By Ben Willmott, Head of Public Policy at the CIPD.
A new approach to labour market enforcement is required which places as much emphasis on supporting firms to comply with employment regulation as it does on enforcement action and financial penalties.
This is one of the central findings from a new policy paper from the CIPD, Revamping labour market enforcement, which explores the challenges of the existing approach to labour market enforcement in the UK and how to improve the system.
The need to improve labour market enforcement was highlighted by the Taylor Review of Modern Working Practices, which emphasised the importance of enhanced enforcement in creating fair and decent work for all.
This was followed by the creation of the Director of Labour Market Enforcement role and office in 2017 and the consultation in autumn 2019 on the creation of a single enforcement body (SEB) in the UK.
In advance of the government response to the consultation, Revamping labour market enforcement, is designed to inform the public policy debate and thinking about how to improve the effectiveness of labour market enforcement to protect people’s employment rights and enhance their job quality.
Why the current system is failing
The paper highlighted the fundamental failings of the existing twin track approach in the form of the individual enforcement of employment rights through the employment tribunal system; and state-based enforcement through a number of key enforcement bodies. These are:
The employment tribunal system has certainly not improved since the Taylor Review concluded in 2017 that ‘[f]rom the decision to initiate action to receiving any financial award, individuals can find themselves having to fight hard every step of the way, even when they have been treated unfairly.
If anything, the system has deteriorated further since then, with a significant increase in waiting times for tribunal hearings, meaning that even before COVID-19 and lockdown, claimants had to wait an average of 38 weeks from lodging a claim to resolution, according to Ministry of Justice figures for Jan-March 2020.
Some workers treated unfairly by their employer now face waiting up to two years for legal redress, because a backlog of cases in the employment tribunal system has become much worse during the coronavirus lockdown, according to an article in the Financial Times published in June this year.
Even where individuals do prevail and win a case against their employer, the non-payment of tribunal awards is extremely common and existing forms of redress are not sufficient for individuals nor penalties for offenders. There is also strong evidence to suggest that only a very small proportion of individuals whose employment rights are breached ever go on to make an employment tribunal claim and receive any form of redress.
Unfortunately, the state-based system of enforcement is also significantly flawed. This is partly because the different enforcement bodies are hugely under-resourced (with the notable exception of HMRC) and fail to work together as effectively as they should. This led the Labour Market Enforcement Strategy 2019 to 2020 to conclude that overall ‘the current system is complex and fragmented and is clearly sub-optimal for workers needing employment protection.’ The paper cites evidence showing that the UK’s enforcement bodies are significantly under-resourced compared with international norms, with too few inspectors to proactively enforce employment rights.
Reforming the system
It is against this context that the Government launched its consultation into the creation of a single enforcement body, which our research suggests could potentially help improve the state-based enforcement of employment rights.
However, this would depend on the establishment at the outset of a clear purpose and strategy for the new body, which should determine its structure, as well as sufficient resources to enable it to both reactively and proactively enforce employment rights. An effective, new, labour market SEB would also need to play a stronger role in supporting the individual system of employment rights enforcement through the employment tribunal system.
Crucially, it would require at least an equal emphasis on promoting awareness and good practice in employment as on detecting and punishing breaches of regulations. This could be achieved with the provision of additional resources to Acas and to support local approaches to providing enhanced business support on people management issues to small firms. This, besides supporting much wider understanding and compliance with employment rights, would also help efforts to boost job quality and workplace productivity and meet the Government’s aspiration set out in the December 2019 Queen’s Speech “to protect and enhance workers’ rights as the UK leaves the EU”.
CIPD recommendations to improve labour market enforcement set out in the report:
Strengthen state and individual enforcement
Boost compliance and raise employment standards:
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