GRADUATE FOG QUIZZES HMRC OVER SYSTEM THAT FAILS YOUNG WORKERS

The people responsible for protecting interns from exploitation have failed to assure Graduate Fog that they understand the scale or complexity of the situation they are in charge of policing.

In an exclusive new interview with this website, officials have also shown no indication that they plan to improve the current reporting and penalty system, which I believe lets down over 128,000 interns every year (not to mention the far larger number of young people blocked from these vital opportunities because they cannot afford to work for free).

Regular readers will know that I think the current system – run collaboratively by The Pay and Work Rights Helpline and Her Majesty’s Revenue and Customs (HMRC) – is weighted heavily in favour of exploitative employers and against exploited interns (and their excluded peers). I have also found that it is extremely difficult for third parties (like me) to submit intelligence about advertised unpaid internships, which I believe officials have a duty to follow up.

So I decided to find out what’s going on.

This is what happened when Graduate Fog met HMRC spokesperson Sara Gaines…

(NOTE: HMRC is responsible for investigating cases of National Minimum Wage ‘non-compliance’. These cases are referred to them by the Pay and Work Rights Helpline, which is funded and run by the Department of Business, Innovation and Skills.)

Graduate Fog asked:

1)       Given that the IPPR has estimated that at least 128,800 interns are currently working for less than the NMW or completely unpaid, do you agree that 34,000 inquiries to the Pay and Work Rights Helpline in 2008/9 is a disappointing figure (remembering that many of these will not even concern internships)? If so, what explanation can you offer for why the number of inquiries regarding internships isn’t higher?

HMRC answered:

The Pay and Work Rights helpline is run by Department for Business, so you would need to address this question to them.

Graduate Fog asked:

2)       Do you agree that there is a fundamental problem with a system that relies on interns reporting their own employers for exploiting them? Does HMRC understand why for most interns currently working for less than the NMW the idea of reporting their employer is extremely unappealing? If you agree, do you have any plans to address this problem?

HMRC answered:

HMRC was created by statute and therefore its rules on confidentiality are governed by legislation. We can provide assurance that if a disclosure is made to us it will be with lawful authority and we will endeavour to preserve the confidentiality of the source of the information.

Graduate Fog asked:

3)       Do you agree that the number of enforcement notices (96 in 2008/9) penalty notices (30 in 2008/9) and prosecutions (six, since 2006) is extremely low, considering how widespread we know the problem of unpaid internships to be? If yes, what explanation can you offer for this?

HMRC answered:

After contacting the Pay and Work Rights helpline, and if an individual decides to pursue a complaint, then it is forwarded on to HMRC look into it. Most employers comply with the National Minimum Wage rules voluntarily. If they don’t and a complaint has been brought to our attention we may investigate, and if arrears are discovered we can issue a Notice of Underpayment. The employer can appeal against the issue of a Notice of Underpayment to an Employment Tribunal. The Employment Tribunal will decide the amount of arrears an employer should pay. If the employer subsequently fails to pay the arrears, HMRC may take a claim to the civil courts. HMRC may also take a claim to the civil courts if the employer does not appeal a Notice of Underpayment and does not pay the arrears set out on the notice.

In April 2009, a new tougher enforcement regime was introduced, including an additional element of arrears that takes into account the length of time a worker has been underpaid and an automatic penalty charge, which is levied on employers when HMRC NMW compliance officers find arrears of the national minimum for any pay periods after 6 April 2009.  Penalties range from a minimum of £100 to a maximum charge of £5,000. Those employers who pay all of the arrears owed to workers and the penalty charge within 14 days of notification will receive a 50% discount of the penalty for prompt payment.

To reflect this change, the system of separate NMW enforcement and penalty notices has been replaced by a combined notice of underpayment and penalty.  This is issued whenever we discover that arrears were outstanding at the start of our enquiries.

BIS and HMRC introduced the NMW Criminal prosecution strategy in 2006/2007 as a possible option in appropriate cases; however the majority of employers comply with the legislation. The most serious cases of non-compliance may be tried in a Crown Court and subject to an unlimited fine.

Graduate Fog asked:

4)       Do you think that recovering lost wages and serving penalty / enforcement notices is enough of a deterrent to employers? If not, why are more employers not prosecuted for ignoring the NMW laws? Is it because it is too costly, and there is no provision for this kind of investigative work in the current budget your department is awarded?

HMRC answered:

See above.

Graduate Fog asked:

5)       Do you share Graduate Fog’s concerns that overall the current system is heavily weighted in favour of the exploitative employer — and away from the exploited intern/worker? For example, if an employer is found to be breaking the NMW laws, why is their identity protected from journalists? And if a third party manages to report a case of NMW non-compliance why can’t they track what happens after that with their case?

HMRC answered:

HMRC has a legal duty of customer confidentiality, enshrined in the legislation that set the department up. We never confirm or deny whether or not we are investigating anyone on any grounds — to do so would break the law. As policy owners for national minimum wage, you may wish to speak to the Department for Business for further information.

Graduate Fog asked:

6)       Graduate Fog feels that a possible solution could be to make it easier for third parties to make complaints about exploitative employers – to take the burden off the shoulders of the intern themselves. (This could be done either by journalists like me submitting advertisements for unpaid internships – or by young people who feel they are excluded from these opportunities because they cannot afford to work for free). Do you agree that the current complaints procedure is not accommodating to this type of complaint?

HMRC answered:

The Pay and Work Rights helpline accepts complaints from anyone, not just from employees. It is worth noting that placing an advertisement for an unpaid intern is not an offence covered by NMW legislation. As the Pay and Work Rights helpline is run by the Department for Business, you may wish to speak to them further about the way in which the helpline is run.

Graduate Fog asked:

7)       Having read the blog post ‘Do not report unpaid internships to this autoresponder’, were you surprised to see how difficult I found it to submit my evidence? Can you tell me what went wrong – and how I should proceed from here?

HMRC answered:

There is an online complaint form that can be completed and submitted, however as before, because the Pay and Work Rights helpline is run by Department for Business, you may find it helpful to refer your question to them.

Since this email exchange, I have been in touch with a representative from the Department of Business, Innovation and Skills. Let’s hope their answers are more reassuring…

*Do you feel protected – or abandoned?
Has HMRC assured you that they are on the case protecting exploited interns and excluded young people who can’t afford to work for free? If not, how could they convince you that they really do care about young workers?