Thousands of jobs could go if NMW regulations changed, warns Deloitte

Wed, 28 Jul 2010

Many thousands of job losses could result if the government amends the National Minimum Wage (NNW) regulations from 1 January in an attempt to reduce the exploitation of vulnerable workers.

Brian White, a tax partner at Big Four accountancy firm Deloitte, told Recruiter that low-paid workers could also be left up to £30 a week worse off.

White added that because the changes would increase the cost of employing these workers, he estimated that the number of job loses could range from “the high tens’ of thousands to a few hundred thousand”. The changes would affect temporary workers earning up to £9 an hour, said White. 

However, recruiters and other suppliers have welcomed the plans. Andy Hogarth, chairman and chief executive of industrial recruiter Staffline, told Recruiter it was “excellent news”. 

“It’s good for the industry because everybody knows what the rules are and it allows everyone to compete fairly, and it is very good for the workers because they will now get full entitlement to state benefits (based on National Insurance Contributions [NICs]) that they should have had before.”

In its ‘Summary of Responses to National Minimum Wage Workers: travel & subsistence expenses schemes’ published this week, following the end of a five-month consultation period, the government said it intends to amend the NMW regulations from 1 January 2011. The policy change will mean that expenses paid to an employee for the cost of travel from home to a temporary workplace along with subsistence costs through travel & subsistence schemes designed for mobile workforces will not count as pay for NMW purpose.

These travel & subsistence schemes typically involve these workers seeing a reduction in their pay tax and NICs in return for the payment of travel expenses.

The government says that worker participating in these travel and subsistence scheme are often only very slightly better off in terms of take-home pay. And in some schemes it says it is the employment business or umbrella company employing the worker who retains the largest part, as they are able to reduce their NICs and tax bill.

The government is also concerned that travel & subsistence schemes operated by some employment businesses and umbrella companies are having a negative impact on workers earnings-related contributory benefits.

Stuart Davis, chairman of the Freelancer & Contractor Services Association (FCSA), told Recruiter the trade body “supports all moves to protect the UK’s vulnerable workers, but continues to urge that government develops a better understanding of the different constituent populations of the UK’s freelance workforce and effects a regulatory environment that fosters rather than hinders their productivity.

“We see the government’s action to address the issue relating to a specific, vulnerable portion of the temporary labour market as an implicit acknowledgment of this developing understanding.”