy to help shape a modern working landscape for the better.  Her predecessor, Matthew Taylor who held the role as Interim Director of Labour Market Enforcement had also been the architect of the “Good Work Plan”, another report written to help shape the UK’s working practices for a twenty-first century Britain.  One report after another full of admirable intentions and proposals that have been met with what Taylor once called “deafening silence” by the Government.  Dare we hope that Margaret Beels will be heard by policymakers.

The publication of the Director of Labour Market Enforcement’s Strategy for 22/23 may have been late, but I am hopeful that Margaret Beels is full of good intentions to tackle the issues that are harming the UK’s labour market and economy and I welcome her plans for 23/24.  She is one of many in a long line of people tasked over the years with devising a strategy to help shape a modern working landscape for the better.  Her predecessor, Matthew Taylor who held the role as Interim Director of Labour Market Enforcement had also been the architect of the “Good Work Plan”, another report written to help shape the UK’s working practices for a twenty-first century Britain.  One report after another full of admirable intentions and proposals that have been met with what Taylor once called “deafening silence” by the Government.  Dare we hope that Margaret Beels will be heard by policymakers.

Beels’ interim report mentions four key themes that she wants to address, namely a focus on: Improving the radar picture; Improving focus and effectiveness; Better joined-up thinking; Engagement and support.

In principle, all four themes are to be commended.  Underlying all of them is how government, stakeholders and the whole supply chain can work better together to drive out non-compliance and raise standards.

Key for me is open communication, transparency and enforcement.   The workplace has radically changed over the last 40 years.  The 9-5 workplace has been banished to the annals of history as we have seen a significant rise in the number of people opting to work for themselves as freelancers and contractors.  And, along with the prominence of the flexible workforce and the gig economy has come a proliferation of regulation and legislation as policymakers seek to navigate and catch up with the fast-moving pace of the modern working landscape.   And they are too slow.  The net result has seen a rise in criminal activity, tax avoidance, disguised remuneration schemes, labour exploitation….the list goes on.  And almost as a kneejerk response, consultations and reports have been published and a catalogue of legislation has ensued.  And with Government often ignoring advice and recommendations from stakeholders and industry experts, any legislation that has taken effect continues to fail to address the underlying challenges that we face.

Visible enforcement is vital
Enforcement is expensive but without it, there is little incentive to play by the rules. In fact, I would argue that the lack of enforcement has fuelled the incentive that has allowed non-compliant providers to flourish.  I would urge Beels to ensure that enforcement does not become more diluted as government 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 flout, 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 result.

Acting on data
HMRC holds the appropriate information that would make it easy to pinpoint 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 give a unique insight into the market and the supply chain.  Matching that data should set alarm bells ringing and help HMRC to identify a dubious provider and take the appropriate action.  Whilst HMRC has introduced a naming and shaming list of tax avoiders, that list still suggests that some schemes listed are still operating, all the while duping workers into signing up for them.  In the recent Spring Budget, the Chancellor outlined his intention to consult on introducing and increasing prison sentences for tax avoiders.  This is simply a case of shutting the stable door after the horse has bolted.   Reacting to the crime is simply not good enough when HMRC has the data it needs to address and punish the perpetrators of tax avoidance now.

Working together
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 the architects of dodgy schemes.

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. I hope that Margaret Beels will take steps to work on her 22/23 interim findings and devise a 23/24 strategy that will work well for all those who work hard to raise standards and get rid of those who seek to perpetually break the rules, behave unethically and cause untold damage.   Action is needed, not more platitudes and lip service.

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