Lower than minimum wages leave seafaring workers stranded

A few years ago, P&O ferries with names like Spirit of Britain and Pride of Kent were under the UK flag with mostly UK-based crew on an average salary of £36,000 (€42,500) a year. Now they are under the flags of Bermuda, the Bahamas and Cyprus and are set to be crewed by agency staff paid an average of £5.50 an hour, well below the UK minimum wage.

When presented with these facts in parliament last week, UK transport minister Grant Shapps seemed at first to somewhat miss the point. "I will be calling on P&O to change the name of the ships," he assured MPs.

For the government’s critics, the real point was that P&O’s decision to sack almost 800 staff had given the lie to the narrative that Britain was “taking back control” after Brexit to create a “high wage economy” where workers were not undercut by low-paid migrants.

In truth, what happened with P&O doesn't tell us much about the pros and cons of leaving the EU. But it does demonstrate that Brexit was no substitute for what is really required to improve the lot of Britain's workers: the closure of legal loopholes and the adequate enforcement of employment laws already on the books.

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P&O can employ agency staff on the Dover to Calais route at £5.50 an hour because a law in 2020 that extended the minimum wage to many seafarers in UK waters excluded workers on ferry routes like these. It might make sense for sailors who are simply passing through UK waters on a long voyage to be exempt, but there is no good reason why people to-ing and fro-ing between two rich countries like the UK and France should be expected to subsist on less than either one's minimum wage.

‘Able seafarers’

The working conditions of many seafarers are largely invisible. There are global minimum standards in place but the floor is low: the worldwide minimum monthly wage for “able seafarers” is less than $700 (€630) while the maximum working hours are 14 hours in any 24-hour period and 72 hours in any seven-day period. You can be on board for up to 11 months without taking leave.

The International Transport Workers’ Federation (ITF) often deals with problems like unpaid wages and seafarers being abandoned on ships with no way home. “There have been times we’ve had to get helicopters to bring them food and water,” says Ruwan Subasinghe, the ITF’s legal director.

Shapps has now said he intends to close the minimum wage loophole for ferry workers. But P&O has also demonstrated the weakness of employment rights on land. The company has admitted it was required to consult unions but chose not to do so. Instead, it offered settlements to workers in excess of the amount they would be awarded by an employment tribunal.

While the government expressed shock that a company would in effect buy its way out of the law, lawyers call this an “efficient breach” and it’s not as uncommon as ministers might like to think.

Rights for sale

“Employment rights are all for sale, there’s a price tag on every single one of them,” one lawyer told me. If ministers want to dissuade companies from making these sorts of calculations, they could uncap the amount of money workers could receive in tribunals, at least for the most serious examples.

Though not at issue in the P&O case, underpayment of minimum wage is another example where stronger penalties would help. A study of employment tribunal records by the Resolution Foundation think tank in 2020 found that, since 2017, only one of the 141 firms found to have underpaid the minimum wage was subject to a financial penalty in addition to repaying the arrears owed.

HM Revenue & Customs does typically levy fines on employers who underpay workers but in 2017-2018 the average violation only incurred a penalty worth 90 per cent of the arrears owed. This is not a strong disincentive given the low chances of getting caught in the first place.

There have been fewer than 20 criminal prosecutions for underpaying the minimum wage since 2007.

A "softly softly" approach to the enforcement of employment rights might seem to be pro-business. In fact, it is often the opposite. This hit home for me a few years ago when I stood with the owner of a clothes factory in Leicester who was following all the laws, trying desperately to compete with sweatshops paying £4 an hour with seeming impunity. Most employers want to do the right thing by their staff. They struggle if they are undercut by the minority who don't.

The government is now scrambling to make sure ferry services don’t end up in a race to the bottom. Workers need a level playing field without loopholes and grey areas. Businesses do too. – Copyright The Financial Times Limited 2022