Surviving the recession-how the minimum wage can help

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					                   Surviving a
                    recession
How the minimum wage can help




     UNISON Submission to the Low Pay
                          Commission




                        September 2010
UNISON submission to Low Pay Commission 2010   1
        Recommendations

        UNISON believes that a decent level of the minimum wage is needed in good
        economic times and bad. Low paid workers should not be the unnecessary victims
        of the current recession and budget cuts. Their living costs are still high (when
        compared to their income), with many working more than one job with little
        disposable income available. The latest analysis of the June 2010 emergency Budget
        shows that they will lose out more than the coalition Government claimed at the
        time. In addition what has not been taken into account by organisations such the
        Institute of Fiscal Studies is that the lowest paid are more frequent and intensive
        users of public services than the higher paid and therefore will lose again when they
        are cut.

         In keeping with our position, “fair rate for the job”, the development rate for 18-
          20 year olds should be brought in line with the full adult National Minimum
          Wage (NMW) rate.

            That 16 and 17 year olds be entitled to the ‘development rate’, with a view to
             harmonising it with the adult rate over time

            That in the interests of fairness and simplicity the new national minimum wage
             rates for all apprentices across the UK should rise from £2.50 an hour to match
             the existing youth rates.

            That public service employers, and their contractors, continue to increase the
             apprenticeships available, negotiating with unions for an appropriate ‘rate for the
             job’ above the current or future minimums.

            That the budget for National Minimum Wage (NMW) enforcement is not cut in
             the spending review to allow more proactive and targeted enforcement to
             continue, especially in those sectors where migrant workers predominate.

            That employment agencies be made a priority target for NMW enforcement by
             HMRC.

            That the HMRC investigate payment systems used by homecare agencies and
             provide guidance on best practice to ensure that care staff are paid their full
             NMW entitlement.

            That for the personalisation of social care the Low Pay Commission and HMRC
             work with Local Authorities, the Department of Health, NHS, DWP and
             devolved administrations to ensure that micro-employment does not lead to non
             payment of the minimum wage.

            That the remit of the Gangmasters Licensing Authority be widened to include
             other sectors with a high proportion of migrant and/or vulnerable workers.

            Finally, we believe that in October 2011 the National Minimum Wage
             should be set at a level to ensure an adequate standard of living for all
             workers, namely £7.60 an hour



UNISON submission to Low Pay Commission 2010    2
               UNISON Submission to the Low Pay Commission

                                         September 2010

1. Introduction

UNISON is the UK's largest public service trade union with 1.3 million members. Our
members are people working in the public services, for private contractors providing public
services and in the essential utilities. They include frontline staff and managers working full
or part time in local authorities, the NHS, the police service, colleges and schools, the
electricity, gas and water industries, transport and the voluntary sector.

This is our fourteenth submission on the National Minimum Wage (NMW) to the Low Pay
Commission (LPC), something we started campaigning for in the 1980s.

UNISON has consistently argued that a minimum wage should be set at a rate which
provides a ‘living wage’, that is sufficient income to secure an adequate living standard,
without dependence on in-work benefits. We believe that there should be a minimum
income standard for healthy living.

With the current political arguments about the state of the economy and the public finances
it is conveniently forgotten that energy, food and transport prices for low paid workers
have risen rapidly. It has meant low paid workers often having an effective inflation rate on
the goods and services they consume nearer 10% a year on average (far higher than the
Retail Price Index for the whole population). The LPC needs to take a longer perspective
not just assessing the current recession and recovery but the recent affordability difficulties
low paid workers have faced and continue to face. That is why we feel it is important to
maintain the NMW rate at a decent rate and not heed calls from business lobby groups to
freeze or cut it.

We welcome the ending of the travel and subsistence scheme loop hole to the minimum
wage in January 2011 and that 21 year olds will receive the adult rate of the minimum wage
in October 2010 with the youth development rate being restricted to 18-20 year olds only.

Therefore the adult minimum wage rate (21 or over) will rise from £5.80 to £5.93 on 1st
October 2010, the Youth Development Rate (18-20) will rise from £4.83 to £4.92 an hour
and for 16-17 year olds it will increase from £3.57 to £3.64 an hour. In addition there will
be for the first time a new apprentice rate that will be introduced for £2.50 an hour for
those aged under 19 or in the first year of their apprenticeship, after which the normal
NMW rates apply.


The Low Pay Commission remit for this review is to recommend rates for
October 2011 and in this submission we make the case for a minimum wage
rate of £7.60 an hour by October 2011.




UNISON submission to Low Pay Commission 2010   3
2. Economic indicators

The Low Pay Commission’s deliberations will be heavily influenced by the current economic
situation and they will have access to the latest economic figures early in 2011 when they
make their recommendation.

Economic predictions suggest that UK economic growth will continue to recover next year,
rising from 1.2 percent for 2010 to 2.3 per cent for 2011 (Office for Budget Responsibility
forecast June 2010). The 1.2% growth figure for the second quarter of 2010 was better than
expected and these forecasts might be revised upwards, not withstanding any deflationary
effects of the coalition Governments cuts in public expenditure.

However, employment growth may lag behind the recovery of GDP growth, though more
workers may be able to increase their hours from part time to full time. Total employment
is predicted to shrink by 0.6 per cent in 2010 and to grow back by a modest 0.2% in 2011.

As a result, claimant unemployment is predicted to rise from 1.50 million in May to 1.66
million at the end of 2010 and then to fall back slightly to 1.61 million by the end of 2011(1).

Table 1: Economic indicators 2008-2011
                 2010 latest figures            Whole year    2011 forecast
                (compared with 12               2010 forecast
                months earlier)
All employment -1.4%                            -0.6%              +0.2%
Employees       -1.4%                           -                  -
ILO                                             -                  -
unemployment
Claimant        1,502,000                       1,660,000          1,610,000 (Dec)
unemployment                                    (Dec)
(millions)
Average         +4.2%                           +2.4%              +2.7%
Weekly
Earnings (total
pay)
AWE             +2.9%                           -                  -
(excluding
bonuses)
GDP growth      -0.2%                           +1.2%              +2.3%
CPI Inflation   +3.4%                           +2.6%              +1.8%
RPI-x inflation +5.1%                           +3.9%              +2.3%
RPI inflation   +5.1%                           +3.8%              +3.1%


As can be seen inflation is still running ahead of earnings and this is hitting low paid workers
particularly hard, due to their differential experience of inflation. In addition the


(1) Forecasts in this section are taken from HMT’s round-up of independent forecasts for the UK economy
(June 2010), using the median of forecasts made in the past 3 months. http://www.hm-
treasury.gov.uk/data_forecasts_index.htm


UNISON submission to Low Pay Commission 2010        4
Government intend there to be widespread pay freezes in the public sector over the next
two years and in Local Government this has started early.


Table 2: GB Employees in Low Paying Industries (thousands)
 Industry                Employees      Change since       change since
                         March 2010     March 2009         March 2009
                         (thousands)    (thousands)        (Per cent)
Agriculture, hunting and 201            -32                -13.8%
forestry
Textile, clothing and    90             -6                 -6.3%
leather goods
manufacture
Retail trade (not motor  2,829          -23                -0.8%
vehicle)
Hotels & restaurants     1,746          -7                 -0.4%
Social care              1,235          +39                +3.3%
Security                 176            nil                -
Cleaning                 428            -20                -4.5%
Hairdressing & other     132            +6                 +4.7%
beauty treatment

All low pay sectors              6,837                -43                    -0.7%

Total employee jobs              25,730               -567                   -2.2%


There is still significant employment growth in some low paying sectors like social care,
whilst the decline in some like agriculture and textiles represent trends that have been
apparent for many years. These are largely service sector jobs that are not under pressure
from exports. UNISON has always maintained that though low paying sectors they are often
very profitable sectors for companies and that increases in the minimum wage are often
more easily absorbed than the CBI and other business organisations would maintain.

3. Inflation matters

The Retail Prices Index (RPI) annual inflation rate was 4.7% in the year to July 2010. The
UK's inflation rate is two or three times higher than similar economies across Europe and
beyond. Figures from the Organisation for Economic Co-operation and Development
(OECD) suggest British families are suffering far more than counterparts across the globe.

According to figures released by the OECD, food price inflation in the UK was 8.6% last
year, four times higher than any other country in Europe. At the same time supermarkets
have been enjoying record profits.2

Other costs rises are also putting a severe strain on the budgets of low paid workers. The
Office of National Statistics records a 9.1% increase in the cost of utilities from July 2008 to
June 2010 and nearly a 70% increase in the cost of transport services. The AA says families

2
 Food price inflation highest in UK: http://www.themoneystop.co.uk/062009/food-price-inflation-highest-in-
uk.html


UNISON submission to Low Pay Commission 2010          5
now spend £52 a month more on petrol than a year ago, with the current average petrol
price being just over £1.15 a litre. According to the Daycare Trust the typical cost of a full-
time nursery place for a child under two is now £167 a week in England, that is over £8,500
a year; a rise of nearly 5% on 2009 costs.

According to research published in July 2010 by the Joseph Rowntree Foundation (JRF) it is
getting harder for people on low incomes to meet a minimum standard of living. A Minimum
Income Standard for the UK in 2010 shows that people on low incomes face a much higher
inflation rate than shown in the official Consumer Prices Index, which the Budget announced
as the future basis for uprating benefits. For people in work, the gap between the minimum
wage and the wages needed for a minimum household budget has widened.

The cost of a minimum budget is estimated by the Minimum Income Standard (MIS) project
to have risen by 38% in the past ten years, due to steep rises in the price of food (up 37%),
bus fares (up 59%), council tax (up 67%) and some other essentials. But official inflation has
only been 23% in total over the same period.

The discrepancy between official and real inflation rates for low income families arises
because someone on a minimum income spends a greater than average portion of their
budget on food, domestic fuel and public transport, whose prices have risen by more than
inflation. 3 The minimum budget also does not include luxury and leisure goods whose prices
are declining, putting downward pressure on the general inflation rate. 4 A report by the
Left Economics Advisory Panel found that expenditure on the 'essentials' accounts for over
two-thirds of the expenditure of the poorest households, but less than one-third of the
wealthiest.5

Added to pressures on low income families, the Institute for Fiscal Studies (IFS) predicts that
the government’s budget will hit the poorest hardest. Families in the bottom income group
are expected to lose 5% of their income, compared to less than 1% for non-pensioner
households without children in the top group. 6

This pressure on the living standards of those least able to cope, raises a number of
concerns. Recent research shows that the proportion of children in poverty living in
working households had grown over the last decade. The latest poverty figures show that
the majority of children in poverty now have working parents. 7

Furthermore, the sharp rise in the cost of basic items raises concerns about increasing levels
of family debt. The amount owed by UK households has tripled in the past decade and many
people are already living on the edge of their financial budget. Increasing prices and further
reductions in family incomes will undoubtedly mean more people turn to their credit cards,
overdrafts or predatory lenders which will lead to an increase in personal debt problems. As
traditional sources of credit have dried up, pay day loans and pawnbrokers with interest
rates as high as 2000%, have grown to a £2bn a year business. According to a study by


3
   Measuring UK Inflation, ONS, http://www.statistics.gov.uk/elmr/09_08/downloads/ELMR_Sep08_Marks.pdf
4
   A minimum income standard for Britain in 2009, http://www.jrf.org.uk/publications/minimum-income-2009
5
  Leap Inflation Report: http://leap-lrc.blogspot.com/2009/10/one-persons-inflation-is-anothers.html
6
   Institute for Fiscal Studies (2010) The distributional effect of tax and benefit reforms to be introduced
between June 2010 and April 2014: a revised assessment, http://www.ifs.org.uk/bns/bn108.pdf
7
   Ending child poverty in a changing economy, Donald Hirsch, 18 February 2009,
http://www.jrf.org.uk/publications/ending-child-poverty-changing-economy. For a further discussion of the
impact of low pay on child poverty see The Impact of Low Pay on UNISON’s Families, UNISON 2010


UNISON submission to Low Pay Commission 2010          6
Bristol University, 70% of the customers of the growing number of pawnbrokers have a
household income of less than £300 a week.8


4. Low Pay & Living Wage

Low Cost but Acceptable

The ‘Living Wage’ or ‘minimum income standard’ is increasingly being used to determine the
basic level of income required to avoid poverty and have a ‘low cost but acceptable’
standard of living. In July 2010 the Minimum Income Standard project, funded by the Joseph
Rowntree Foundation, concluded that even a single person with no dependants living in
council housing needs at least £14,400 a year before tax to afford a basic, but acceptable
standard of living. That would amount to approximately £256 a week or £7.46 an hour. A
couple needs £29,200 a year or £7.60 an hour for a family with two children with both
adults working full time. 9 These annual figures have increased from £13,400 and £26,900 in
the past two years.


Living Wage in London

In June 2010 the Greater London Authority’s Living Wage Unit produced its annual report
saying that a worker in London taking advantage of their full entitlement to tax credits and
benefits, would need to earn £7.85 an hour to provide a minimum acceptable quality of
life.10

Evidence from GLA Economics research shows that around 1 in 5 employees in London
receive less than the London Living Wage. Relatively high proportions of this group are
outer London residents and workers, and are less well qualified young, black and ethnic
minority or disabled employees.

Gains have continued to be made in winning living wage agreements across the public,
private and voluntary sectors. In London at least 100 organisations have implemented the
London Living Wage in the last 5 years according to the GLA.


Local authorities

The Greater London Authority has now implemented the London Living Wage throughout
the GLA ‘family’, which includes Transport for London, London Fire and Emergency Planning
Authority, London Development Agency, Metropolitan Policy Authority and the
Metropolitan Police Service.

Ealing Council has introduced a living wage in its school meals contract with Harrison
Catering Services. The company becomes one of the first hospitality operators to commit
to the London living wage. Lewisham and Tower Hamlets Councils have adopted policies
committing them to actively review and bring contracts up to the LLW as they come due.

8
  Metro, 6 September 2010, “A nation in hock to pawnbrokers”
9
  For the report of the Minimum Income Standard project see: http://www.minimumincomestandard.org
10
   A Fairer London, GLA 2009, http://www.london.gov.uk/mayor/economic_unit/docs/living-wage-2009.pdf


UNISON submission to Low Pay Commission 2010       7
Other local authorities considering living wage policies include Camden, Islington, City
of London and Lambeth. There is an active living wage campaign in the City of London.

Outside of London living wage policies have been adopted by Glasgow, Preston, Manchester
and Oxford City Councils. Oxford’s £7 an hour minimum rate for directly employed and
contract staff came into force on 1 April 2009. Manchester City Council raised its minimum
rate for directly employed staff to £6.74, boosting the pay of 800 staff. Glasgow City
Council, has implemented a Living Wage policy raising the salaries of its 700 lowest-paid
staff to more than £7 an hour. The council is also working to ensure that companies bidding
for contracts on the 2014 Commonwealth Games pay the living wage.

In the first living wage gain in central government, the Department for Children Families and
Schools (DCFS) agreed to pay a Living Wage to its staff, including subcontracted staff, from
April 2009. Living wage agreements have also been reached for cleaners working in both the
House of Lords and the House of Commons.


Higher Education

Recent cross-campus campaigns by UNISON and UCU branches, working with student
unions in the ‘Bloomsbury’ Universities have resulted in living wage victories at SOAS,
Birkbeck, Institute for Education and School of Hygiene and Tropical Medicine and
Goldsmith’s College. Further campaigns are underway at Kings College and UCL.

Students at Magdalene College, Oxford campaigned successfully for college cleaners to be
paid the Oxford living wage of £7 an hour. The University of London Union (ULU)
representing 20,000 students across the capital, has retendered its cleaning contract to bring
its cleaners up to the London Living Wage. Despite the sharp increase that will come into
effect on 1 April 2010, ULU will save £30,000 a year on all cleaning services by switching to
a living wage contract.

The success of living wage campaigns across both the public and private sector indicates that
employers are capable and willing to support higher pay rates – even if the face of the
recession – when they are convinced of the business case.




UNISON submission to Low Pay Commission 2010   8
5. Minimum pay in the public                      sector


Table 3 Minimum Pay rates in the public sector


UNISON bargaining groups                 Date         Annual       Hourly

NJC for Local Government               1/4/2009       12,145         6.30
(E&W)
NJC for Scottish LGS                   1/4/2009       11,835         6.13
Sixth form colleges support            1/4/2009       12,270         6.36
staff
Police staff council (E&W)             1/9/2010       14,529         7.53
Police staff council                   1/9/2009       12,574         6.52
(Scotland)
NHS                                   1/4/2010        13,653         7.08
Higher Education                      1/8/2009        13,150         6.82
Further Education                     1/8/2010        13,491         6.99
Probation                             1/10/2010       14,182         7.35
Youth and Community                   1/9/2009        14,143         7.33
Workers
British Waterways                      1/7/2009       12,600         6.53

Above are just a selection of the minimum rates in some of the main bargaining groups.
Rates for staff working for private contractors frequently fall below these levels.

In June this year Chancellor George Osborne has announced that there would be a two-
year pay freeze for public sector workers. The Chancellor promised to protect the pay of
the 1.7 million workers working in the public sector but earning less than £21,000, saying
that they would receive a £250 pay rise this year and next. However, Local Government
Employers have made clear that they will not be paying the £250 this year, despite the fact
that local government workers are facing a three-year pay freeze. This has a ripple effect as
the national Local Government negotiations are a benchmark for private contractors and
voluntary sector employers.

The proposed 3 year local government pay freeze, if enacted, represents a significant cut in
living standards. If RPI inflation is 3% in each of 2010, 2011 and 2012 and if the 2009 local
government minimum pay rate of £6.30 an hour kept pace with inflation each year then it
would be £6.88 by 2012. The difference of 58p an hour generated by the pay freeze
proposal represents a significant real decline in income and living standards for low paid
local government workers working directly for local authorities or for contractors or
voluntary sector providers. In such circumstances the rate of the National Minimum Wage
becomes more significant.




6. Youth rates


UNISON submission to Low Pay Commission 2010      9
       Since the introduction of minimum wage in legislation in 1997, UNISON has consistently
       called for the elimination of differential rates based on age. In our 2007 submission we
       wrote:

       “UNISON believes in the “rate for the job” and would like the full NMW rate to begin
       at age 16. We believe this could be achieved in two stages lowering the adult rate to 18
       and then 16.”

       We are pleased that the apprentice exemption will be ending shortly and that 21 years
       olds will receive the adult rate from October 2010 too.

       UNISON has generally argued that lower age rates are discriminatory. They are based
       on a personal characteristic that has nothing to do with the performance of the job. Our
       own research has repeatedly shown that lower pay levels offered to young workers do
       not adequately reflect of the value of the work they work they do, and result in real
       hardship for young workers.

       UNISON’s views have been echoed by The Employers Forum on Age (EFA), an
       independent network of leading employers with over 240 member organisations that
       collectively employ over four million people in the UK (more than 14% of the UK
       workforce). Core members include B&Q, Barclays, British Airways, BT, Cabinet Office,
       Cadbury Schweppes, Centrica, Chartered Institute of Personnel & Development, Co-
       operative Group, Craegmoor Healthcare, Department of Work & Pensions,
       Department for Transport, GlaxoSmithKline, HBOS, HSBC, Manpower, Marks &
       Spencer, Procter & Gamble, Nationwide, Royal Bank of Scotland Group, Royal Mail,
       Sainsbury's, Shell and Transport for London.11

       Because development rates can be applied irrespective of an individual’s job or
       responsibilities, the EFA believes that “this constitutes direct age discrimination”. They
       call on the government to equalise NMW rates at 18. While this might lead to a short
       term rise in costs to the employer, the EFA asserts that “this would, in many instances,
       be off-set through the subsequent increase in labour supply. Higher wages would bring
       more candidates to the workforce giving the employer a greater number from which to
       choose the most productive workers. In addition, the increased rate of pay could
       increase the overall productivity of each worker, benefiting the medium and long term
       outputs and profitability for the employer.”
       The EFA also discounts arguments that a higher minimum wage for young people will
       cause significant job or lead to more young people leaving higher education. They believe
       instead that higher rates will draw more young people off benefits and into the labour
       force and provide incentives for employers increase training for young workers. Far
       from being a drain on the economy, EFA estimates that the multiplier effect in the
       economy, where a rise in spending leads to a rise in national income, would benefit
       economic activity by approx £227 million a year.”




11
     http://www.efa.org.uk/about/default.asp


UNISON submission to Low Pay Commission 2010     10
    RECOMMENDATION:

            In keeping with our position, “fair rate for the job”, the development rate for 18-
             20 year olds should be brought in line with the full adult rate.

            That 16 and 17 year olds be entitled to the ‘development rate’, with a view to
             harmonising it with the adult rate over time



7. Apprenticeships


        In September 2009 we submitted written evidence to say that all apprentices should
        get the current NMW rates and not a lesser amount. We had found many high
        quality apprenticeship schemes that paid considerably more than this and that they
        also had high completion rates close to 100%. We believed that the national average
        completion rate for apprenticeships of 68% needs to rise significantly and decent pay
        is necessary precondition to doing this.

        We were very pleased that an apprentice rate minimum wage rate will be
        established in October 2010 but disappointed at the rate of £2.50 an hour. UNISON
        will monitor the implementation of the new apprentices rate in public sector
        schemes while continuing to encourage branches to negotiate higher rates for
        apprentices.



    RECOMMENDATIONS:

            That in the interests of fairness and simplicity the national minimum wage rates
             for all apprentices across the UK rise from £2.50 to match the existing youth
             rates.
            That the public services, and their contractors, continue to increase the
             apprenticeships available, negotiating with unions for an appropriate rate for the
             job above the current or future minimums.


8. Vulnerable Workers and Enforcement

        There was a great deal of focus on vulnerable workers by the Labour Government in
        the last 4 years and several initiatives; the Gangmasters Licensing Authority,
        increasing the number of minimum wage and agency inspectors, a shared
        enforcement telephone help line and great inter-agency co-operation to share
        information on bad practise and to enable third parties like unions to get involved
        with complaints without violating data protection and other regulations.

        The Pay and Work Rights helpline (0800 917 2368) launched in September 2009
        covers:

        National Minimum Wage


UNISON submission to Low Pay Commission 2010   11
        Agricultural Minimum Wage
        Working Time (48 hour average working week)
        Employment agency standards
        Gangmaster licensing

        Previously, five separate departments handled these queries, advise and possible
        complaints.

        We regret that the Coalition Government is seeking to end the Agricultural
        Minimum Wage system.

        In addition the Employment Act 2008 increased NMW penalties for employers and a
        fair arrears system for workers who had not received the minimum wage.

        The TUC’s Commission on Vulnerable Employment (COVE) had had a very hard
        hitting report in 2008 that had helped to strengthen the Labour Government’s
        resolve in this area.

        The third round of the Union Modernisation Fund concentrated on supporting
        vulnerable workers, and UNISON was awarded funds in September 2009 to help
        migrant workers in the outsourced public services area.

        Migrant workers are particularly at risk. Evidence collected by UNISON and London
        Citizens reinforces the conclusion that unscrupulous employers and employment
        agencies are continuing to take advantage of migrant workers despite the
        strengthening of enforcement measures in this area. Typical problems reported are
        the low wages, unclear pay slips, unauthorised deductions and corrections on pay
        slips. This is leaving aside workers in the undocumented economy. UNISON’s UMF-
        funded Hidden Workforce project has focused attention on the problems routine
        faced by the UK’s 2 million vulnerable workers. A range of case studies can be found
        at: http://www.unison.org.uk/hiddenworkforce/docs_list.asp


        The most significant legislative advance to aid low paid workers recently has been
        the finalisation of the regulations implementing the EU agency workers directive
        which will give rights to equal treatment in basic pay and conditions after 12 weeks.
        Unfortunately implementation has been scheduled for October 2011 not sooner.

        We would also support any attempt by HMRC, DBIS and Low Pay Commission to
        lay down guidelines on internships, another area that young people can be vulnerable
        to exploitation.

        We also remain concerned that the increasing promotion of personal budgets in
        social care (with inadequate funding), means that in instances where the budget
        holder chooses to employ staff directly there is a risk of non-payment of the national
        minimum wage.




UNISON submission to Low Pay Commission 2010   12
       Private home care services

             There were an estimated 1.75 million paid jobs in adult social care in England in
             2009, of which 1.61 million were directly employed, with a further 140,000 held by
             agency, bank and pool workers, volunteers, students and the self-employed.12

             The adult social care workforce has grown by 246,000 jobs, a 16% increase on the
             2007-8 estimate of 1.51 million jobs. Much of the increase is due to the growth of
             adult social care, especially in direct personal care and domiciliary care services.

             In its 2009 report the Low Pay Commission raised concerns about the pressure on
             public authorities to keep costs down by commissioning care as cheaply as possible.
             ”We continue to be concerned by the shortfall in funding experienced by many
             social care providers,” and recommends that “the commissioning policies of local
             authorities and the NHS should reflect the actual costs of care, including the
             National Minimum Wage”.13

             The case study below indicates that pay practices in the sector may need scrutiny to
             ensure that they comply with minimum wage regulations.


       Case study: Pay in homecare

             In our 2009 submission to the Low Pay Commission UNISON highlighted the case of
             “Model Care Inc”, a large private homecare company with contracts in East Anglia,
             Yorkshire, London and the South East. The company has 55 local operations and
             employs around 4,500 staff caring for 15,500 service users around the country. In
             2007 the company, was acquired by ‘Standard’, a large social housing company
             looking to expand into the social care market.

             UNISON members working for Model Care suspected that company pay practices
             were leaving them earning less than the minimum wage. Rather than being paid a
             straight-forward hourly rate, the workers were paid a set amount per call, with
             different rates for calls of 15, 30, 45 or 60 minutes. Crucially, travel time between
             calls, calculated as five minutes a call, was unpaid, so carers could lose as much as 15
             minutes pay per hour. A typical rota of 12 calls shown below, totaling over 7½
             hours work, would earn the home carer just £42.99 or £5.61 an hour if she worked
             in Norwich, or £39.62 or £5.17 an hour in Loddon.

             In addition, Model Care workers were on zero hours contracts and therefore paid
             only for the time they were actually carrying out a call. Any gaps between calls were
             unpaid, even if the time did not constitute an official ‘break’. For example, in cases
             where two carers were needed for a “double-up” assignment, the time one carer
             was required to wait for the other to finish a previous call was unpaid. Furthermore,
             workers did not receive full pay when calls were cancelled, nor did they receive full
             compensation for using their cars for work.



12
     Skills for Care, (2010) The state of the adult social care workforce in England, 2010
13   Low Pay Commission (2009) National Minimum Wage.



UNISON submission to Low Pay Commission 2010                      13
         In response to our members’ concerns, UNISON raised these issues with
         the NMW Enforcement Agency. After a detailed investigation, the Minimum Wage
         Compliance Officer assigned to the case concluded that there were weaknesses in
         the employer’s system of calculating hours worked and record keeping which ‘might
         lead to an underpayment of minimum wage’. He also concluded that time spent
         traveling between visits should be regarded as time worked for NMW purposes. If
         travel time was included in the calculation of time worked, then many of the Model
         Care workers were receiving less than the minimum wage for the hours they
         worked.

         Both the compliance officer and the employer agreed that the work done by the
         care workers fell into the category of ‘time work,’ which meant that weekend
         enhancements received by the majority of the workers could not be counted
         towards the minimum wage. However, the legal advice provided by Technical
         Section of the Enforcement Agency contradicted this view. Because workers
         reported that payments for visits were sometimes adjusted when calls took a longer
         or shorter period than scheduled, the legal advisor argued that:

         “From the evidence available I suggest that the workers are not paid "by reference
         to the time for which they work" (time work). Although the workers are paid by
         reference to an estimate of hours worked, the evidence indicates that they are in
         fact paid per visit, at a rate depending on the type of visit. Nothing on the file
         indicates a direct link between hours actually worked and amounts paid. Apart
         from the estimated times in the rotas, the employer does not appear to have a way
         of knowing how long the workers are working for…. I would suggest therefore that
         the type of work here is actually unmeasured, and furthermore that in the absence
         of a daily average agreement the workers would need to be paid for every hour
         worked.”14

         The legal advice confirmed the Compliance Officer’s view that travel and waiting
         time should be paid, but challenged the assumption that premium payments should
         be excluded from the calculation of pay for NMW purposes. Because nearly all of
         the workers were rostered to work every other weekend and paid higher rates for
         this work, their average pay rose above the NMW threshold when premium pay was
         included.

         Neither the Compliance Officer nor the Head of the Enforcement Agency were
         happy with the conclusion that the Model Care workers were engaged in
         ‘unmeasured work’. However, the legal opinion put UNISON in a quandary as to
         how to proceed. If we took ET cases for individual workers claiming underpayment,
         the cases might fail based on the view of the technical expert, setting a negative
         precedent for other care workers. On the other hand, the present payment system
         was clearly unfair to Model Care workers.



14
   Model Care workers dispute this description of their work practices, claiming that they are required to stay
for the full time of a scheduled visit. Even if they finish the tasks early, they are told to use the time to chat to
the client or do other work. If the allotted tasks take longer than the scheduled visit, however, they are not
paid for the extra time. They recently received a memo which read: ''All Carers must stay the full time that is
stated on the time sheet and these times must be duplicated on the care notes''.




UNISON submission to Low Pay Commission 2010             14
    Fortunately, the ‘Standard Group’ which had taken over the management of Model
    Care, was sensitive to the risk of being found in breach of NMW regulations. Standard
    management entered into discussions with UNISON with the aim of addressing travel
    time and mileage costs as well as other concerns. The negotiations yielded increased
    rates and a much improved agreement on mileage costs which ensured that care
    workers were paid at their hourly rate for travel time and for some forms of waiting
    time.

    Table 4: Model Care payments for typical daily rota

                                                               Length of call   Rates per call   Rates per call   UNISON
                                                                 (minutes)      Norwich          Lodden           negotiated rates
                                                                                                                  per call Norwich
                                                                                                                  & Lodden




                                                                                        £             £                 £
                                                                 15                     2.35         1.58              2.41
                                                                 30                     3.18         3.17              3.32
                                                                 45                     5.25         4.76              4.47
                                                                 60                     7.00         6.34              5.96
        Typical rota: minutes per call
    Time of call           Travel time        Waiting time


        14.30                   5                                30                     3.18         3.17              3.32
        15.05                   5                                45                     5.25         4.76              4.47
        15.55                   5                 15             15                     2.35         1.58              2.41
        16.30                   5                                30                     3.18         3.17              3.32
       17.05                    5                                15                     2.35         1.58              2.41
        17.25                   5                                30                     3.18         3.17              3.32
       18.00                    5                                30                     3.18         3.17              3.32
        18.35                   5                 10             15                     2.35         1.58              2.41
        19.05                   5                                30                     3.18         3.17              3.32
        19.40                   5                                30                     3.18         3.17              3.32
        20.15                   5                                45                     5.25         4.76              4.47
        21.05                   5                                30                     3.18         3.17              3.32
        21.40                                                    30                     3.18         3.17              3.32
       Total earnings
                                                                                42.99
       for all calls                                                                                 39.62             42.33
       Total hours on                                            6.25
       calls
       Travel time (5                                            1.0                                                   5.96
       min per visit)

       Waiting time                                              0.42                                                  2.50


       Total hours inc                                           7.67                                                  £50.79
       travel and
       waiting time
        Hourly rate with unpaid/paid travel and waiting time                            £5.61        £5.17             £6.63




UNISON submission to Low Pay Commission 2010                   15
        Most important, Model management agreed to recognise the union for collective
        bargaining purposes, giving members a right to negotiate on a range of terms and
        conditions. It could have been the ‘shock’ of being investigated for potential violation
        of NMW regulations or simply recognition of the injustice of the arrangements that
        propelled Model management into a much improved relationship with their staff. As
        the UNISON branch secretary explains:

        “UNISON has developed a constructive relationship with the ‘Standard’ group on
        the Model Home Care contracts. We are able to raise any concerns the employees
        may have and work with Standard senior management to find solutions. We have
        negotiated conditions of service that compare favourably to other private sector
        providers. We are able to discuss Health & Safety issues to help ensure the safety of
        the service users and the workforce. Standard encourages a network of local
        UNISON representatives from their workforce to put forward the views of their
        colleagues.”

        The Model Care case has had a positive outcome for this particular group of
        workers, adding roughly £200 a month to the average salary of a full time care
        worker. But problems remain. For example, Model Care workers do not get
        occupational sick pay. For low paid workers, taking unpaid time off work can be
        simply unaffordable. This provides a strong incentive to work sick. Short staffing adds
        to the pressure on staff not to take time off if they are ill. As one worker related:

        “I called into office to report that I had flu. I said I could do some calls but I was
        concerned about one client, a frail, elderly man. I didn’t want to risk infecting him
        with my coughing. I was told to “suck a sweet” and carry on with the call.”

        Perhaps this reflects the low priority given to infection control by the company.
        Model Care staff receive only one hour’s training in infection control, while health
        and safety and first aid are each covered in a 20 minute video.

        Model Care staff managed to negotiate major improvements in fuel allowances (going
        from 25p to 40p a mile) and the provision of work-related equipment such as mobile
        phones and uniforms, provision is not generous and many care companies still
        compel staff to pay for these items out of their own pocket. As one Model care
        worker reported:

        “The company now gives us two tabards, but once they wear out you have to pay
        for your own at £7 each. Some companies make you pay £2 for rape alarms. But I
        was lucky. Model Care gave me one as a Christmas present, wrapped up with a
        packet of Minstrels!”

        Another problem touched on the issue of lump sum payments for ‘on-call’ work that
        UNISON has raised in previous submissions. Model Care office staff report being
        required to take their laptops home and be ‘on call’ all night for a lump sum £25
        payment.

        “From 6pm to 11pm carers are still out there, so you are actually working. You have
        to be at the other end of the phone in case anyone has a problem; a carer has to be
        replaced or is late turning up. Then from 11pm until 6am you can sleep, but you




UNISON submission to Low Pay Commission 2010   16
        must still be available to answer calls. And then from 6am until you come into
        work at 9am, visits are taking place again, so you are essentially at work.”

        The Model Care Case has highlighted a problem in NMW enforcement which is
        likely to affect workers throughout the homecare sector. The original payment
        system used by Model Care, with timed visits paid for at different rates and no
        payment for travel or waiting time, is common across the industry. As has been seen
        in other cases, such as the payment of ‘room rates’ to hotel housekeeping staff,
        anomalous payment systems can disguise underpayment of the minimum wage. Most
        important, the basic principle enshrined in the NMW legislation is that methods of
        pay ought to be transparent and clearly recorded so that workers can easily
        determine whether or not they are being paid at the correct rate. The payment
        systems used by most homecare agencies are complex, variable and extremely
        difficult to understand. UNISON urges the Enforcement Agency to investigate how
        pay is calculated and recorded by homecare agencies and to provide guidance on
        best practice to ensure that care staff are paid their full NMW entitlement.


    RECOMMENDATION:

            That the budget for National Minimum Wage (NMW) enforcement is not cut in
             the Spending Review, to allow for more proactive and targeted enforcement,
             especially in those sectors where migrant workers predominate.

            That employment agencies be made a priority target for NMW enforcement by
             HMRC.

            That the HMRC investigate payment systems used by homecare agencies and
             provide guidance on best practice to ensure that care staff are paid their full
             NMW entitlement.

            That for social care personal budget holders, both the Low Pay Commission and
             HMRC work with Local Authorities, the Department of Health, NHS, DWP and
             devolved administrations to ensure that micro-employment does not lead to
             non-payment of the national minimum wage.

            That the remit of the Gangmasters Licensing Authority be widened to include
             other sectors with a high proportion of migrant and/or vulnerable workers.


9. Gender Pay gap

        Low Pay Commission Reports have showed that raising the National Minimum Wage
        is a very effective way of closing the gender pay gap and the introduction of the
        NMW in 1999 had a significant impact in closing it for both part time and full time
        working women. Indeed two thirds of the beneficiaries of the National Minimum
        Wage are women. With the new Equality Act 2010 ensuring a continued focus on
        the gender pay gap, the importance of the NMW and keeping it at a decent rate
        should not be forgotten.




UNISON submission to Low Pay Commission 2010   17
10.      Disabled Workers

        The UNISON submission to the LPC in 2008 included extensive evidence about the
        extra living costs in terms of heating, energy, transport, housing, prescriptions and
        other costs that disabled workers face. These still exist today. The Joseph Rowntree
        Foundation have been thorough in documenting these costs too.

        This is another reason why it is important to maintain a decent level of the minimum
        wage.


11.      UNISON’s National Minimum Wage Target

        In conclusion UNISON would make the following recommendation for the main
        rates of National Minimum Wage.

        We believe that in October 2011 it should be set at a level to ensure an
        adequate standard of living, namely £7.60 an hour.

        It is important that in a recession that the economic hardship felt by those low paid
        workers who remain in work is minimised. Energy, food and transport price
        increases were high for many of the recent years, dipped in 2009 in the recession,
        but rose significantly in 2010 linked to rises in world energy and commodity prices.
        UNISON is adamant that low paid workers should not be victims of the recession
        and that the LPC recommendation should reflect this.



12.     Further Information

        For further information on this submission contact:

        Sampson Low and Deborah Littman
        UNISON
        1 Mabledon Place
        London WC1H 9AJ
        e-mail: bsg@unison.co.uk

        To join UNISON call 0845 355 0845.




UNISON submission to Low Pay Commission 2010   18

				
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