Immigration Bill

Written evidence submitted by Forum of Private Business (IB 40)

RE: Immigration Bill at Committee Stage

Last month the Government published their response to the Home Office consultation, "strengthening and simplifying the civil penalty scheme to prevent illegal working."

The Forum of Private Business supports many of the proposals in the consultation response and welcomes the Government’s commitment to simplify the civil penalty system for employers. It is however our belief that some of the reforms proposed in the response will disproportionately hurt small businesses and should be rethought.

The response outlines four reforms to the current system that the Forum believes would have a disproportionate impact on small businesses. These are:

1) Increasing the maximum penalty to £20,000;

2) Removal of the partial check as a mitigating factor;

3) Removal of the warning letter for a first breach of the right to work checks;

4) The starting point for the calculation of a first civil penalty.

Moreover, the Forum does not believe that the Government has adequately justified these reforms neither in the consultation document nor in their response, and on one occasion, has ignored the majority opinion of respondents.

As the Immigration Bill progresses through the Committee Stage the Forum of Private Business would ask that you read the attached briefing and consider the impact the four reforms outlined above will have on small and micro businesses.

The Forum of Private Business is a proactive, not-for-profit organisation providing comprehensive support to over 18,000 small and medium-sized businesses. We add value to businesses through a collective voice for them in local, central and European Government, and the provision of tailored solutions that promote business success.

Immigration Bill Briefing

Alongside the publication of the Immigration Bill on 10 October 2013 the Government published their response to their consultation, "Strengthening and simplifying the civil penalty scheme to prevent illegal working."

The Forum of Private Business supports many of the proposals in the consultation response and welcomes the Government’s commitment to simplify the civil penalty scheme for employers. However the response outlines four reforms to the current system that the Forum believes would have a disproportionate impact on small businesses. Moreover, the Forum does not believe that the Government has adequately justified these reforms neither in the consultation document nor in their response, and on one occasion, has ignored the majority opinion of respondents.

The Forum of Private Business is a proactive, not-for-profit organisation providing comprehensive support, protection and reassurance to over 18,000 small and medium-sized businesses. We add value to businesses through a collective voice for them in local, central and European Government, and the provision of tailored solutions that promote business success.

The Forum would like to draw your attention to the four areas detailed below. Our latest research reveals the cost of compliance to small businesses has increased by 8.5% in the last two years reaching a staggering £8.2 billion. [1] Similarly our employment law panel highlights the overwhelming feeling amongst small businesses that Coalition reforms are making the management of employees harder for small businesses. The Forum believes that the reforms outlined below would outweigh the good work being done to simplify the civil penalty system and make employment checks more onerous for smaller businesses.

Question 1 – justification of the maximum penalty increase to £20,000:

The consultation document asked whether £20,000 was the right level to increase the maximum penalty if an employer breaches the right to work checks on more than one occasion.

Whilst we recognise the importance of establishing a robust deterrent for the practice of employing illegal workers the Forum does not believe the substantial increase of the maximum civil penalty to £20,000 has been effectively justified. Furthermore the following comment in the Government’s response:

"A small number of respondents commented that the consultation document did not contain evidence to support the level of the increased penalty, but only a few respondents provided any evidence as to why £20,000 was too high"

was perceived as a poorly constructed argument that does in our opinion excuse the lack of evidence for deciding to increase the maximum penalty to £20,000.

This increase, taken together with the removal of the partial check as a mitigating factor (see question 2), would have a significant impact on small businesses. The financial implications of such a cost would be considerable to a small business whereas a larger business, with a formal HR function, would not suffer in the same way.

Question 2 – removal of the partial check as a mitigating factor:

The Forum welcomes the government’s decision to simplify the checks for employers however we do not believe that the removal of the partial check as a mitigating factor is necessary to reach the policy outcome.

By removing the partial check employers who have made real effort to comply are effectively treated in the same way as those who purposely flouted the law and made no attempt to comply with regulations.

We believe this reform, combined with the increase in the level of both first and second offence penalties, will not only have a disproportionate impact on smaller businesses that lack formal HR departments but also on recent start ups who lack employment experience and would benefit most from retaining the partial check as a mitigating factor.

Question 3 - Should a warning letter no longer be issued for a first time breach of the right to work checks?

From the analysis of responses the Forum recognises this question received a mixed response. However given that the majority (54%) of respondents felt the warning letter should continue to be issued, the decision to remove the option of the warning letter does not reflect the evidence supplied.

Furthermore, the Forum believes that using longevity of practice to justify regulatory change illustrates a fundamental misunderstanding of business. Repeated change to regulation is one of the greatest problems for small businesses, many of which do not have formal HR departments to deal with the constant flow of regulatory change. The Forum of Private Business’ survey of members revealed earlier this year the cost of compliance to small businesses has increased from £16.8bn in 2011 to £18.2bn in 2013. [2] Compliance with employment law is the highest cost to business after tax at £4.7bn. [3]

We recognise that the proposal to retain a ‘warning type’ letter that would apply in some instances, however the requirement that a warning type letter would apply:

"where an employer is able to demonstrate that they have effective recruitment processes in place which are generally compliant with the regulatory duty"

does not appear to marry with the Government’s intention to remove the partial check as a mitigating factor.

Question 5 - What should be the starting point for the calculation of a first civil penalty to act as an effective deterrent to employing illegal workers?

The analysis of the responses indicates that the majority of respondents (54%) opted for the lower option of £10,000. However the Government intends to set the penalty for a first breach £5,000 higher at £15,000 – doubling the starting point for the calculation of a first civil penalty. We fail to understand why £15,000 has been chosen as the starting point given that the majority of respondents opted for £10,000.

                                                                                                                                                                                                                                                                                                           

November 2013