The Confederation of British Industry responded this week to an annual strategy report by Sir David Metcalf, the director of Labour Market Enforcement. The CBI said it strikes a good balance and the helping firms understand their legal duties is a first step while firms that flout the law should be punished. However, it raised concerns over the Employment Agency Standards Inspectorate’s ability to regulate umbrella companies and payroll intermediaries as well as enforce agency worker regulations.

One recommendation in Sir David Metcalf’s report calls for more resources to enforce current regulations and expand the inspectorate’s remit to cover umbrella companies and intermediaries.

“Overall, the Director of Labour Market Enforcement’s strategy strikes a good balance — investing in helping firms understand their legal duties should always be the first step to ensuring high compliance, and it is right that firms who flout the law are punished,” Matthew Fell, CBI’s UK policy director said in a statement.

Fell added that CBI research found 95% of firms support improved enforcement of labour market rules, and businesses support other measures, including statements of rights and itemised pay slips for workers.

“As ever, implementation is key,” he said. “While companies support asking the Employment Agencies Standards Inspectorate to regulate umbrella companies and intermediaries, concerns remain regarding its ability to enforce agency worker regulations concurrently.”

Other recommendations in the report include:

• Higher financial penalties for employers who exploit their workers and pursuing more prosecutions.
• Making leading brands jointly responsible for noncompliance in their supply chains. This would be done in private but with public naming of the brand and supplier for failure to correct non-compliance.
• Locally or regionally piloting licencing of hand car washes and nail bars, which have been identified as sectors at risk of labour exploitation.
• Tackling “phoenixing” — the practice of directors dissolving their companies to avoid paying workers tribunal awards and other enforcement penalties.

Some aspects of the report drew concerns from elsewhere.

“Some of its reform proposals should prompt more than just a shudder from certain employers, the most obvious being the proposal to make companies jointly responsible for what happens in their supply chain,” James Moore, The Guardian’s chief business commentator wrote.