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Lord Clinton-Davis moved Amendment No. 2:
The noble Lord said: My Lords, I shall speak also to Amendments Nos. 3 and 5. The amendments address a specific troublesome technicality which has only just become apparent. I have written to the noble Baroness, Lady Miller, and the noble Lord, Lord Razzall, on this matter.
The general effect of the three amendments is to extend slightly the flexibility of the power to calculate the rate. We want to be confident that the clause provides us with the power we need to deliver through the regulations what the Low Pay Commission has recommended regarding the treatment of homeworkers who are paid by the piece.
Let me remind the House how Clause 2 operates. Clause 2 deals with the determination of the hourly rate of remuneration. This clause was drafted flexibly to enable us to reflect, as far as could be envisaged, whatever the Low Pay Commission might recommend in its report regarding the calculation of the hourly rate for national minimum wage purposes.
It is essentially a technical clause but one which is important to the flexible operation of the Bill. It provides for a wide range of possible permutations in determining what elements of pay can be included or excluded; for example, overtime, bonuses, benefits, holiday pay and so forth. It enables a wide range of working situations to be taken into account, including piece-work, payment of standard wages at a regular rate, and payments on commission or at different rates over different periods of time.
Since receiving the report, we have been considering the practicalities of putting into effect the Low Pay Commission's recommendations. In particular we have been looking at those workers who work away from the office and are paid by output rather than time worked. For this particular case, it has become apparent that the clause may not be flexible enough. In particular, the LPC recommendations suggest that piece-workers should be entitled to the hourly minimum wage of every hour worked regardless of the piece rate, and that employers of homeworkers should be able to demonstrate that piece rates have been evaluated to confirm compliance.
The fairest and least bureaucratic way to do that is to ensure that there can be agreement between worker and employer over the maximum hours to be worked and the output expected. We need to ensure we have the powers to do that under Clause 2. We are therefore proposing three amendments to the clause, the third of which is purely consequential.
Amendment No. 2 addresses subsection (3), which relates to how working time is to be treated for minimum wage purposes. The amendment ensures that the regulations can prescribe those times for which a
Amendment No. 3 addresses the same subsection and makes explicit the power to prescribe that an agreement may be reached regarding the maximum or minimum time that a person shall be treated as working. As with Amendment No. 2, this change is necessary in the particular case of the piece-worker working at home with no present limit on the hours to be worked.
In the interests of legal certainty, it ensures that we have sufficient flexibility to implement the Low Pay Commission's recommendations regarding piece-workers and homeworkers through the regulations. I beg to move.
On Question, amendment agreed to.
Lord Clinton-Davis moved Amendment No. 3:
On Question, amendment agreed to.
Baroness Miller of Hendon moved Amendment No. 4:
The noble Baroness said: My Lords, I regret having to move this amendment at this stage of the Bill, but it arises from a recommendation contained in the report of the Low Pay Commission. As your Lordships are aware, although the report was in the hands of some trade union leaders several days before its official publication, it was not available to Parliament until two of the three sessions of the Committee stage had taken place. At the Committee stage, the matter of yet another leak of the document was raised and subsequently inquiries were made by my noble and learned friend Lord Fraser of Carmyllie. I regret to say that he has received a far from satisfactory reply from the Minister.
However, having had the opportunity to read the report, I am concerned by the recommendation of the Low Pay Commission as regards benefits in kind. The recommendation is contained in paragraphs 4.27 and 4.30, commencing on page 59. It provides that with the exception of accommodation, benefits in kind shall be
That is a formidable list and a costly one to employers. The Low Pay Commission contends that:
apart from retail discounts. I certainly believe that to be true. But we are concerned about those low-paid employees who receive benefits in kind from their employers as part of their remuneration package. Although it may cost the employer a considerable sum to provide those valuable benefits, the Low Pay Commission proposes that all but one of them--the cost of accommodation--should be ignored. It also goes on to put an arbitrary and totally inadequate figure on the maximum to be allowed as the cost of that accommodation.
I shall return to that point, but, first, I wish to tell your Lordships about the industry which, as I mentioned when I spoke to Amendment No. 1, is in danger of total destruction if the provisions of the Bill are not modified, in particular the provisions concerning benefits in kind. This industry employs more people than there are share fishermen, whom the Government have made a special case under Clause 43. Yet I am not pleading for a special exemption for this industry alone. There are other types of businesses in similar circumstances which are affected in the same way by the provisions concerning the valuation of board and lodging provided by the employer. The commission recommends that nothing should be allowed for the value of board and a derisory £20 a week for the lodging. Even that is to be phased out in the longer term.
In order to explain the problem in relation to various industries, perhaps I may first tell your Lordships about the activity holiday trade. It runs what are commonly called "summer schools". In the United States of America they are called "countrywide summer schools". In this country, there are 30 activity holiday centres affiliated to one trade federation. There may be other similar unaffiliated concerns in the country, but, between them, those 30 businesses employ some 3,000 staff at any one time. They provide activity holidays for some 200,000 children a year, most of them sent on package visits by their schools. The children have to pay their own fees, or the schools raise the money by appeals, jumble sales and similar means for those children whose parents cannot pay for them to go.
This means that the charges must be kept to the barest minimum, otherwise the schools could not afford to participate. The charges are limited, despite the fact that apart from the facilities which the activity centres have to provide they also supply board and lodging for the pupils and any of their own teachers who accompany school groups. The activity centres must also, rightly, comply with the stringent safety requirements imposed by the Activity Centres (Young Persons' Safety) Act 1996.
The staff of these centres are involved in work experience towards National Vocational Qualifications in catering, leisure activities, sports training and customer care. They receive pocket money and full board and lodging as well as their work experience, to say nothing of having, in effect, a working holiday. And your Lordships should bear in mind that there are far more applicants for staff places than there are vacancies. With the training they receive and the benefits they enjoy, I am not at all surprised.
If the value of their board and other fringe benefits is totally disregarded, as the Low Pay Commission recommends, and the value of the living accommodation is limited to £20 a week, none of these businesses will be able to stay in business. I stress that I am not pleading a special case either for this industry or one firm within it, but merely trying to illustrate the problem. As an example, I should like to show your Lordships what the effect of the Low Pay Commission's proposals would have on an activity centre in Bude, Cornwall.
Apart from pocket money of between £50 and £75 a week, and the value of training for nationally recognised qualifications, the staff also receive a package including full board, uniforms, laundry, equipment and other benefits worth at least another £44 a week. To supplement the cash paid to the employees because of the items that the Low Pay Commission recommends should now be disregarded will cost the centre an extra £120,000 a year. But its profits, which it would normally expect to plough back into the facilities, amount to only £80,000. Despite the fact that this centre operates only seasonally from April to October, it contributes £1¼ million a year to the struggling and hard-pressed local economy.
In the United States, the originator of the summer camp, the exception where applicable is given to small businesses with a turnover of less than 500,000 dollars a year. That is one exemption, refused by the Government, which at a stroke would solve many of the problems created by the Bill. But another exemption in the United States applies to the seasonal camps, which are also exempted from the national minimum wage; another example of how the national minimum wage is adapted to the needs of particular trades. That is the flexibility to which the Government pay lip service, but refuse to concede.
I refer again to the recommended ceiling for accommodation. It is £20 a week--what a ridiculous figure! If the employee uses it only for five days or nights a week it works out at £4 a night. If he is there for seven nights a week--for example, a resident caretaker--it is under £3. Where can anyone find accommodation at that price? A night's stay in the city of Bath YMCA costs £11 a night in a dormitory and at least £14 in a single room, breakfast included. The YMCA could hardly be called a profiteering organisation. The Youth Hostels Association, depending where its facility is situated, charges about £9.75. My recollection of the YHA is that the facilities were pretty spartan.
I am not suggesting that the value of the accommodation should be equated to the cost of staying at the Ritz. But the information which I have given to
The Low Pay Commission conducted a painstaking inquiry before it wrote its report. I do not agree with many of its conclusions or recommendations, but I cannot fault its methodology on most aspects. However, in respect of benefits in kind, particularly over the value of accommodation, its work has been perfunctory and slapdash. Hence, I believe that its recommendations are neither credible nor acceptable. I quote from its report:
There are two reasons why the Low Pay Commission is wrong to suggest that the value of the benefits is difficult to calculate or to monitor. The first is that the Inland Revenue has considerable expertise, built up over generations of defeating tax evaders and closing up tax loopholes, in valuing benefits in kind and enforcing the payment of tax on them.
In its report, the Low Pay Commission actually recommends that enforcement of the national minimum wage should be left in the hands of "an existing Government agency". The commission particularly and enthusiastically recommended the Contributions Agency, which is to combine with the Inland Revenue just as this Act will come into force because, and again I quote:
I submit that the Contributions Agency, combined with the Inland Revenue, will have absolutely no problem in valuing the benefits in kind and preventing fraud by employers. In addition, the Low Pay Commission has recommended that,
The model pay slip that is shown as an example in the 12th schedule to the report could just as easily require the employer to state the value of the benefits that he or she is claiming should be taken into account. The onus of proving their value in case of dispute will of course be on the employer. It should be noted that the Secretary of State has taken powers under Clause 12 to prescribe by regulations the contents of an employee's wages statement.
The second reason that the Low Pay Commission is wrong to say that the value of benefits is too difficult to calculate is that it was the commission's responsibility and duty to recommend a framework to do so. I have never heard of a commission of inquiry such as this abdicating its responsibilities and saying, in effect, "It is much too hard. We just can't do it. Instead, we will
What I expect to hear from the Government in reply to my amendment is that, when the Secretary of State makes the regulations under Clause 2, particularly under subsection (4), she will not arbitrarily ignore and disregard benefits which have a real value to the employee and a real cost to the employer--that is to say, a value in cost which can both be measured and verified by the tax or other enforcement authorities, and which the employer will have to declare in writing under other regulations which the Secretary of State is going to make--a value and cost which it will be up to the employer to prove if challenged.
This amendment is not about the problems of the activities centres' industry; indeed, it is just an example of the problems that will afflict every employer who provides benefits in kind as part of the remuneration of his workers. Simple justice demands that they should get credit for them and that they should not be ignored just because the commission and the Government find it difficult to check them. I beg to move.
Lord Haskel: My Lords, this amendment raises the issue of what benefits should count towards pay for the purpose of the national minimum wage; and how they should be valued. The noble Baroness prayed in aid a quotation from the report of the Low Pay Commission, which states:
However, what the noble Baroness did not mention was that the commission then went on to say:
So the Low Pay Commission did take the matter most seriously and, indeed, gave it serious consideration. The Government have said that they accept these recommendations in principle, subject to consultation on the detailed regulations. Those regulations are of course important. The point is that the primary legislation--that is, the Bill--already provides the flexibility to allow particular benefits in kind either to be included or excluded. It is the secondary legislation which will determine the details. As I indicated, we envisage that this will be done in line with the recommendations of the Low Pay Commission.
In my view, if the amendment of the noble Baroness were accepted, it would mean a degree of considerable complication. It would require the Secretary of State to set a maximum amount for the value of food or accommodation; and, in setting that maximum, to take account of the different cost of food, accommodation and other living costs in different areas of the United
The amendment therefore goes beyond the Low Pay Commission's recommendation which excludes all benefits from the calculation of pay for national minimum wage purposes, except accommodation, on which, as the noble Baroness said, it puts a maximum of £20 a week. If the amendment is intended to provide an offset for food, I do not see why we need to depart from the commission's recommendation in the way suggested. As I have said, the Bill enables the regulations to provide for offsets for any kind of benefit in kind and, if it is right, to impose a maximum on the amount that may be offset in respect of the benefit in question. Therefore, by regulation, the Minister has the flexibility to deal with it. Thus I believe the amendment to be unnecessarily prescriptive.
The whole point of the amendment is that it would overcome the feeling that the Low Pay Commission has that we should discourage payments in kind. The whole purpose of the National Minimum Wage Bill is to set a fair and reasonable minimum wage; indeed, it is not to set a wages policy.
The noble Baroness raised a question about activity centres. I cannot deal with individual cases, but I would refer the noble Baroness to Clause 44 which deals with the question of volunteers. There may or may not be a contract of employment between people who work in such activity centres and those who run them. That may be a matter for an employment tribunal, but it is not one for the Inland Revenue. I cannot deal with that particular case. Nevertheless, if the noble Baroness were to look at Clause 44, I believe that she would find some part of an answer.
The noble Baroness was rather critical of the Low Pay Commission and said that it was really not very diligent and had not carried out its work properly. Perhaps I may remind her that the commission visited 61 cities, towns and villages around the country. Members of the commission spoke to many people; they consulted existing studies and carried out their own research. In the view of the Government, the work of the commission was very well carried out and I do not accept the noble Baroness's criticism of its work. I believe that what we have put in the Bill is a sensible approach at the start of the minimum pay legislation. There is some flexibility there to review it if necessary, so I hope that the noble Baroness will feel able to withdraw her amendment.
Page 2, line 11, leave out ("and times at which,") and insert ("times at which, or the time for which,").
Page 2, line 15, at end insert--
("(3A) The provision that may be made by virtue of paragraph (a) of subsection (3) above includes provision for or in connection with--
(a) treating a person as, or as not, working for a maximum or minimum time, or for a proportion of the time, in any period;
(b) determining any matter to which that paragraph relates by reference to the terms of an agreement.").
Page 2, line 19, at end insert ("and such valuation in relation to food or accommodation shall stipulate a maximum amount determined by the Secretary of State that may be added to wages paid in cash, taking into account any information that is reasonably available to him of the average cost of food and the average value of staff accommodation (including Council Tax and the cost of utilities) in different areas of the United Kingdom").
"Benefits include a wide range of cash and non-cash items, including paid holidays, occupational sick pay, paid maternity leave, pensions, life assurance, company cars, private health insurance, shares and share option schemes, and subsidised restaurants, free meals and luncheon vouchers".
"Few low-paid workers receive much in the way of benefits",
"It is difficult to estimate and monitor the value of many benefits ... On grounds of simplicity and enforceability, therefore, we recommend that, with the exception of accommodation, benefits should be excluded from the calculation of the National Minimum Wage".
"It analyses payroll data, and for benefit fraud reasons checks for apparently abnormally low wages. It has compliance investigation teams, allied to fraud teams".
"employers should be required to display on pay slips both the national Minimum Wage and details to enable workers to claim readily whether they have received the statutory minimum".
4.30 p.m.
"with the exception of accommodation, benefits should be excluded from the calculation of the National Minimum Wage".
"An offset should be allowed where accommodation is provided as a benefit-in-kind. In order to protect workers from unreasonable charges, however, a maximum figure of £20 per week should be set for any deduction for the cost of the accommodation. The operation of this offset should be monitored and consideration given to phasing it out in the longer term".
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