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Compliance measures and the labour market

Updated: Feb 17

Between October and December 2015, the Government carried out a consultation on four proposals it had formulated to assist in enforcing labour market legislation, including the National Living Wage and direct labour provision.

The four proposals were:

  • the establishment of a statutory Director of Labour Market Enforcement to set priorities for the bodies who enforce compliance with labour legislation, from criminally-minded exploitation to payroll errors;

  • the creation of a new offence of “aggravated breach of labour market legislation”; sharing intelligence and data between the existing enforcement bodies; and

  • the widening of the remit and strengthening of the powers of the Gangmasters Licensing Authority to enable more effective tackling of serious worker exploitation.

Along with this, the Government also announced new measures which were aimed at increasing compliance with the National Minimum Wage and its (partial) successor, the National Living Wage, which is due to be introduced in April 2017.

Those measures include:

  • The penalties for non-payment of the National Minimum and National Living Wages will be doubled. Non-compliance will now be punished by a financial penalty of 200% of the arrears (which will be halved if the penalty is paid within fourteen days). There will be no change in the maximum penalty of £20,000 per worker.

  • The budget for enforcement measures will be increased in 2016.

  • A new team of HMRC compliance officers will be established to deal with non-compliance with the National Minimum and National Living Wages. To achieve its ends, the team will be able to use penalties, prosecutions and naming recalcitrant employers.

  • Consideration of disqualification from company directorship for up to fifteen years for anyone found guilty of non-payment offences.

  • Giving more guidance and support for firms to help them with compliance and for payroll providers to ensure their software contains checks that staff are receiving the proper rates of pay.

A new role

The Director of Labour Market Enforcement is a role that will extend across the whole labour market, including direct employment as well as labour providers, and it will encompass every aspect of non-compliance from occasions where employers inadvertently infringe regulations to instances of blatant and deliberate criminality.

The Director will develop a strategic plan for labour market enforcement and set priorities for the existing enforcement bodies – HMRC, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority (GLA).

The Director will also have an intelligence hub that will bring data together from all parts of government involved in the labour market. This will enable the Director to focus efforts on areas that require attention and mean that enforcement agencies can share information relating to specific cases.


Hitherto, the Gangmasters Licensing Authority has been responsible for specific areas of the economy such as agriculture. Now, with its transformation into the Gangmasters and Labour Abuse Authority, its remit will be expanded to investigate worker exploitation in any sector, whether workers are employed through an agency, gangmaster or by an employer with a direct contract.

The new GLA will (in England and Wales) have enforcement powers similar to those of the police. The existing licensing regime will be retained but reforms will be undertaken to increase flexibility and capability to respond to changes in risk on the advice of the Director of Labour Market Enforcement.

New Enforcement Order

It is intended to bring in a new type of enforcement order regarding breaches of labour market legislation. If there is a reasonable belief that such a breach has occurred, enforcement bodies will have the power to request an undertaking from the business in question to take steps to prevent further offending. If this undertaking is not complied with, or where a business has failed to give one altogether, the enforcement bodies will have the power to obtain an enforcement order, failure to comply with which will be a criminal offence.

The enforcement order will also be available as an option for courts dealing with labour market legislation breaches. Again, if the order is breached, the offender can receive a maximum custodial penalty of two years.

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