Wednesday, June 11, 2014

How to punish bad employers

The government has released a discussion document on strengthening the enforcement of labour standards. At the moment, breaches of the minimum wage, denying people their holiday entitlements, or not even bothering to provide them with a formal employment agreement attract derisory penalties which are hardly ever imposed. But now they're looking at cracking down, not only by naming and shaming bad employers (which costs them in bad PR with the public), but also with higher fines and bans on company ownership:

Another option would extend financial penalties to deter unlawful behaviour and to ensure there is no financial gain from non-compliance.

Fines would also be targeted at individuals to stamp out "phoenixing" - when directors wind up a company and begin another to avoid enforcement.

The ministry also suggests a measure that would restrict the ability of non-compliant companies to do business.

This would include director bans, licence amendments, revocations, disqualifications, seizure of assets or other restrictions.

So if you abuse your employees, you won't be running a company again. Good. We'll only stop this when it stops being financially worthwhile to abusive employers. But penalties are only half the equation - there also needs to be more effective enforcement, so that employers will actually fear those penalties. They're looking at this too, but it'll take a significant increase in funding for labour inspectors before there is an effective deterrent.