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Enforcement of the national minimum wage would be improved if Her Majestys Revenue and Customs had the additional powers in Clause 12. As I said in an earlier answer, HMRC has often been forced to abandon potential prosecutions because it has been reliant on evidence that it just cannot get. I stand here as someone who believes that the provisions should be set at a level that can be used as a tool in a modernised economy; therefore, we must have the ability to enforce that so that respect is obtained in the employer community as well.
Lord Campbell of Alloway: The national minimum wage is a matter for considerable debate in this Bill in many respects, although I shall not go into that. My worry is that the criminal procedure should be changed by a civil Bill. This is an Employment Bill, and that is my objection. I wanted to make that plain in view of what has been said by noble Lords on the Benches oppositeperhaps I should not say that because they are all on the same Benches.
Baroness Wilcox: I thank the Minister, particularly for his reassurance that the Government have no plans to expand these powers over more and more matters. I liked the picture of the toolkit that he described, and I can understand how he sees that working. It is hoped that toolkits are used to repair doors and not necessarily to break them down.
The noble Lord said: Amendment No. 24AA amends Section 44 of the National Minimum Wage Act 1998 to broaden the type of expenses that can be reimbursed to voluntary workers without triggering eligibility for the minimum wage. I am very proud that I can stand here and move this amendment, because in my former life I was involved in the hospice movement in various ways, and I saw this happen on the ground often in my home city of Birmingham. To have the chance to make a difference today is a privilege.
The amendment will mean that, as well as being able to reimburse expenses incurred in the performance of duties, voluntary organisations will be able, should they wish, to reimburse expenses necessary to enable the voluntary worker to perform the duties. That does not normally apply in employee situations, although, in the eyes of the Revenue, for years it has applied in self-employed situations.
Voluntary workers are a special class of employee. They are exempt from the minimum wage. They can be employed only by charities, voluntary organisations, associated fund-raising bodies or statutory bodies. For brevity, therefore, although the amendment applies to that broad nature of voluntary worker, I shall refer to them as voluntary organisations to cover all of them.
During the development of the national minimum wage legislation, it was recognised that an exemption was necessary for voluntary workers to ensure the successful continued operation of the voluntary sector. The exemption in Section 44 of the 1998 Act means that voluntary workers can continue to work for free without being eligible for the minimum wage, and that voluntary organisations in turn can continue to benefit from that dedication.
Section 44 specifies that no monetary payments can be made to a voluntary worker apart from the reimbursement of expenses actually incurred in the performance of the workers duties. That was to ensure that voluntary workers would not be out of pocket in doing the job that they had volunteered for, and that only relevant expenses could be repaid. In that way jobs could not emerge in the voluntary sector which, through the reimbursement of spurious expenses paid at sub-minimum wage levels, could exploit the most vulnerable, for obvious reasons.
However, following the Governments consultation on the national minimum wage and voluntary workers last year, we heard compelling arguments from voluntary organisations that there were expenses which voluntary workers necessarily incurred in order to perform their duties but which were not actually incurred in the performance of those duties. The Government feel that those should similarly be reimbursable without bringing minimum wage entitlement. We recognise
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To fall within the scope of the exemption, such an expense would have to meet three tests. First, the expense must actuallynot maybe incurred or reasonably estimated to have been incurred. That is already the position for the expenses currently permissible under Section 44, and means that the voluntary worker will have to have made the outlay already and should not be reimbursed more than that specific outlay. The reimbursement of any expense will never bring a voluntary worker into any sort of profit. Secondly, the expense must be necessary to enable the worker to perform their duties. For example, if a voluntary worker claims for the cost of work bootsprotective bootsbut in fact only undertakes office duties, that would not be allowed to fall into the exemption. Thirdly, the expense must be reasonably incurred. It would not be reasonable for a voluntary worker to incur the expense of a new car merely to travel to the place of work, and to have that expense totally reimbursed. A car would of course provide a significant benefit which could be used beyond the voluntary work. I hope that that is obvious. However, it would be reasonable for the voluntary worker to incur the cost of public transport to travel to the place of work and have that fall within the protective net.
Members of the Committee may also have noticed that accommodation expenses are not permitted by the new clause. That maintains the current position that voluntary organisations cannot reimburse rent to voluntary workers. Instead, Section 44 permits voluntary organisations to provide accommodation directly to the voluntary worker in such cases as needed.
Amendment No. 28A enables the provision to commence two months after Royal Assent. Voluntary organisations such as the Association of Volunteer Managers have urged us to make the change as swiftly as possible, as it is having real effect in various areas of the voluntary sector. We are working with voluntary organisations to produce guidance which will include these changes, should they become part of the legislation.
I commend these additions to the Bill. If the consultation on the national minimum wage and voluntary workers had yielded the response that we
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Baroness Gardner of Parkes: Is Amendment No. 24AA basically about a tax issue? We all remember the Mallalieu case of the black clothing, and how it was ruled that she could not claim for it. The phrase has actually incurred will benefit the volunteer as against HMRCI was going to say Inland Revenue.
Lord Jones of Birmingham: I am glad that the noble Baroness raised this. When I was trying to get my mind around it the other day, I went all the way back to my tax law at university to think about it. The distinction between expenses allowable for self-employment and those for employment is the word necessarily. I tried to transpose that into the application here. This is not about tax law, but about what is or is not caught under an employers obligation under the National Minimum Wage Act. So if something was transposed into the national minimum wage that, in the minds of the noble Baroness and myself, would not have been incurred necessarily and was therefore not allowable under Schedule E taxation, it would be deemed remuneration for the purposes of the calculation of the national minimum wage. It would have nothing to do with the Revenue. It would be caught under that method of calculation. The employer would therefore be caught by the National Minimum Wage Act 1998.
Now that word is being moved so that, although this type of expenditure would not be necessarily incurredso it would be caught under Schedule E taxation and not allowablehere, and only in NMW terms, not Revenue terms, it will be deemed not to be remuneration. Therefore the employer does not get caught, is more minded to take on the voluntary worker and, in certain situations such as childcare, the voluntary worker can now do it. We leave them outside the NMW. If that was inside the HMRC but not the NMW environment, it would still fall foul of Schedule E and not be allowable because it was not incurred necessarily. What is important is not the taxation application, but the necessarily principle of taxation.
Lord Borrie: The Government deserve to be congratulated on thinking this one out so that, without triggering the national minimum wage legislation, expenses rather wider than those incurred during the performance of duties are covered. These expenses are to enable the workerI am sorry the
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My only question for the Minister is why accommodation expenses which are incurred in order to enable the worker to perform his duties, and are reasonably so incurred, are not covered as well. It might be in the practicalities that accommodation expenses of even the most modest kind would inevitably be considerable compared with mere travel on the bus or the cost of lunch. Can the Minister explain why in no circumstances could expenses for accommodation necessary to do the voluntary job be covered by the amendment?
Lord Wedderburn of Charlton: I endorse everything that my noble friend Lord Borrie said and we congratulate the Government on this move forward. However, society moves as fast even as House of Lords Grand Committees. What may need increasingly to be provided is not accommodation but accommodation expenses. This will apply often to young voluntary workers. We all know how difficult it is for young people to find anywhere to live in London, and the same is true of some other cities. Will the Government keep under active review the paragraph that excludes accommodation expenses?
Lord Jones of Birmingham: Perhaps I may allay the fears of my noble friends Lord Wedderburn and Lord Borrie by making the following distinction. As noble Lords know, Section 44(1)(b) of the NMWA states that a voluntary organisation can provide accommodation directly for the voluntary worker. That means not only that the young persons to whom my noble friend rightly referredit would help society if many more younger people got into the world of voluntary workhave a roof over their head which would not fall foul of the new clause, which is excellent, but that they would not have to make the up-front payment and find the dosh to pay an advance on rent, which is no bad thing. If that voluntary worker was not in directly provided accommodation and had to attend a conference, for instance, or had to go away from their locality of normal work, obviously any attendant hotel costs or other accommodation expenses would be reimbursed. Although they might not necessarily be caught for the purposes of other legislation, they would be caught by this clause.
We do not consider the reimbursement of enabling expenses to extend to the cost of rent per se because jobs should not emerge in the voluntary sector which could attract the vulnerable by offering significant remuneration or what is seen as a benefit and leave them in a position that is more than neutral. If their situation is enhanced, other sectors in society will ask why they are getting something different from anybody else. The clause is not trying to inhibit the young especially from getting into the world of voluntary workquite the opposite: it is trying to ensure that we achieve a neutral position for those people vis-Ã -vis their employer and not bring even more legislation down on their heads.
Lord Watson of Invergowrie: To some extent, the Minister has tried to clarify the position on accommodation but I am less clear now than I was before he stood up. No doubt that is due to me more than it is to the Minister. He mentioned the relevant section of the National Minimum Wage Act. If it states what he said it does on accommodation, it seems to be at odds with the amendment. I do not understand how the two are compatible. I was concerned as to how accommodation, such as hotel accommodation, would be covered in the case of a trade show or conference that a voluntary worker was attending. The Minister has cleared that up: that would not fall foul of the new clause. But if accommodation expenses are excluded, how does that sit with what he said was in the National Minimum Wage Act?
New subsection (1A)(b) states that the expenses must be reasonably so incurred. Will the Minister clarify who will determine what is reasonable? In the light of his earlier remarks, I suggest that it would not be HMRC but its National Minimum Wage Inspectorate.
Lord Jones of Birmingham: Perhaps I may write to noble Lords on why there is a distinction between reimbursement of rental expenditure, which will not fall into the safety net, and direct accommodation provided, which will. That would provide the clarity that noble Lords seek. It would be better than my carrying on telling them what I believe is the distinction and some noble Lords saying that they do not understand it. We could then move on. I will undertake to do that now.
I am at pains to point out that we are trying to get people into a neutral position so that the voluntary organisations and those who work for them are no worse off because of the implementation of the national minimum wage legislation. Regulation is to be avoided at all costs but, when it has to apply, let us at least not fall foul of the law of unintended consequences. That is what the amendment seeks to achieve.
Lord Jones of Birmingham: I am so sorry; I forgot. The test of reasonableness will ultimately be decided by a judge in a tribunal somewhere and will go through two or three hurdles on the way: first, common sense; secondly, the inspectorate, rightly; thirdly, probably someone from HMRC in some form of inquiry; and, lastly, anyone who disagrees with the test of reasonableness has every right to go to an adjudicator or a tribunal to understand what it is.
Baroness Wilcox: I am delighted to respond to these government amendments, which we welcome. They are good news for both voluntary organisations and those who wish to volunteer. There have been mutterings on my side as to whether their Lordships are volunteers as well, but possibly they are not.
I am glad that the Government are taking steps to clear up any confusion about what expenses are allowable and that they are expanding them to reflect more accurately the difficulties and costs that a voluntary worker can incur. There are many expenses that might deter a potential volunteer worker from participating fully, as the Minister mentioned, such as childcare and travel expenses.
The advantages that charities and other eligible organisations bring to those whom they help and to the communities in which they work are of course of enormous importance and, I hope, widely appreciated. The benefits that a voluntary worker will enjoy, especially if he is otherwise unemployed or unable to partake in paid employment, are only starting to be appreciated by many but are also remarkable. Voluntary work should be encouraged if at all possible and I hope that the amendments will allow more people to participate fully.
However, I draw the noble Lords attention to an adjustment that the Department for Work and Pensions made two years ago when attention was drawn to the effect that volunteering expenses had on state benefits. It was pointed out that many beneficiaries of jobseekers allowance and incapacity benefit should be actively encouraged to seek voluntary work. As I mentioned, such work has a proven effect on a persons self-confidence and health, and can give them valuable experience and training before they become immersed in the world of paid employment.
On 9 October 2006, therefore, the Department for Work and Pensions announced that meal expenses and so on would not affect benefits, and so recipients could work towards re-entering the job market without fear of being penalised. Today, the Minister has repeated what the Department for Work and Pensions said two years ago. Therefore, the question is: why on earth has it taken two years for a lesson that one department learnt to be taught to another? The situations are practically identical. However, we are delighted to support the amendments.
(1) Section 1 of the National Minimum Wage Act 1998 (c. 39), (workers to be paid at least the minimum wage) is amended as specified in subsection (2), and section 40 of that Act (application of the wage to mariners) is amended as specified in subsection (3).
The noble Baroness said: I should perhaps explain that I am moving this amendment because my noble friend Lord Rosser, who originally tabled it, is away on holiday. I move it on his behalf and as a former trade union official. The amendment was drafted by legal advisers at the RMT, the union to which the employees referred to belong.
Until I was asked to move the amendment by my noble friend and the RMT, I knew little about seafarers terms and conditions. Like most people who use ferries and travel by sea from time to time, I had assumed that the employees looking after us were all in receipt of at least the national minimum wage, and the idea that some would be in receipt of what amounts to penury wages would not have occurred to me. It now appears that that is the case due to complexities and anomalies, which the amendment is intended to correct.
For the purposes of this Act, an individual employed to work on board a ship registered in the United Kingdom ... shall be treated as an individual who under his contract ordinarily works in the United Kingdom unless
Seafarers are covered by the minimum wage legislation whilst employed to work on a United Kingdom registered ship working in the United Kingdom or its internal waters (i.e. estuaries and, also, the sea between the United Kingdom mainland and many islands). In addition, when working on board a ship registered in the United Kingdom, a seafarer must be paid at least the minimum wage (wherever in the world that ship may be) unless: all his work takes place outside the United Kingdom (and its internal waters); or he is not normally resident in the United Kingdom and the ship is outside the United Kingdom (and its internal waters).
On the DTIs construction, working within the UK would not include all work performed within the UKs territorial waters, but only that performed within its internal waters. Employment beyond internal waters is regarded as being wholly outside the United Kingdom. UK internal waters include the Solent, the sea between Scotland and the Inner and Outer Hebrides, the Firth of Forth, the Wash and the Thames Estuary. They do not include waters between Scotland and the Shetlands or between the mainland and the Channel Islands or the Isle of Man. Territorial waters are defined as 12 nautical miles from the baseline.
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