Chapter 6: How to enforce minimum wages

6.5 Labour inspection

The number and duties of labour inspectors

The enforcement of minimum wages falls within the scope and responsibilities of labour inspectorates.1 There are a number of indicators to assess the capacity of labour inspection systems, including: the number of inspectors, the number of inspections undertaken, and the number and amount of penalties imposed in practice. The effectiveness of labour inspection will also depend on whether inspectors are properly trained.

A precondition for effective enforcement through labour inspection is the provision of sufficient human and other resources. Though there is no internally agreed formula for determining the appropriate number of labour inspectors, ILO standards stipulate that the number of inspectors should be sufficient to secure the effective discharge of the duties of the inspectorate.

The scope of these duties can be gauged by the following criteria: number of inspectors, size and situation of the workplace, number of workers per enterprise to be inspected, and the number and complexity of the legal provisions to be enforced.2

Labour inspectors must be able to access enterprises subject to inspection, to inspect wage records and other documents, and conduct interviews with workers and management. Labour inspectors should be able to issue warnings or open administrative procedures so that they can impose penalties in cases of non-compliance.

The need for pro-active strategies

Labour inspectors generally intervene either when complaints are received or when programmed inspections are due. Complaints procedures to ensure the effective application of minimum wage provisions should be as simple and accessible as possible. In the context of wages, there is a tendency for inspections to be triggered by complaints rather than proactive identification of inspection targets in the context of labour inspection programmes and strategies.

To avoid an entirely reactive complaints-based strategy, proactive strategies could include awareness-raising campaigns and could analyse the levels of compliance based on labour statistics. Data could be obtained from fiscal and social security institutions in order to identify sectors or enterprises where there is a higher probability of non-compliance. This would facilitate targeted interventions. For these reasons, cooperation between labour inspectorates and fiscal and social security institutions is very important – particularly on sharing information regarding amounts declared for tax and social security purposes.

Technology has enabled labour inspectors to monitor wages payments in new ways (see Box 1 below). This could also be a mechanism for monitoring and improving compliance, where minimum wages exist.

Box 1

Relying on new technologies to monitor payment of wages

In the United Arab Emirates, since 2009, all enterprises have been legally required to pay wages for both national and migrant workers through banks and other financial services providers. This system allows the Ministry of Labour to have a comprehensive wage database and an electronic wage payment monitoring mechanism for enterprises within the country. This system also allows the timely detection of delays in payment of salaries and enables it to subject non-complying companies to sanctions.

Source: Labour Inspection in Arab States: Progress and Challenges, ILO working paper 2014

Fast-track administrative procedures

In Israel, under the 2011 Act to increase the enforcement of labour laws, Israeli labour administration agencies were empowered to fine employers for minimum wage violations through fast-track administrative proceedings. Prior to this act, criminal prosecution was the only means of recourse.

These reforms introduced financial sanctions, in addition to the possibility of penal sanctions, thereby improving the procedure through which fines were imposed. These measures were accompanied by the recruitment of 120 additional labour inspection staff.

The legislation also provided for employer self-assessment through a scheme involving government-certified private “wage inspectors” and for the joint liability of private employment agencies offering security, cleaning and catering services and service recipients.

This process creates stakes for both the employment agency and the user. As a result this increases the chances for workers to be able to claim their rights, it encourages compliance, and it also gives an advantage to workers in cases of litigation. Data collected by the authorities in Israel showed a considerable increase in enforcement action and an increased use of financial sanctions.

Table 1. Key measures to enforce Israel’s labour laws
Year Files opened Files closed Warnings of criminal procedure Indictments Criminal fines Administrative warnings Financial sanctions
2011 1118 1651 789 283 614 - -
2014 3430 3479 130 72 193 7771 532 Sanctions totalling NIS 31,197,960

: State of Israel/Ministry of economy, Second Progress Report on the Implementation of OECD Recommendations- Labour Market and Social policies, August 2015.

Additional Reference:

1 In some countries, other institutions enforce minimum wages. For instance, in Germany and the United Kingdom, enforcement of minimum wages is the responsibility of the customs authorities.
2 ILO General Survey on Labour Inspection (2006)