National Minimum Wage (Amendment) (No. 2) Regulations 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the National Minimum Wage (Amendment) (No. 2) Regulations 2023.

My Lords, these regulations were laid in draft before the House on 13 September 2023. This statutory instrument will help ensure that so-called live-in domestic workers will be paid at least the national minimum wage for the time that they are working. The live-in domestic worker exemption was part of the National Minimum Wage Regulations and provides that work done by a worker residing in the employer’s family home and treated as a member of the family is not work for the purposes of the national minimum wage and therefore does not have to be paid the national minimum wage. The exemption was originally created mainly to cater for au pairs, so that they should gain experience of cultural exchange through living and being a part of a family in the UK, although the legislation covers other types of domestic workers as well.

Currently, the National Minimum Wage Regulations state that workers do not need to be paid the minimum wage if they live with their employer and are genuinely treated as part of the family. Such treatment is particularly expressed in the provision of living accommodation and meals, sharing of tasks and leisure activities. The exemption is not compatible with most jobs, and it is hard to prove whether someone is or is not being treated as a family member. The removal of the exemption will remove the inequality facing these workers, who are more likely to be migrant workers and women.

In 2016, an employment tribunal judgment considered whether the exemption indirectly discriminates against women, as such workers tend to be women. The employment tribunal found the exemption had given rise to unjustified indirect discrimination, and thus the exemption was disapplied in this case. After the employment tribunal judgment on live-in domestic workers was published, the Government asked the Low Pay Commission to research low-paid live-in domestic workers.

In 2021, the Low Pay Commission published research into the live-in domestic worker exemption. During the gathering of this research, the commissioners came to a consensus conclusion that the exemption should be removed. The Low Pay Commission heard evidence of employers using the exemption to exploit domestic workers, often non-British nationals, who were required to work long hours and were not fully treated as members of the family. They found examples of domestic workers suffering abuse, including physical abuse, with little recourse for enforcing their employment rights. The commission found that the exemption is rarely being used for its intended main purpose, as in practice there are now few au pairs in the UK.

The Low Pay Commission’s extensive evidence in 2021 on this issue provided a clear recommendation to government that the exemption should be removed. The Government accepted the Low Pay Commission recommendations and announced that the live-in domestic worker exemption would be removed in March 2022. During this period, the employment tribunal decision was appealed, and the Employment Appeal Tribunal agreed earlier this year that the exemption should be disapplied. These decisions established the removal of the exemption as a matter of case law.

I thank the noble Earl for his comprehensive introduction to this SI, which deals with regulations as to work in a family household, and rightly seeks to protect such workers by acknowledging their rights as workers and not as some inferior being. On my Benches, we support this new regulation.

The Minister expanded beyond this SI, for which I am grateful, so can I use the opportunity to say to the Minister that this is only one such unfair anomaly? Could I also call attention for the need of the abolition of the separate apprenticeship wage? I had a briefing from the End Child Poverty coalition, which talked about how this is a barrier to young people from less well-off backgrounds going into apprenticeships, because they are not sustainable.

Could I also ask for an assessment on the policy of having different wages for different ages? Is this the right thing to do? The cost of living is the same no matter how old you are, and it is hugely ignorant of the Government to assume that young people will be able to have support from their families.

Finally, unfairness goes right through the system. Could the Minister comment on the policy of paying under 25s less universal credit? This is punitive, particularly for young parents and care leavers. Again, we cannot assume that parents can or will give financial support to their adult children.

I welcomed the Minister’s expansion on this SI, and what the Government are doing, but I have tried to point out that there are still some gaps, which I hope the Government will remove in ensuing legislation and statutory instruments.

My Lords, I am not going to ask the Minister questions on the regulations, which I think are fine.

But the background to this is fascinating. I was a founder member of the Low Pay Commission 25 years ago, and the complexity of establishing the minimum wage was quite fantastic. I remember that, when the legislation was settled, we had some very indignant lobbying from the au pair association to say that we were basically killing off the ability to have au pairs. I have to say that it was not a prominent consideration for the original Low Pay Commission, although I am sure that that was neglect on our part. But there was certainly, to some extent, an anomaly. So when that exemption was established, it then of course created the difficulty about live-in domestic workers.

One priority of the Low Pay Commission was for situations when people had complete power over an individual. The then chair, Sir George Bain, who was formerly director of the London Business School and vice-chancellor of Queen’s University Belfast, used the word monopsony, which some of us had never heard of as individuals. But we became very expert on the subject of monopsony—basically the power of an employer to tell an employee what to do, and the employee feeling that they have no choice. Very often they were people such as agricultural workers in rural areas and piece workers in declining industries—but they were particularly domestic live-in workers. So for the Government to right this anomaly is very welcome.

There were all sorts of areas that we had to clarify when the minimum wage was established, not least whether London weighting was in or out, how you calculated piecework and how you dealt with the accommodation off-set. I remember going to visit a monastery down in Devon, where we were shown around, helping us to calculate what the importance of accommodation off-sets was. I also note overtime. All those complexities helped to set up what I think was a great social reform.

My Lords, I thank the Minister for the overview and explanation of the statutory instrument. We on this side very much welcome this instrument. I thank my noble friend Lady Donaghy for her contribution and for bringing us up to speed on what happened 25 years ago.

As many noble Lords know, the national minimum wage was introduced on 1 April 1999 by the last Labour Government. It creates an obligatory threshold pay level. At the time, the party opposite argued that it would cost millions of jobs, but, 25 years later, this has not happened. In fact, the national minimum wage has had negative effects on the overall UK labour market. Today, around 1.6 million workers—roughly about 5% of all UK workers—are paid at or below the minimum wage. When there is such high inflation and a sustained cost of living crisis, this is just not good enough. Employers should be encouraged to recognise that making work pay with a real living wage and strong workers’ rights is good for growth and for the economy.

This statutory instrument removes the option for a person who resides in a domestic family home, but who is not a member of the family, to be asked to do work in a household without remuneration. This means that a potential loophole by which the unscrupulous employer could require someone living with them and treated as a member of the family to unreasonably be expected to perform jobs in the home without being paid at all. From 1 April 2024, such tasks will now have to be paid at the relevant band of the national minimum wage.

Does the Minister have figures for how many employees —nannies, au pairs and other domestic workers—can expect their income to increase as a result of this change in legislation? Can he also indicate which channels or organisations the Government plan to utilise to alert affected workers to their new rights, especially as I imagine some may not be British citizens or have any union representation? Given the sensitivity of employee-employer relationships in a domestic situation, can the Minister inform your Lordships’ House what provisions are in place to support workers who might find themselves in vulnerable situations, or even potentially homeless, if their employer refuses to recognise their right to be fairly paid as a result of these changes, since their access to legal advice may be very limited? Finally, as well as making people aware of their rights and offering support when made aware, will there be any more proactive steps to ensure that as few people as possible slip through the cracks?

My Lords, I thank noble Lords for their valuable contributions during today’s short debate. These regulations will reward low-paid live-in domestic workers right across the country so that they are paid fairly for the work they do. It will give more clarity on wage regulations for the families that employ these workers, making sure they are paid the national minimum wage. It will also ensure that HMRC enforces the national living wage and national minimum wage for live-in domestic workers, in line with other sectors. The legislation will ensure that all work is treated fairly, and it will end the misuse of the exemption to exploit workers, particularly migrant women.

I will now take the opportunity to answer some of the specific questions asked by noble Lords. The noble Lord, Lord Palmer of Childs Hill, said that this is only one of the unfair anomalies in operation at the moment. The Government accept that and are working as hard as they can to ensure that this is dealt with. The question about different ages and rates is certainly something that I have always found quite difficult to come to terms with—I always paid everybody the same amount, regardless of their age. I can see the argument for bringing people up to a certain level as they leave education and start building up to a full-time job while living at home. Certainly, the Government have moved to narrow the gaps and, as I said, the full national living wage is a significant salary—that is good news. I will write to the noble Lord about the issue of less universal credit. I do not think that it is our policy to take away universal credit, but I will write to confirm that that is the case.

The noble Baroness asked about au pairs. I am advised that there are still 45,000 au pairs in this country, which is a surprisingly large figure. Although it is a small number in the total scheme of the 1.6 million workers, this is an important step to take—I suspect there are a lot of other people who are not covered by the au pair qualification. Clearly, it is the responsibility of HMRC to police this, and it has been given a substantial increase in the funds it can address towards this area. As I said, it follows up every single report it gets about this. Of course, there is a link to slavery and all sorts of things, which one worries about deeply. On the accommodation off-set, I rather like the idea of the monastery. That does reduce the national living wage but at a reasonable rate—I think it is about £1 per hour at the moment, or something like that.

Motion agreed.