uk employment regulation · mr michael clapham mp (labour, barnsley west and penistone) mr jonathan...

(incorporating HC 1223-i, Session 2003-04) Published on 18 May 2005

by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Trade and Industry Committee

UK Employment Regulation

Seventh Report of Session 2004–05

Volume II

Oral and written evidence

Ordered by The House of Commons to be printed 8 March 2005

HC 90-II

£20.50

The Trade and Industry Committee

The Trade and Industry Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Trade and Industry.

Current membership

Mr Martin O’Neill MP (Labour, Ochil) (Chairman) Mr Roger Berry MP (Labour, Kingswood) Richard Burden MP (Labour, Birmingham Northfield) Mr Michael Clapham MP (Labour, Barnsley West and Penistone) Mr Jonathan Djanogly MP (Conservative, Huntingdon) Mr Nigel Evans MP (Conservative, Ribble Valley) Mr Lindsay Hoyle MP (Labour, Chorley) Miss Julie Kirkbride MP (Conservative, Bromsgrove) Judy Mallaber MP (Labour, Amber Valley) Linda Perham MP (Labour, Ilford North) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine)

The following Member was also a member of the Committee for part of this inquiry: Mr Andrew Lansley MP (Conservative, Cambridgeshire South)

Powers

The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publications

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/t&icom.

Committee staff

The current staff of the Committee is Elizabeth Flood (Clerk), David Lees (Second Clerk), Philip Larkin (Committee Specialist), Grahame Allen (Inquiry Manager), Clare Genis (Committee Assistant) and Joanne Larcombe (Secretary).

Contacts

All correspondence should be addressed to the Clerks of the Trade and Industry Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5777; the Committee’s email address is [email protected].

Witnesses

Tuesday 20 November 2004 Page

Mr Ian Brinkley, Mr Richard Exell and Ms Hannah Reed, Trades Union Congress Ev 1 Mr John Cridland and Mr Neil Bentley, Confederation of British Industry Ev 15 Tuesday 30 November 2003

Miss Emmeline Owens, Mr Lewis Sidnick and Mr Francis Toye, British Chambers of Commerce Ev 30 Mr Mike Emmott and Mrs Dianah Worman, Chartered Institute of Personnel and Development Ev 40 Mr Peter Schofield, Mr Stephen Radley and Mr David Yeandle, Engineering Employers’ Federation Ev 46 Mr Alan Tyrell QC and Mr Stephen Alambritis, Federation of Small Businesses Ev 51 Monday 20 December 2005

Mr Paddy Lillis, Mr Graham Markall and Ms Ruth Stoney, Union of Shop, Distributive and Allied Workers Ev 57

Tuesday 18 January 2005 (Morning)

Mr David Arkless, Manpower Ev 67 Mr Tony Dubbins, Mr Tony Burke, Mr Mike Griffiths and Professor Keith Ewing, Amicus, GPM Sector Ev 77 Tuesday 18 January 2005 (Afternoon)

Mr Nick Isles and Ms Alexandra Jones, The Work Foundation Ev 87 Mr Gerry Sutcliffe MP, Minister for Employment Relations, Competition and Consumers, Ms Janice Munday and Ms Beatrice Parrish, Department of Trade and Industry Ev 95

List of written evidence Page

1 Amicus Ev 103

2 British Chambers of Commerce Ev 105

3 Chartered Institute of Personnel and Development Ev 110

4 Citizens Advice Ev 114

5 Confederation of British Industry Ev 119

6 Department of Trade and Industry Ev 122

7 Engineering Employers’ Federation Ev 139

8 Equal Opportunities Commission Ev 144

9 Federation of Small Businesses Ev 151

10 Graphical, Paper & Media Union Ev 155

11 National Group on Homeworking and UK Poverty Programme, Oxfam Ev 161

12 National Outsourcing Association Ev 162

13 Popularis Ltd Ev 166

14 Professional Contractors Group Limited Ev 170

15 Recruitment and Employment Confederation Ev 176

16 Small Business Council Ev 182

17 Trades Union Congress Ev 182

List of unprinted written evidence

Additional papers have been received from the following and have been reported to the House but to save printing costs they have not been printed and copies have been placed in the House of Commons Library where they may be inspected by Members. Other copies are in the Record Office, House of Lords and are available to the public for inspection. Requests for inspection should be addressed to the Record Office, House of Lords, London SW1A 0PW. (Tel 020 7219 3074). Hours of inspection are from 9:30am to 5:00pm on Mondays to Fridays.

Business in Sport and Leisure Ltd Chemical Industries Association Connect Midlands Engineering Industries Redeployment Group Limited (MEIRG) Unilever UK

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Trade and Industry Committee: Evidence Ev 1

Oral evidence

Taken before the Trade and Industry Committee

on Tuesday 2 November 2004

Members present:

Mr Martin O’Neill, in the Chair

Richard Burden Miss Julie KirkbrideMr Michael Clapham Judy MallaberMr Nigel Evans Linda PerhamMr Lindsay Hoyle

Witnesses: Mr Ian Brinkley, Chief Economist, Mr Richard Exell, Senior Policy OYcer, Labour Markets,andMs Hannah Reed, Employment Law; Trades Union Congress, examined.

Q1Chairman:Goodmorning,Mr Brinkley. Perhaps Q3 Chairman: You used the expression “quality” ofwork has improved. Is that just because it is full timeyou could introduce your two colleagues. I am not

sure if either of them have been before this permanent employment, or are there otherdimensions to quality that you would maybeCommittee before, although I am sure they have

been before others. identify?Mr Brinkley: On my right is Richard Exell, who is Mr Brinkley: We have primarily looked at these

quantitative measures, and what we have seen asthe TUC expert on labour markets and labourmarket policy and he wrote thememorandum that is well as the shift between permanent and temporary

and full and part time are falls in the number ofbefore you so, if you like, it it is a collective eVort; ifyou do not like it, it is his fault! Hannah on my left people in part time jobs because they cannot get full

time work, so there has been an increase in the shareis the TUC’s expert on employment law andemployment regulation. That is our team this of people who are in part time and temporary jobs

because they want to be in them, rather than becausemorning.they have no choice but to accept those jobs, andthat we think is some indication that the quality ofemployment has improved. It is much harder to getQ2 Chairman: Thank you. Maybe we could start oVqualitative judgments about whether employment inwith a general “softening-up” question, if I can put general has increased, and I think on the evidence onit that way. After, what, nearly seven and half, eight that we have rather greater concerns. Some of the

years of a Labour government, how would you survey evidence suggests that people feel lessassess the Government’s broad approach towards satisfied with work than they did 10 years ago, andthe labour market, either in terms of its flexibility or there is some indication, particularly in workingits inflexibility with the degree of regulation? In time, where progress has been very poor indeed. Sogeneral terms, how would you assess that? on some of these other indicators the debate on theMr Brinkley: I would say generally it has probably quality of work is much more mixed, but in terms ofmoved us a bit closer to the combination of quantity it has undoubtedly been a successfulflexibility and security that we see in some other approach.European economies. It has actually increasedregulation in the labour market. We have a

Q4 Chairman: Finally from me, you made the pointminimum wage for the first time, we have increasedabout part time working and obviously there is thethe strength of employment protection rights, tradegrowth of the supermarkets and 365 days a yearunions have a right to recognition and we havealmost employment, 24 hours a day. In someincreased the protection of maternity and paternityrespects you have opposed that. On Sunday openingleave, so in many ways we have moved a bit closerI remember long valiant campaigns led by USDAWtowards what we call the European social model, orand others, but in retrospect do you think things likea variant of it. In doing so it has been prettythat may be a kind of a Canute-like approach tosuccessful. Not only have we seen a lot of jobslabour market flexibility?created but also the quality of those jobs has gone

up, so job creation over the last five or six years, Mr Brinkley: Historically it was undoubtedlyopposed, I am not sure with overwhelming supportlargely permanent, a lot of full time jobs, a decrease

in the number of people in jobs that they do not want from rest of the trade unionmovement, but certainlyour shop workers did oppose that. I think the viewto do. So generally speaking it has been a successful

combination of strengthening regulation, bringing nowadays is more to emphasise the importance ofmaking sure that people are not forced to workus closer to Europe, and a lot of good outcomes in

terms of the labour market. antisocial hours if they do not want to, and that

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Ev 2 Trade and Industry Committee: Evidence

2 November 2004 Trades Union Congress

when they do they are compensated in a diVerent Q6 Miss Kirkbride: That might be to their cost, ofcourse, eventually, but that is another thing. Can weway, with additional payments and so on, so I thinkjust be clear what you were saying about thethe whole debate has shifted in the trade unioneconomically inactive? Were you basically talkingmovement. The whole question about whether 24about incapacity benefit recipients who have gonehour working has really increased by a huge amountthrough the roof in the last seven years? Who areis muchmore diYcult to imagine, because in the pastthose people you are talking about as beingthe large manufacturing plants and industries likeeconomically inactive?steel and coal worked 24 hours anyway, but it wasMr Brinkley: The two large groups are lone parents,much less visible. It was largely manual workerswhere the UKhistorically has not had a good recordworking in the big factories whereas now you havein terms of getting them into the labour market, andbanks and supermarkets and all the rest open 24the other group is predominantly older workers,hours, and it is much more visible and clearer tomany men, who are on long-term sickness andpeople. So the shift may not be quite as radical as wedisability benefit. We saw a huge rise of thesethink in terms of the shares of the workforce, butbetween the early and the mid-90s.there are undoubtedly diVerent bits of the workforce

which are now working 24 hours compared to thepast. Q7 Miss Kirkbride: And you have seen a bigger rise

since on the latter? Incapacity benefits claims havegone up quite significantly. Lone parents you areQ5 Miss Kirkbride: I am curious why you wish to right about but incapacity benefits have gone up amove towards the European social model when it great deal more.

seems to have delivered quite high unemployment in Mr Brinkley: The measure we are concerned with isGermany and pretty high unemployment in France not the numbers on the incapacity benefit; it is theand we have been very successful. Why should that numbers who say they want a job who are in thisbe a model you aspire to? area, and the numbers who say they want a job haveMr Brinkley: Unemployment varies a lot across stabilised since 1997. It has gone down a bit but notEurope. There is not a European unemployment by a great deal. So we have stopped the problemproblem. A number of European countries— getting any worse, but we have not been successfulDenmark, Netherlands, Austria, Portugal, Sweden yet in reversing it.—have all achieved very low unemployment rates Mr Exell: Also the number of people receivingcompared to our own so the fact we have some incapacity benefit has gone down steadily since 1997European countries with high unemployment and and so has the proportion of the working ageothers with low suggests you can have diVerent population on incapacity benefit. Go to the DWPvariations of the European social model to suit website and look at the quarterly statistics fornational needs and national circumstances. It is also incapacity benefit.worth making the point in the United Kingdom that Miss Kirkbride: There we are.unemployment is very much like an iceberg. Theopen unemployment we see is only part of our

Q8 Mr Evans: On Judy’s point, are you at allproblem, measured by the international statistics.concerned about the number of economicallyWhat we have compared to most other European inactive peoplewhomay not be seeking jobs but theycountries is this huge problem of inactive people of just do not see the labour market here as being

working age who say they want a job, and that is attractive enough for them to get oV benefits and getvastly higher here than in Germany or France, and into work? It damages business, does it not, the factonce you take that into account the diVerences that we have some skill shortages in this country andbetween the United Kingdom and these other we have not got people to fill them. We have to goEuropean economies narrows significantly. So I abroad to get workers in, to get plumbers andthink in terms of looking at the total demand for goodness knows what these days, and there is awork, the diVerence between ourselves and Europe whole host of inactive people out there who are notis much less stark than you would get by just looking interested in getting into the labour market.at the unemployment problem alone. Mr Brinkley: There is always going to be some but aMrExell: It is alsoworth noting that inGermany the lot of these people will not be receiving any benefitsunemployment problem is very much concentrated at all, and they do not want to participate in thein the eastern laender rather than the west, so there active labour market perhaps because they areis the continuing problem of the inheritance from looking after children or perhaps they have somecommunism there. There is also a forthcoming very long term illness, so I would not necessarily sayreport called the Kok report which is about the that we have a lot of workshy people who are notfuture of the Lisbon process, andwe understand that struggling to get into the labour market. I think inthe Kok report is very likely indeed to recommend terms of policy it is much easier to start with the verythe maintenance of the European social model, the large numbers who say they want a job and get thosecombination of flexibility and security that into the labour market as your first priority, becauseEuropean states have traditionally tried to achieve, at least there you are cutting into the grain of bothso certainly at the level of policy-making there is not human nature and the fact that people are giving youan impression of Europe pulling back from the a clear signal that they want to get into the labourEuropean social model at all. In fact, they are market and therefore are much easier to help

through the various agencies. So in terms of policyrenewing their commitment to it.

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priority that is my starting point. You always start up as areas for further action are, for example, somewith the things you can do, the easiest, and I think of the regulation and administrative burdens aboutthat is where I would centre policy to start with. actually starting a small firm or a new firm. That is

not really a problem for us; it is perhaps a problemmore for the rest of Europe, but I think it isQ9 Miss Kirkbride: When answering my question Iimportant to bear in mind that the European socialwas struck by the fact that you compared us with themodel and the regulatory environment is constantlysmaller countries in Europe and it is easier to workevolving; it is never fixed and never should be fixed,with employment policies in smaller countries thanand I think it is having that sense of dynamiclarger countries, and normally when we do compareadjustment to competitive pressure all the timeourselves we compare ourselves with the bigwhich is important, rather than saying, “You have topopulation countries where there clearly is a gap

between our unemployment figures and the French move rigidly towards either deregulation or, evenand Germans, etc, but what assessment have you further, tighter regulation”.made of America who, historically, have always Mr Exell: In this country it is also worthbeen much more successful at job creation than the emphasising there is a tendency to use the LisbonEuropean continent, and I wonder what your view agenda as shorthand for deregulation. That is notmight be, taking to it the opposite end rather than what it is about. The Lisbon agenda is explicitlythe European social model, on the success America about social inclusion and environmentalhas had with her economy? sustainability as well as economic competitiveness,Mr Brinkley: I think America has been quite and it is explicitly based on a social partnershipinteresting looking at the last four or five years, and model.the gap between the labour market performance inAmerica and the labour market performance inEurope has narrowed. There are some very Q12 Mr Clapham: Mr Exell, a short while ago youinteresting figures in the Kok report in one of the referred to flexibility and security which is embracedannexes which compares the performance between in this term “flexicurity”. Could you say a little bit1999 and 2003, and there it shows the more about that and how necessary it is really tounemployment rate in Europe going up and in stimulate and to ensure the continuity andAmerica going down. So I think the old view that sustainability of labour markets?America has had this unassailable lead in labour

Mr Exell: Yes. We are looking for a labour marketmarket performance has not been borne out bymodel in which flexibility and competitiveness arerecent experience. Secondly, America also has thisnot the enemies of security but are mutuallyproblem of inactivity amongst its working agereinforcing. That is particularly relevant to thepopulation, particularly amongst the unskilled,British case because, if you look at the problems weamongst blackworkers, amongst those in the poorerhave for our economy as a whole, as describedparts of America which have suVered from afor instance in the Porter report, what we havedeindustrialisation, so in many ways America hasis an economy where we are still competingsimilar problems in its labour market to us, andoverwhelmingly on the basis of cost in a world incertainly their historic record of employment growthwhich technological change and competitivehas not helped them overcome these centralpressures are making that less and less sustainable.problems.We need to move from a low road to a high road inour business strategy. Now, the high road approachQ10Miss Kirkbride: So Tony Blair is wrong to pushin which you invest in your workers, in which youthe Lisbon agenda?train them, in which you involve them in decision-Mr Brinkley: I do not quite follow.making, relies upon security. People are not willingto make the level of commitment to the firm that isQ11 Miss Kirkbride: Because Tony Blair tells the required for a high road model in an insecureBritish public that the Lisbon agenda is abouteconomy, so we need to combine flexibility andfreeing up markets and making Europe moresecurity. Now, diVerent countries have diVerentcompetitive, and deregulation, and you are saying,ways of going about this. We are not saying, and I“Well, that is completely the wrong direction to gohave to make this absolutely plain, “Just copy whatin because what we have been doing so far has beenthey do in Denmark or the Netherlands andremarkably successful.”everything will be okay”. Britain is a diVerentMr Brinkley: I certainly think you need to changecountry: we have to find our own route to it. Butregulation over time. It would be foolish to thinknonetheless the Danish and Dutch comparisons arethat the regulation regime in place 20 years ago isreally quite instructive. They have managed togoing to be still relevant today, so you constantlycombine generous benefit systems with growth ratesneed to revise, review and reform regulation, and inand productivity rates that surpass Britain’s, so it issome areas you may be able to get rid of it to changecertainly possible; the question is “Can wemanage ato new circumstances and, broadly speaking,British equivalent of that”, andwe think that we can.Europe has moved I think quite significantly inThat is a matter of intelligent product and labourterms of deregulating product markets, so a lot ofmarket regulation combined with investment inthe old protectionist tariVs and barriers to tradeskills. They are the two really important keystoneshave now largely gone within Europe. Some of the

areas which the Kok Commission report has flagged for this. But also with the level of the firm it will




need work organisation reforms, it will need we would give firms a strong incentive to raise theirgame; and for the country as a whole, that shift upinvestment—this is about changing a system, so you

have to operate at each point of the system. to the higher road is a really important preconditionfor future success.

Q13 Mr Clapham: Looking at the British labourmarket at the present time, are there any sectors Q16 Linda Perham: So what is your solution to thewhere you can see that peculiarly British approach productivity gap?developing? Mr Exell: Now, there is a question that we couldMr Exell: Interestingly enough in some ways the take the wholemorning answering!Whenwe and thepublic sector is showing signs of this. I think the CBI looked at productivity a couple of years ago forpublic sector forum is an indicator of the way the Chancellor we looked at four areas: innovation,forward. There are certainly far more attempts to skills, investment and best practice, and we needinvolve staV in decision-making than there were action in all those areas. The government hassome years ago, and there has been a significant already taken some important steps such as, forinvestment in skills in the public sector, so there I instance, the R&D tax credit which was one of thethink you could see some of the first stirrings of it. major recommendations we had on that. We stillAlso, across the economy we have had some need to improve our game on skills. The long tail ofelements of the institution building that we want to low-skilled workers in this country is one of themainsee, because if you want to create an environment in reasons for low productivity and one of the mainwhich the high road business model becomes easier reasons for high inequality, so once again the pointsto follow you need the right institutions for it, and in we are making about a fair society being a moreparticular we have seen as well as the creation of the eYcient society link in here. If we are tackling bothPublic Sector Forum we have seen the Low Pay we have to address the skills agenda. We also needCommission, we have seen the Pensions to be promoting best practice, and DTI is alreadyCommission. The diYculty we have is that at the doing quite a bit on that and the recent reforms onmoment this institution building tends to be ad hoc best practice should help. We do have historicallyand uncoordinated and we strongly believe that low levels of investment in this country butthere need to be broader forums—if that is the right unfortunately, if you look at some comparisons ofword—for discussing national economic policy and matched samples where people have been workingprospects. We have got the Monetary Policy with the same equipment in Britain and in otherCommittee, for instance, but at the moment none of European countries, we are still getting lower levelsthe forums we have involves the social partners of productivity when using the same equipment, soproperly, so we are not getting the national debate obviously capital investment cannot be the wholeabout the way forward for Britain that we feel we story. Once again skills is part of the issue, but alsoneed. there is a work organisation issue here. If you look

at the typical German Mittelstand company, theyhave a lot of middle-skilled workers trained to a highQ14MrClapham:Given what you have said and thelevel, and they are able to rely very often on leavingexplanation that you have given, then, you wouldthem to get on with the job and doing it, whereas insay that flexicurity embraces a kind of greaterBritain, because we have not invested in middle levelsecurity for the workers. It is not entirelyskills to the same extent and also because we havereregulation, though one would want to see somethis command and control tradition, we are not ableregulation, but it does not run counter to yourto get the same level of productivity out of workers.advocacy of a kind of anti-flexibility policy, becauseThe Americans get round this issue by throwingyou are saying ‘flexibility with security’. That is thegraduates at the problem, so they have high levels ofkind of framework you want?investment in the management of unskilled peopleMr Exell: Yes.which is their typical way of getting round theproblem. So you have a continental approach ofQ15 Linda Perham: I think, Mr Exell, you argue inhaving low-skilled production workers and anyour evidence against the assumption of a linkAmerican approach of having investment inbetween greater flexibility and greater productivity.management. We have tended to fall between theIf that is the case, do you think that greatertwo stools and not have either, which really is aregulation would improve productivity?weakness for the future, and we think that anMr Exell:What we are saying is that flexibility is aimportation of the European social model intomulti-faceted thing. There are diVerent types ofBritain would be to invest in the skills of people atflexibility. Some types undoubtedly are linked tothe bottom end of the range because that is the keyimproved performance, for instance, greater taskto getting fairness plus eVectiveness.flexibility within companies. What we are saying,

though, is that equally some types of flexibility justgive permission for a low road approach. For Q17 Chairman: Where do you see the trade unions

coming into this? Is it as a kind of policy forum? Isinstance, if you allow employers to have a hire andfire approach to their employees, thatmakes it easier it spectators in the wings cheering on the people to

greater eVorts? You have not really, as it were,to compete on the basis of cost, it makes it easier forcompanies to survive simply by constantly trying to institutionalised, if I can put it that way, the role of

trade unions in this new agenda. Where do you, orscrew higher production out of their workforce,whereas if we regulated to stop that type of flexibility your members, fit into this?




Mr Exell: We say that collective bargaining and those two approaches: one which was socialpartnership based, the other driven eVectively bysocial partnership are the biggest missing

institutions thatwe have.When Iwas sayingwe need DTI lawyers, is quite instructive. If you get the socialpartners actively involved both in designing andan institutional environment that promotes the high

road approach to competitiveness, unions are the implementing regulation you will get a better resultbecause these are the people who have to live withbig missing institution in that picture. We have lots

of evidence that firms are more likely to invest in the results and know exactly what you have to do toget something that is workable in the workplaceskills when they have a recognised trade union; that

they are more likely to invest in health and safety rather than something that satisfies some of thelegal niceties.when they have a recognised trade union; they are

more likely to innovate when they have a recognisedtrade union—at the very least firms are more likely Q19 Richard Burden:Do you think that sort of thingto involve their workers in decision-making when could happen regionally?they have a recognised trade union. Now, that is Mr Brinkley: I can see no reason why it should not.putting it at its absolute mildest. There is one study We think the regional development agencies havewhich said that firms consulted their workforce only been a bit of a success story precisely because theywhen they had a recognised trade union, so we think have tried to replicate some of that thinking andthat we have the potential to contribute a great deal approach in the work that they have done. Theyand this is a common feature of the European social need to build on that but I cannot see any reasonmodel in other countries. Now, it works in diVerent why we should not see an equally good success storyways. For instance, one reason why Denmark at the regional level.always comes down towards the bottom of thesetables of how regulated a labour market is, is simply Q20 Mr Evans: You have just surprised me a bitbecause in Denmark they hand everything over to there by saying something I did not expect to hearthe unions. They have a highly unionised economy, from you which is that there are rules andvery high levels of collective bargaining coverage, regulations within industry that do not helpand so they do not need so much in the way of anybody and, indeed, hamper industry and shouldlegislation because the unions are doing it all for the be got rid of. Why do I not associate the TUC witheconomy in any case. In other countries you have trying to roll back some of these useless regulationsGermany’s tradition of tripartism; you have Spain’s that are dogging industry at the moment?new social pact which is looking for a way out of Mr Brinkley: The problem with the Working TimeSpain’s traditional problems—so it is certainly Directive is that because of the opt-out, because ofpossible for us to find a way forward that builds on its weakness, it does not do the job it is supposed toour traditions; we might well see a collective do, which was reduce the long hour culture—bargaining structure that was more decentralisedthan in other countries if we were having a British Q21 Mr Evans: You have reassured me now youmodel, and we would certainly like to see it linked to have gone back on to “We need stiVer regulations”!the decentralised governmental institutions, so we Mr Brinkley: No, no. The reason why it does notwould like to see unions and employers working work is because it has been made too weak. Itswith the regional development agencies, for objective was to reduce long hour working in theinstance, and the local authorities to promote economy, and it has not succeeded in doing that. Yeteconomic development. We think there is a very you have this bureaucracy there for a regulationimportant potential role for unions, and we stand which is now so weak that people still fill in forms alleager to play our part! the time and sign the opt-out, yet it is still not

achieving what it was supposed to do, and that iswhy it is not really pleasing anyone, to be honest.Q18 Richard Burden: Just picking up on your last

point, are there any examples of best practice of thatkind of thing happening that you would want to Q22 Mr Evans: Better do away with it then?point us to as things that could create that kind of Mr Brinkley: Well, if you get rid of it you areculture you are talking about in the United condemning the United Kingdom workforce to

working these very long hours compared to the restKingdom?of Europe. You are not tackling the centralMr Brinkley: I think one example of institutionproblem—building is really the workings of the Low Pay

Commission which has both trade unions andemployers active in it. It has been a huge success Q23 Mr Evans: But you also know there are a lot ofstory as an example of a regulation that has been workers out there who want to work longer hours tointroduced at very little adverse cost to both the earn more money to make provision for theiremployers and the economy yet has done a lot for families.low paid workers. You contrast that with, say, Mr Brinkley:Well, the experience we have is that isworking time which seems to have pleased a small minority. A much larger number say theyabsolutely no one and has not achieved very much. would rather work shorter hours, and where tradeSo we have this bureaucracy, which firms have to union negotiated agreements have been brought in,comply with, which has undoubtedly helped make particularly in the transport sector, we have seenlawyers rather rich but has done no good in the substantial reductions in working hours without loss

of pay simply because firms have had to reorganiselabour market, and I think the contrast between




their workforce and reorganise the way they do evidence we have, that we are going to need what theAmericans call ‘post placement’ support. One of thebusiness in a more eYcient manner. So the transport

sector shows it can be done through negotiation, and key points here thatwewould say froma trade unionpoint of view is that you need to work carefully withwewould certainly like to see that approachwidened

out to other industries. employers, you need to understand what employers’needs are, because the only people that theChairman:We will probably come back to this in a

minute. employers are going to allow into the workplace areservices that they can see are going to becontributing to the goals of being in business as aQ24 Judy Mallaber: How do you respond to thewhole. So we are going to need post placementargument that greater regulation benefits those whoservices that are sympathetic to the needs ofdo not particularly need it but deters employers fromemployers and designed in consultation withrecruiting lower skilled, unskilled workers, otheremployers, and that needs to be there for the longpeople who have disadvantages of various kinds?term. We have good reason for believing that whatMr Exell: I think perhaps the best answer to that isyou have with many of the people who are in whatwhat has happened since 1997 when, as we werethe Treasury identified five years ago as the “lowsaying, we have had a partial reregulation of thepay/no pay cycle”—whereby people get a job, theylabour market in this country. If you look at thekeep it for a few months and they are unemployedemployment rates of disadvantaged groups: overfor a couple of years, get another job for a few50s—the employment rate has gone up from 64.7%months, are unemployed for a few years again—theto 70.2%; ethnic minorities from 54.8% to 59.4%;reason why many of them get into that cycle islone parents gone up from 45.3 to 54%; disabledbecause of the other problems they havewhichmakepeople from 43 to 50.1%. For the lowest qualifiedit really diYcult for them to hold on to their jobs intheir employment rate has gone down but there wesome cases and, in other cases, because the only jobsdo think that there is a problem about the decreasingthey can get are inherently insecure ones, so whatdemand for unskilled labour. For mostyou need is services that are staying with them afterdisadvantaged groups partial reregulation of thethey have got into those jobs, first of all to help themlabour market has been accompanied by awith things like family crises, addiction problems,narrowing of the employment gap as compared withproblems with housing and so on, or to help them tothe rest of the population. This is one of those casesuse the job they have just got which is not very securewhere I find, when we are talking to people on theas the firm point for leaping up to a better job, whichother side, they do tend to say, “Well, that is all veryis more secure. Now, what we are hoping is that, aswell in practice but what is your theory?”, and thethe government gets more and more successful withtheory here is that we have a sensible approach togetting people into jobs—andMr Blair said a couplereregulation which bears in mind the possibility thatof weeks ago that the Government is aiming to getbadly designed regulations can cause problems. Wethe employment rate up from 75–80%—as thatare not, in principle, enthusiasts for labour markethappens so the savings and the increased taxregulation regardless of how it is designed,revenues that come from that can be used to provideregardless of what eVect it is going to have. We areextra investment in the post placement services thatenthusiasts for intelligent, well-designed labourwe want to see. At the moment they are a tinymarket regulation which, on the whole, is what weproportion of United Kingdom active labourhave had so far. We want to see it go further; wemarket programmes, and hopefully furtherwould like some more of it in some areas such aseconomic success will mean that as a proportion ofending the opt-out, but we are not against thespending they can be increased.Government’s attempt to craft regulations that are

going to have a positive eVect, and that is what wehave seen so far. Q26 Judy Mallaber: One of the biggest areas where

we do not utilise the potential skills of the workforceis amongst women who are limited to a very limitedQ25 Judy Mallaber: Looking at some of thoserange of occupations, and yet again there is agroups, the people you talked about earlier, thecontradiction. To enhance the overall use of theinactive people who say they want a job, now thereworkforce you need to be able to give both men andmay have been success in getting them to work butwomen opportunities to combine work and home,how far is that to do with other areas of extrabut at the same time you will often get employersassistance that they clearly need, and how far is it tothat say “It is not worth my employing a womendo with the impact of employment reregulation?because she will go oV and get pregnant” or they willMr Exell:Yes. One of the big challenges that no onenot invest in skilling her and moving her on to otherhas really worked out is, firstly, how we get the mostareas of work. How do you deal with that dilemma?disadvantaged into jobs and, secondly, how we keepMsReed: Interesting questions were raised when thethem there once they have the jobs and how we helpPart timeWorker Regulations were introduced backthem to progress once they have got into their jobs.in 2002. It was argued that, by introducing newIt is all very well to get people into a job, any job,employment regulations providing more rights tothough we are getting more success on that than wepart time women workers in particular, fewerhave ever had before, but across the whole world noemployers would be interested in employing women.one has really cracked this issue about how we getHowever, oYcial statistics demonstrate that sincepeople to keep their jobs and to progress in them. It

does seem very likely indeed, looking at what 2002 what we have actually seen is an increase of 7%




of people entering the labour markets through part regulations are introduced, demand increases in thecase of part time workers, or relatively does nottime employment. And women using these newdecrease faster in terms of fixed-term employees.rights benefit not only from equal treatment in terms

of terms and conditions of employment but also arebenefiting from new opportunities to access training Q28 Mr Evans: On the flexibility front, do youto enable them to create new career opportunities for recognise as well that there are some businesses thatthemselves and to move on to better quality jobs. are small but that simply could not participate in aThere are similar arguments at the present time number of the things that you said would betaking place around the issue of agency workers and beneficial to them on flexibility? Do you recognisewhether there should be regulation for agency that there is a size issue there?workers on the basis thatmany employers argue that Ms Reed: There are a variety of examples I thinkagency work oVers an attractive form of flexible drawn from the small business sector. I was recentlyemployment for women in particular with caring at a conference with an employer from the Smallresponsibilities but also with men for caring Business Council, who said he has sat down with hisresponsibilities, and if we were to introduce whole workforce and talked about working timeregulations in this area employers would reduce arrangements because he was heavily reliant upon

women workers. That was his principal source oftheir demand for agency workers. Now, the TUCemployees, and he recognised the need to match thedoes not accept those arguments, partly because theneeds of employees to balance their working timeempirical evidence and surveys taken of employersresponsibilities and their family lives. That had beenshows that the use of agency work within the Uniteda very successful example. He said he wasworking inKingdom is not based on a cost-based analysis fora sector within a local area where it was very diYcultemployers but on their need to achieve flexibility.to access the appropriate skilled members of staV.Also research carried out by the EuropeanHe, unlike other small businesses operating in thatCommission at the present time shows that mostarea, had a number of people who were queuing upagencyworkers across Europe in countries includingto work for him as an employer. There are otherthe United Kingdom have far fewer access toexamples of small businesses that have used jobtraining opportunities than other forms of workers.share arrangements and other forms of flexibleSo often they will find themselves in very short-termworking. Our encouragement would be to smallassignments with no investment for their employersbusinesses to sit down and talk with their staV,in terms of enabling them to create new careerideally through elected representatives, to look atopportunities. They therefore get trapped into awhat flexible systems and what flexible patterns ofcycle of moving from one low-paid, low-skilled jobwork wouldwork for their work place.We recogniseto another without really having the opportunity toboth the needs of the employee and the employeradvance within the labour market. So our argumentneed to be met. But a collective conversation aboutor analysis of new equal treatment legislation thatthese issues often comes out with sensible solutions.we have seen since early in this century has benefitted

individuals who often operate at the margins of theQ29 Mr Evans: You say elected representatives, butlabour market who are attracted to more flexibletheremay be some small businesses that only employforms of work but who benefit from a system oftwo or three people, and for them to go down theregulationwhich enables them to access training. Onroute of flexibility may be much more diYcult. Youa counterpoint we also believe that these bringare pointing to one business example where it hasbenefits to employers because investment in a widerworked, but do you recognise as well that there willrange of workers raising the skill levels of morebe others where they simply are not able to benefitindividuals who want flexible forms of work ensuresfrom it because they have not got a pool of peoplethat the quality of the pool of workers that arelooking for part time work?available to employers will increase. Therefore theMs Reed: The smaller the organisation the morechoices and flexibility available to employers willdiYcult it may be to use diVerent forms of flexibleincrease.employment. But small employers are the same asany size of employers and they need to be able to

Q27 Judy Mallaber: But how successful are you in retain skilled members of staV. And often they havepersuading employers of that argument, that it is families and have family pressures. One of the key

findings from many empirical surveys is thatworth taking on that investment in those skills andemployers who investigate and consider flexibletraining?forms of work are more successful in retainingMs Reed: Well, certainly the evidence in terms ofskilled members of staV, and therefore do not needpart time work and also the evidence of what hasto invest in training new members of staV that theyhappened to the temporary work sector—wherewould have to recruit to replace these members ofagain we have seen new regulations introduced forstaV who may leave because flexible workingfixed-term workers—is that relatively in thepatterns are not available.temporary sector there has not been a decline in

the use of people on fixed-term contracts since theintroduction of the regulations. So while at the Q30 Mr Evans: On the general point of smallerpresent time the employers may argue that businesses, with all the rules and regulations that thethe regulations will result in lower levels of demand TUC might like to roll out themselves as protection

for workers and all that sort of thing, do youfor these forms of workers, in practice when the




recognise that there is any scope at all for having and stress and sickness at work. There is also amore flexible regulations for smaller businesses relationship between these very long hours andbecause they find it more diYcult to aVord to do workers making more errors when they are actuallysome of the things that the huge industries are able at work, which ultimately is going to impose a costto aVord because they have personnel departments, on firms in terms of the reliability and the quality ofwhereas in smaller businesses the owner is the the services and the goods they are producing. So wepersonnel department? would see this as a productivity boosting measureMs Reed: We recognise that the conditions which rather than a productivity decreasing measure.enable businesses to grow and to thrive often applyright across the board, and that would include fair

Q33 Richard Burden: So what you are saying is thattreatment of members of staV. We are verymoving away from a long hours culture wouldconscious that in many small businesses,improve productivity?employment disputes have become a big issue. AndMr Brinkley: It is our view that this would help.the Government’s own statistics show that the small

business sector gives rise to the largest proportion,or a disproportionate number, of employment Q34 Richard Burden:Do you see the removal of thetribunal claims, which suggests that employment opt-out as the same, because they are diVerentrelations are not always as good within the small issues? There is an argument that says you couldbusiness sector as they might be. Our view would be come back with a long working hours culture and atthat if small businesses, and many of them do this, the same time keep some kind of individual opt-out?adopt better practices and look at putting in place MrBrinkley:The experience in theUnitedKingdompolicies, and work with organisations such as ACAS does not suggest we would have to wait an awfuland the Equal Opportunities Commission, not only long time for that to happen. Our calculations arewould they help to resolve employment rights that we would take forty years at the present rate ofdisputes and retain quality skilled staV within their progress to get down to the European average ofworkforce but also, we would argue, become more

people working more than 48 hours if you keep thecompetitive and productive in the future.status quo, so that is an option I do not think is reallyviable. I do not think you have any choice. Either

Q31 Mr Evans: I recognise that last point but it you get rid of the opt-out or you retain the longmight well be that in the very small businesses the hours culture, but I do not think you have a halfwayowner is working so hard themselves to keep the house between the two.business going that sometimes they have not got thetime or even the inclination. They lose thewill to live,

Q35 Richard Burden: Why do you think generallyquite frankly, at the end of the day to sit down andthat businesses are opposed to removing the opt-then do the paperwork, a lot of which is rules andout? There will be some that just think that if peopleregulations from government, and maybe that iscan work all hours God sends then that is good forwhere they fall foul sometimes of some employmentproductivity, and there will be some that say that,legislation because they have not got the time to keepbut presumably there will be an awful lot more thatup with it. There is a whole mountain ofwill say “We do not agree with that, but still we thinkpaperwork there.removal of the opt-out would be detrimental to us”.Ms Reed:Which is why we very much welcome theWhy do you think they think that?work the DTI is doing with ACAS at the presentMr Brinkley: I think there is a slightly nuancedtime and with the Small Business Council to try and

ensure that the forms of advice and support response from business, perhaps rather moreavailable for small business matches their needs. nuanced than is sometimes said. Those firms whichAnd that they can have workplace visits from are actually working quite comfortably within the 48experts who can help them with introducing basic hours do not care much one way or the other, butemployment policies within the workplace. So we because it is not aVecting them they do not feel theyrecognise that small businesses do face challenges have to support it. There are others who perhaps arebut we welcome the fact that the DTI is seeking to not aVected very much by the 48 hour one but arechannel resources to assist them. just opposed to it in principle, and they do not likeMr Exell: It is worth recalling that the Kingston the idea of the government intervening in theirUniversity research for the DTI did find that particular work organisation issues, and then therecomplying with employment regulation was quite a is a disappointingly large number who do it becauseminor issue for most small businesses. it is the easy thing to do. It is firms taking the low

road, which we referred to earlier, in that by goingdown the path of longer hours you can get by, youQ32 Richard Burden: Can we go back to thecan survive, you can compete on that basis, but it isWorking Time Directive? I am not entirely clearvery much the easy option. It is not going down thewhether you are saying that removing the opt-outroute of high investment and high productivity. Ifwould improve productivity or whether you arelong hours were really essential for improvingsaying that removing the opt-out would have abusiness eYciency then the United Kingdom woulddetrimental eVect on productivity.be up towards the top of the European league inMr Brinkley: We think it would have a positiveterms of workplace productivity, not at the bottom.eVect. There is clear evidence that there is a

relationship between these very long working hours Certainly if you look round Europe, they have




clearly seen a reduction of the long hours culture that all Directives provide for a derogation for theimplementation of the regulations at enterprise levelthere go hand in hand with very long high levels ofor national level through collective bargaining.work place productivity.

Q39 Mr Evans: So you are not opposed to aQ36 Richard Burden: I am not trying to take up thederogation?issue of long hours culture and I accept your viewsMsReed:Well, our view is in the context of workingthat if you give any concessions on an opt-out youtime but also in the context of other forms ofencourage that, but let me put to you an exampleregulation that collective bargaining oVers the mostthat I have had put to me. I work quite closely in thesensible way forward to ensure that the minimummotor industry particularly with the performancestandards which are set out in the legislation areengineering motor sport industry, they have lobbiedintroduced in a way which meets the needs of thesaying “The area we are involved with is in gettingworkforce of the particular enterprise but also thecars ready to race on a weekend, and if you have notneeds of the employer. That does not mean we aregot the car ready it does not mean the race does nottalking about a diminution from the minimumstart you just have to do it, and if that meansstandards or any derogation from those minimumworking through the night before that is what youstandards, but introduce the standards in a way thathave to do”, and I am not talking about the veryis flexible. And working time is probably the bestwealthy teams here but right down to the small firmexample of that where we have an individual right tothat produces widgets that go into a bit that goesrequest to work flexibly which we would suggestinto a bit that is needed at the weekend. Now, whatmaybe is not the best way forward to try andthey are saying is not that they want a long hoursreorganise working patterns to meet the needs bothculture, but that there will be times where people willof employers and individuals.Wewant to retain thathave to work incredibly long hours, and they do notindividual right but we believe the aims of thathave a problem, they say, in terms of coming to aindividual right can be best achieved through avoluntary agreement with their employees aboutcollective route, through social partnership withindoing that, but they have a problem with codifyingorganisations. And our Changing Lives projectthat in a way that can meet a whole lot of forms toshows examples of where trade unions have workedbe filled in at the end of the year or the end of thevery successfully to match both the employer’smonth. Do you recognise that as being a potential operational needs and also the workforce’s needs inproblem in that example or perhaps in other terms of caring responsibilities, and also requests forexamples in the motoring industry, or elsewhere? career breaks and other forms of flexible workingThe entertainment industry? patterns.

Mr Brinkley: If they can get to a voluntary Mr Exell: In the Changing Lives project—which theagreement, the question is why have not they done it TUC was one of the sponsors of—there was a veryalready? Why have not they moved to a more interesting experiment in Bristol libraries, forflexible system? instance, where working together the council was

able to combine oVering flexibility for staV withcaring responsibilities with opening up the library atQ37 Mr Evans: Some would say they have done ittimes at the weekend and in the evenings, foralready, that they would not be able to carry oninstance, when it had not previously been availabledoing it if the opt-out is removed, because you couldfor local citizens. One of the reasons why we supportnot come to a voluntary agreement and have an opt-social partnership is we think that you needout. That is what they are saying?regulations to set up basic standards but, if you wantMr Brinkley: In our view the opt-out and theto apply things in the context of a workplace withoutregulations contain quite a lot of flexibility insidea heavy-handed approach, something that meets thethem. It does not say you cannot work more than 48needs of the people that are going to be aVected byhours over a weekend if you are going to get readyit, then unions and employers who know thefor a race; it says you cannot work more than 48company that they are talking about are best placedhours consistently over a long reference period.to do that. For instance, when the Parental LeaveDirective came out there was provision in that thatwe took up saying “We would like to see thisQ38 Mr Evans: In terms of the model of socialDirective implemented on a social partnership basispartnership that you are talking about, you do notwith government, unions and employers comingwant to have in a sense regulation for the sake of it,together to try and work out how best to apply thisand if it can be done by some kind of socialin theUnitedKingdom.”Unfortunately we were thepartnership model on the ground whereby, perhapsonly people saying that, so it was not implementedthrough representative unions and in other casesin that way, but we are certainly willing to take upnot, employees and employers are agreeing a fairour role to promote flexibility.system of regulation for themselves, how could that

be developed in the United Kingdom alongside aremoval of opt-out which it could be said would Q40 Richard Burden:One further question: you say,prevent them doing that? and I cannot remember where, that you reckon thatMs Reed: In some ways that option is already the DTI have overestimated the negative eVects ofavailable to us, not only in the Working Time removing the opt-out. Could I ask what estimates

you have made of the other way round?Directive but also in other European legislation, in




Mr Brinkley: We have looked at the Labour Force there are diYculties for unions as well as gains, but Iwould say, by and large, where collective bargainingSurvey, which is the source of most of these figures,

and where we think that the DTI has over- influences the outcome, then you have got workingarrangements that look fairly sensible and certainlyinterpreted the results from that survey, is that they

have assumed that everyone who says their those firms, I think, would cope very easily withmoving towards the end of the opt-out.contracted hours are more than 48 hours are being

paid for that, and that is not what the survey tellsyou.All it tells you is that these hours are contracted;

Q43 Chairman: The position of trade unions in theit does not tell you whether you are being paid orconstruction industry is somewhat weaker than itunpaid for them, and our estimate is looking at—Iused to be, is it not?think a more reasonable interpretation of theMr Brinkley: Yes.question—which is that the number of people

working beyond 48 hours contracted and paid ismuch less than the DTI is suggesting. So the Q44 Chairman: Whereas in printing it is still prettypotential diYculty you have of going down to the 48- well-organised. Union organisation does not seemhour limit is therefore a lot less than they are to be the factor there, or is it just small printingsuggesting. businesses have a diVerence in culture?

Mr Brinkley: I sometimes think printing is almost aunique culture industry in certain respects. There areQ41 Chairman: Can you tell us, on this issue, whatnot too many parallels, I think, we would want toyour experience is of European adherence to thedraw across from it.Working Time Directive? One of the problems that

is often suggested about the British interpretation ofEuropean regulation is that in the first instance it Q45Chairman:That has been my experience as well.should be adhered to whereas it seems in some Mr Brinkley: I would say printing is the one we havecountries that there is more a cultural voluntarism, most in mind when we are talking about theif I can put it as discreetly as that! diYculties trade unions will have, in some areas,Mr Brinkley: This is often diYcult to actually pin convincing their own members to be sensible anddown, exactly how rigorous our European plan to reduce their own working hours. But, as Icompetitors are in enforcing or implementing say, generally we see collective bargaining andEuropean regulation or legislation. I would say in collective bargaining arrangements as helpingmost countries the Working Time Directive has not companies cope with the directive quite easily.been regarded as a very big deal either way, becausein most of these countries the national framework,

Q46 Chairman: So, set aside printing for thethe national legislation, is already setting workingpurposes of the discussion, what you are saying ishours well below the 48-hour limit; so for mostthat you want the Working Time Directive to becountries this really was not a big deal. Certainly inintroduced in order to protect what arethe UK—and to some extent Ireland—where thispredominantly non-unionised and non-organisedwas seen as a major change in the way the laboursections of the labour market?market was regulated, we are the ones that tended toMr Brinkley: That would have a major eVect onhave the biggest problems with it. As I say, in thatthat, and also have a major eVect on some of theparticular instance, I can see why most othernon-manual workers, particularly professionalEuropean countries would not see this as a majormanagerial workers, some of which are organised onproblem. I suspect we may have more problems, lessthe public sector, but a lot are not. So we areon the labour market, more on product regulationapproaching this not so much because we think thisareas, and certainly there are some examples, Iis going to get huge gains for union members inthink, where you might say that implementation ofparticular, but because it will give huge gains to thesome of the directives in this country has beenworkforce in general, and that has been ourprobably a bit over-enthusiastic, compared to thoseapproach on regulation, really across the board. Ifelsewhere.you look at the national minimum wage, hardly anyunion members get that, and quite right too,

Q42 Chairman: Have you made any assessment otherwise unions would not be doing their job, butwithin the membership of the TUC, or the unions, we still think that is a very important labour marketand the areas where the unions are negotiating? To regulation because it primarily increases the wageswhat extent would the Working Time Directive be of the most vulnerable in the workforce.unnecessary, because by negotiation and by customand practice the hours have been less than 48?Mr Brinkley: By and large where union negotiations Q47 Chairman: It also has the advantage of raising

the level of the water for all the other boats as well,and agreements are in place, firms are pretty close tocomplying with the directive anyway, particularly in does it not? If you raise the national minimumwage,

everything goes up?engineering and areas such as retailing, and so on.That is not a huge problem. There are greater Mr Brinkley: It has not up to now. It may now be

starting to. The minimum wage has finally got up todiYculties, I think, in some particular industries,notably printing, where there is a tradition of long a level where we think it may be having some impact

on wage rates above. I think what has been strikinghour working and in areas such as construction,which again has a tradition of long hour working. So so far is the lack of knock-on eVects actually.




Q48 Mr Evans: Why is the TUC so in favour of the agency to do the filtering, to do the interviewing,to make sure they are selecting people with the rightthe job destroying Temporary Agency Workers

Directive? skills. That is basically what they are paying themtheir fee for.Mr Brinkley: We certainly do not think it job

destroying. The two European countries wheretemporary work is probably the most developed, at

Q51Chairman: But are we not maybe putting applesleast in terms of agency work, are France and theand oranges together in the same bag here in theNetherlands. The Netherlands, in particular, has asense that for low-wage, relatively low-skilledhuge agency labour market, and they have done itemployment in some respects the agencies just do theagainst a background of pretty strong employmentdirty work for the management; but what about thatregulations. I do not think the evidence reallysector of the economy where it is high-wage, high-supports the idea that regulating agency workers isskilled, individualised working, where it is as muchsomehowgoing to decrease their use in the economy.for the convenience of the individual worker. I amthinking of IT or some of the design functions of

Q49 Mr Evans: The CBI certainly does and the engineering and things like that, where people areChartered Institute of Personnel and Development. literally parachuted into a job for a period of timeThey both say that it is going to make Britain less and these folks do notwant towork 12months of theattractive for inward investment, it is going to make year; they do not need to. Are we perhaps lumpingcompanies that would otherwise use temps decide them in with the university student who needs a jobthat they are not going to do so because of all the in a call centre and goes along in early June says,extra red tape and the extra cost that is involved in “Give us a job”, sort of thing, and they get one untilthe whole thing; and a number of workers that get September, or the mum who just needs a temporaryinto the labour market in the first place via agency job, and the agency is the place to do it, althoughjobs are not going even to get that. I do not know if quite often the result is both of them get exploitedthe general idea is to try and make Britain less but the others do not. Are we maybe not confusingcompetitive in this area. Is this what you want? diVerent bits of the labour market under theMr Brinkley: Let’s take these three arguments one umbrella of temporary working?by one. Inward investment: I think it is extremely Ms Reed: Looking at the proposed regulations onunlikely that a huge multinational company coming agency workers, there is no reason to presume, it isin in a high value-added service or a high value- certainly not our conclusion, that the regulationsadded good is going to be concerned about the will impact in any way upon the high-skilled, high-regulation of temps. These are companies which paid sector of the agency workers regulations, of theoperate in labour markets throughout the world, agency sector. Partly because the rights to equalincluding those in Europe, and their decision is treatment contained within the agency sector onlygoing to be based on other things than what—to give the agency worker the right to parity with userthem—is really a very minormeasure. Secondly, will members of staV; the right to equal treatment doesthis actually reduce job opportunities? We do not not go the other way. So if a high-skilled worker hasthink so. Agency work obviously has a role to play been employed on a short-term assignment becausein getting people into the labour market, but we do they oVer a particular skill; the new rights would notnot see it as a major one or a decisive one. Thirdly, mean that the permanently employed members ofcompanies by and large will go on employing staV would have the right to equal treatment withtemporary labour for the reasons that they always that high-skilled member of staV. What the Agencyhave done: to provide cover for maternity leave, sick Worker Directive will do, however, is to provide aleave, to cope with the ups and downs in production, framework or a floor of rights for the low-skilled,and those overwhelming economic and industrial low-paid workers who often access the labourreasons will continue. We have no reason to think market through the agency sector. And the DTI’sthat they will not go on employing temps to meet own regulatory assessment on the impact of thethose sorts of demands simply because you have directive showed that the levels of pay inequalitymade what is, after all, a fair and modest change in faced particularly by low-paid workers within thethe way agency work is regulated. agency sector is very high, in the region of £2–3,000Mr Evans:We will ask the CBI shortly whether big a year, which we would recognise as being a majorcompanies are not bothered by this particular sumofmoney for particularly low-paid workers.Werevelation. are also concerned that many employers report, and,

indeed, agencies report, that they have a problem inrecruiting enough agency workers to matchQ50 Chairman: In some respects would you say thatemployer’s demands. One of the reasons for this, wethe agencies are now assuming the HR function thatbelieve, is that agency work is not an attractivethe personnel department in days of old used tooption because agency workers do not benefit fromfulfill? They take on the responsibility of hiringmost employment rights contained within UKpeople, of agreeing a rate for them, and they do soemployment law, including family friendly rights,because it is virtually subcontracted to them?but also job security rights, unfair dismissal rightsMr Brinkley: I think it is certainly true that theand rights to redundancy pay. And theagencies are providing some sort of filter role forGovernment’s own statistics have shown that, of allemployers. Employers go to agencies and willforms of work, agency work is probably one of thespecify they want a high standard of work in a

particular job quite rapidly, and they are relying on least attractive within the labour market. Only 30%




of agency workers would choose agency work over issues of unfair dismissal and redundancies isbecause alongside debates taking place on thea permanent form of employment. We recognise

that in the changing labour market employers do Temporary Agency Workers Directive, the DTI isalso carrying out its review on employment status,need more flexible forms of work, but let’s employ

fair and attractive terms and conditions for those. which looks at those categories of workers who falloutside of UK employment legislation. Agencyworkers are probably the largest group of workersQ52 Chairman: I remember being lobbied a couplewho do not benefit from existingUK legislation. Butof years ago by the people who, as it were, employedthe European Directive, that the question wasthe high flyers, or who recruit the high flyers, deployfocused on, would provide only equal treatmentthem and then they leave. Are you tellingme that therights in terms of pay, hours and holidays. The issuefears they expressed to me then have now beenabout employment status and access to unfairlargely addressed and that they are not concerned indismissal rights or redundancy pay is matter forthe way that once they might have been? Because Idebate within the UK andwe await the long awaitedget the impression talking to employers, as distinctresponse from the Government on employmentfrom the agencies, that the message has not gotstatus.through.

Ms Reed: Our view is that that concern is misplacedQ55 Miss Kirkbride: Your view of that would be?because, provided those high-skilled workers receiveMs Reed: The TUC’s view is that all workers,at least theminimum standards that are provided forregardless of the nature of their employmentpermanent staV within the organisation, therelationship, should have access to the same range ofregulations will not impact upon their deploymentemployment rights. The reason for that is that—or use within the labour market. The aim of the

Agency Worker Directive, as with all employmentregulations, is to provide a floor to ensure that the Q56 Miss Kirkbride: You are a temporary workermost vulnerable low-paid workers benefit from fair and you get redundancy pay. I do not get it!treatment in their work. Ms Reed: You only qualify for redundancy pay if

you have been in the workplace for over two years,and most agency workers would never qualify forQ53 Chairman: I have no problem with that side ofthat right. However, we are conscious that in someit. What I do have is a concern that has beensectors, in manufacturing, and in the public sector,expressed tome and has yet to be properly addressedagency workers were being employed on a muchof this rather small, privileged, in fact, very fortunatelonger term basis. These workers often havegroup of people who can, as I say, literally parachutesignificant responsibilities in terms of mortgage andthemselves into the labour market in well-paidtaking care of their families. We believe that it isemployment and can only do so by the mechanismunfair that those workers simply can be fired at theof specialised agencies who deal with that. It is notwill of the employer without needing to go throughexploitation, it is mutual convenience, and usuallyany formof procedure or needing to pay redundancyrather large sums on both sides, I have to say. I canpay to those individuals; but the vast majority ofsee the temporary position, but I think thatagency workers within theUKwould not qualify forsomehow the message has not got through in thethose UK based job security rights such as unfairway that it should have done.Wemay have to call indismissal and redundancy pay because theirpeople like this to get their fears and anxieties,assignment would not be long enough in thebecause they are quite often the kinds of peopleworkplace to qualify them for those rights.whose presence creates employment, has a cascade

eVect further down the line, and it is a bit like thework we have done with ECGD. The important Q57 Miss Kirkbride: You say pay on the Europeanthing is that we get the contracts, because then the directive, does that include a pension contributionsupply chain comes into play at a later position. I or does that not form part of the pay?certainly am a little concerned about the somewhat Ms Reed: Our understanding of the definition ofsimplistic almost knee-jerk response that comes ‘pay’ is the same as equal pay as within EU law.from yourself; and we will be having the CBI in a However, there have been debates, or there wereshort while and we will have a look at their knees as back in 2002, as to whether the directive shouldwell, in a professional sort of way! cover pensions or not. The TUC’s view on pensions

is that occupational pensions should be covered bythe directive—Q54 Miss Kirkbride: I just want to be clear about

what the floor was. You mentioned when you weretalking to the Chairman and also to Nigel about Q58 Miss Kirkbride: For temporary workers?

Ms Reed:—to protect those members of staV whoredundancy pay. Does redundancy pay form partof— are on very long-term assignments, particularly in

the public sector but also in some forms ofMsReed:That does not form part of the TemporaryAgency Worker Directive. The Temporary Agency manufacturing. However, as with all equal

treatment rights, there is an objective justificationWorker Directive would give agency workers equaltreatment on issues relating to pay, holidays, hours. defence for employers; and our view is that in the

vast majority of cases where agency workers are onIt would also, importantly, give agency workersthe right to access training opportunities within short-term assignments employers will not need to

give rights to agency workers to access occupationalorganisations. The reason why I mentioned the




pension schemes because the equal treatment rights treatment in terms of holidays and hours andtherefore their comparison should be with thewould not apply to them. That does not mean there

is a need to look at some form of pension provision worker that they are working alongside.for agency workers, who are often low-paid womenworkers, but that is a diVerent debate, a much

Q60 Judy Mallaber: Can I follow up on this? Onwider debate.temporary non-agency workers, one of the largegroups that made representations to a previouscommittee I was on was the scandal about FE andQ59 Richard Burden: Could I return to the question

the Chairman was asking before, because I received HE lecturers who are often on long-term, continuingtemporary contracts, and that is in the high-skilledsimilar representations a couple of years ago and one

of the areas of concern appeared to be some area where clearly, we were told, there would besome resolution of their position. I was surprised inconfusion about whether the Temporary Agency

Workers Directive was about regulating the the part of your evidence where you were giving theanalysis of the labour market you slightly dismissedrelationship between the agency worker and

the agency or whether it was about regulating the home-working as not going to be the typical patternof the future, and yet there is a huge number ofrelationship between the agency worker and the

employment, the place in which they were working. home-workers, particularly, for example, in theMidlands (where I am) in the textile sector, who areAgain, for those people who are genuinely poorly

paid with poor conditions, and so on, that is less of quite highly exploited, and you do not seem to havemade any reference to that in relation toan important distinction because they probably need

protection both ends. For the high flyers, it might be employment status and regulation. Again, it will bethe argument that by giving them employment statusa bit more of a complicated area about what it is we

are trying to regulate and which relationship we are and regulation you are going to take away from theirability to get work. I did not know if you wished totrying to regulate. Has that come up with you, and

have you any idea of that kind of dilemma about comment onwhat representations you havemade onthe employment status review on home-workers?which relationship we are regulating?

Ms Reed: The directive seeks to in some ways Ms Reed: Certainly our submission to theCommittee argues that the Government shouldregulate both relationships, but not in a heavy-

handed way. In terms of the relationship between revise the law on employment status, and we wouldvery much encourage you to look at the issue ofthe agency worker and the agency, the aim of the

directive is to identify the agency as being the employment status as part of your review. What wehave said to the DTI and have lobbied theemployer for the agency worker. We are very

conscious in the UK that agency workers already do Government, is to change the definition of whoqualifies for employment rights to include all groupsqualify for certain basic employment rights, such as

sex discrimination and race discrimination cases, of workers, and a key group not only is agencyworkers but is also home-workers. You may well bebecause those rights apply to all workers. However,

many agency workers find it very diYcult to enforce aware of a recent case of Beverly Dew who was, oris, a T&G member and who has been supported bythose rights because they do not know who to bring

the legal claim against. Do they bring the legal claim the National Group of Home-workers. Beverlyfought very hard to try and get improved nationalagainst the agency itself or do they bring the legal

claim against the user employer? And the law on minimumwage rights, particularly in the regulationson how piece rates are paid. She was the leadingwho is their employer is incredibly complicated, and

it changes from week to week—it changes according campaigner and, thanks to her campaigning, theGovernment has listened to the plight of home-to which employment tribunal happens to be sitting

at the time. We believe that uncertainty is unhelpful workers and has changed the law in October.However, what also happened to Beverly is that shefor both employers and for employees. So we

welcome the directive, as it would make it clear that found that, when she stood up and asked heremployer to pay her the national minimum wage,it is the agency who has the responsibility in terms of

employment rights and in terms of regulating the her employer’s instant response was to stopsupplying her with work. And this was even thoughemployment relationship with the agency worker.

Having said that, what the directive also does is to she had been employed by the same supplier for 14years. She had received a very regular supply ofworkrecognise that, when we are talking about lack of

access to equal treatment for agency workers, the over that time, so the economic reality of therelationship was that there was a commitment fromcomparison needs to be made not between agency

workers and agency worker but between the agency both the employer and from the home-worker tosupply work and for the home-worker to do theworker and the worker with whom they are working

alongside who is permanently employed by the user work. However, because the employer hadconsulted their employment lawyer and had recentlyemployer. So in terms of establishing whether the

agencyworker is accessing equal treatment, they will changed the contract that the home-workers weresupplied on and had written in a clause within thelook to the employee who is employed by the

permanent employer, by the hiring employer. The contract to say, “I have no legal responsibility toprovide you with work”, even though in practice hereason for that is to say we need to ensure that

agency workers are not exploited and do not receive had been supplying home-workers with work forover 14 years, because of that one legal clause withinlower rates of pay than is the going rate for the job

that they are doing, to ensure that they also get fair the contract, BevDew recently found when she went




to the Employment Appeal Tribunal that defeated labour market can still cope with above averageher right to claim protection from dismissal and, increases, but there is no way, other than testing it,indeed, protection from detriment when trying to to find out whether you are coming up against theenforce her national minimum wage rights. We are limit or not. So we think the Low Pay Commission’svery concerned that this legal loophole is enabling approach of recent years to put up the minimumemployers to exploit workers and not to provide wage faster then average earnings is the correct one.them with fair treatment. And ultimately we believe We think £5.35 by October 2005 is an ambitious butthat that is not necessarily good for the employer. manageable increase in the national minimumwage.We have been having a long discussion today aboutthe need to move towards a high skilled, high

Q64 Judy Mallaber: Are there any sectors you areproductive workplacewhere all individuals are givenparticularly concerned about or do those sectors justopportunities to access training and skills, but thereorganise the working patterns to avoid theproblem with the legal loophole in employmentproblem?status often means that people working at theMrBrinkley: So far they do seem to have coped withmargins of the work force are not treated withit pretty well. As I say, employment has gone up inequality, are not considered to be of equal value byall the lower paid industries. We have not seen anemployers and, therefore, lose out on training, skillsimpact on aggregate profitability, which hasand often their full potential.remained high in the service sectors where most ofthe low paid industries are concentrated. We haveQ61 Chairman: Could you send us a note on that,seen an impact on investment, and it does appearplease? Could you give us an additional note?that productivity is now increasing faster in areasMs Reed:We would be very happy to do that.such as distribution or commercial hospitality thanChairman: I think it would be helpful. With nothe rest of the economy.We cannot make a hard anddisrespect to your answer to Judy’s question, I thinkfast link between that and the fact you have got ait would be useful to get something in writing onhigh minimum wage, but it certainly will bethat, it would be helpful, and we might well canvasconsistent with the minimum wage producing aother opinions on the same issue as well.beneficial impact on growth in those sectors. So farthe economic evidence, I think, is encouraging in

Q62 Judy Mallaber: Moving on to the minimum terms of the impact of the national minimum wage,wage, which has been referred to, my note here says and that is why I want to test it further to see justyou called for a significant rise in the national how far we can get the national minimum wage upminimum wage. I was leafing through this and I without actually having these adverse economicthink you called for an adequate minimum wage. I impacts.am not sure exactly what you have put down, soperhaps you can tell us what level you think theminimum wage should be at the moment. Is there a Q65 Judy Mallaber: What evidence is there, if any,minimum you would ask for? of employers cutting working hours to deal with theMr Brinkley: Perhaps I can declare an interest here. higher hourly rate?I am actually on the Low Pay Commission, as one of Mr Brinkley: There is a little bit, but it is notthe trade union commissioners. The TUC evidence conclusive in either direction; so we do not have firmto the Low Pay Commission calls for a minimum evidence that hour cuts are being reduced. That iswage of £5.35 byOctober 2005 and towards £6.00 by certainly something youwouldwant tomonitor veryOctober 2006. I think our reasoning here is that we carefully.are looking for increases above the rise in averageearnings to try and increase the impact of the

Q66 Chairman: How do our European partnersnational minimum wage as long as we are satisfiedhandle the national minimumwage? They have beenthere is not going to be an adverse eVect ondoing it a lot longer than we have.employment. This is basically the trade-oV in theMr Brinkley: Their national minimum wages, byjudgment we are trying to make all the time. We stilland large, have to do less work than ours becausethink there is some scope to increase the national

minimumwage faster than average earnings without they have collective bargaining over somuch of theiradversely aVecting employment—that is the basis of workforce. Typically, 80–90% of their labourour submission to the Low Pay Commission. markets are covered by collective bargaining; so the

minimum rate is set down and those agreements arecovering an awful lot more low-paid workers than isQ63 JudyMallaber: I realise the Commission has tothe case for collective bargaining in this country. Inmake that judgment and there is a degree of horseterms of international comparisons, we tend to betrading and analysis, but how does the TUC arriveabout in the middle at the moment in terms of theat your view of what themarket can bear, if you like,relationship to other wages. Again, as with so muchor what is the maximum that you can put in for?of this regulation, they just regard it as part of theMrBrinkley:We have been looking at past increasesfurniture. It does not cause huge problems for themin the minimumwage, which has been going up overin terms of either collective bargaining, structuralthe last two years at 7.5% per annum, and there is nolabourmarket regulation, partly, as I say, because soimpact on employment in the lower paid industries.much is done through the collective bargainingEmployment in the lower paid industries has

actually gone up over that period. So, clearly, the system in these countries anyway.




Q67 Chairman: One last question. If we can come not train unless you are prepared to go a bit furtherin terms of introducing some system of compulsionback to the skills issue again, talking about high

roads and low roads, I think it is fair to say that the whereby all employers do a bit in some way.Mr Exell: Also, one persistent problem in thisGovernment has tried an awful lot in these areas and

there have been a number of initiatives.Why is it not country is that we tend to see skills solely as a matterabout supply side problems—are we trainingsucceeding, or do you think it is succeeding? You

have identified that one of our problems is the low- enough people—and the fact that we have got skillsshortages indicates that is an issue, but there is alevel of skills in the British labour force. Why are we

not moving fast enough to improve it? What is the demand side to the skills equation as well. If youlook at what employers are looking for fromdiYculty that we have in your estimation?

Mr Brinkley: I think I would identify a couple of workers, overwhelmingly it is very low level skillsindeed, and one of the things that we say about thepoints. One is it has taken us a long time to get to a

reasonable infrastructure with typically the need to shift British companies up a notch is that weneed to increase the demand for skilled workers, anddevelopment of the sector skills councils and a much

clearer focus and a much more eVective focus on changing company strategies is going to be part ofthat. Relying on unskilled workers to do unskilledtraining for young people. So I think it is partly

because it has taken such a long time to get to a jobs that they are not going to be committed to ispart of an equilibrium that all has to be changed atdecent institutional arrangement which would start

to raise skills. It is partly because of traditional the same time. At themomentwe have got a problemwhere in many cases increasing the supply of skilledconcentration and priority in looking at graduate

level skills. So we have been quite good at expanding workers would simply be pushing on a piece ofstring. You would not actually get those skills beingthe share of the workforce going into higher

education and increasing the share of the workforce used. We need to get employers wanting to use theirworkers intelligently, and when they do that theywith graduate level skills, and much, much weaker

on this vocational skill element which is still a will find that they need far more skills from them.Chairman: Thank you very much. That is veryweakness within the British labour market. I think

we would say the reason why the progress has been helpful; a good start. It took rather longer than wehad anticipated, but that is in part because of therather slow is that we have not moved to a greater

degree of compulsion within the system, what an ex- questions that your answers provoked. Wemay wellcome back to you on one or two points. There wereadviser to the Chancellor used to call the “post

voluntarism phase”, when it comes to building up references to bits of research and the status issuewhich wemight want to explore a bit further, but wetraining arrangements in this country, but we

suspect you are always going to struggle to reach bits will get in touch with you if we need you. Thank youfor your time this morning.of the labour market where employers simply will

Witnesses: Mr John Cridland, Deputy Director General, andMr Neil Bentley, Head of Group on Skills &Employment, Confederation of British Industry (CBI), examined.

Q68 Chairman: Good morning, Mr Cridland and factors essentially around regulation, and when weask them which regulations, number one on the listMr Bentley. We have just heard from the TUC, who

have been arguing the case for greater UK by a high margin is employment regulation, numbertwo on the list—significant but a long way behind—competitiveness but from a slightly diVerent

standpoint from your own, I think it is fair to say. is environmental regulation, and those are the bigtwo, and when we plot what it is that is causing themYou have, I think, highlighted the concerns of a

number of people that UK competitiveness could be concern, we know that there have been 21 pieces ofextra employment regulation since 1998, eitherundermined by greater employment regulation,

particularly coming from Europe, and I think your resulting from decisions of Parliament or fromdecisions of the European Council, and in aggregateargument is that, because of what you see to be our

accredited status as one of the most flexible labour that has been a significant extra burden for them todigest, however laudable the individual measuresmarkets, you are expressing anxieties. Could you

perhaps highlight this for us. What are the grounds are. I think the reason that they place so muchemphasis on labour market flexibility as a source ofthat you have that British industry and British

business is being beaten down by regulations and we competitive advantage is that it compensates forother competitive weaknesses that UK businessare reducing our hitherto flexible status? Maybe you

could start there and we will move on. faces. So in our panoply of competitiveness policieswe would see labour market flexibility as somethingMr Cridland: When we survey our members on

competitiveness they tell us that the UK is a very the UK trades on to make good some of ourweaknesses in areas like skills policy or education,good place to do business. They take the view that it

is less good as a place to do business than it was five or, to take a non-employment issue, our transportinfrastructure; and I think the concern of business isyears ago, is likely to be less good, most alarmingly,

as a place to do business in five years time. Their that our competitive edge on labour marketflexibility is being chipped away at principally bystarting point is a positive one, but they see that

advantage for investing in the UK slipping away. European social policy which is tending toharmonise a labour market model in a way which isWhen we asked them why, they quote a range of



2 November 2004 Confederation of British Industry

unhelpful and indigestible for UK business, and this a problemwith the principle of sensible regulation ofhours and agreement on what is a reasonableis ironic, at a time when some of our principal

competitors within the European Union are seeking number of days paid holiday, but the way in whichthe Working Time Directive works in practice hasto deregulate their labour markets. So if one looked

at labour market flexibility on a scale of one to five, been a complete dog’s breakfast. The second point Iwould make is it is the 21 in aggregate. By anywith five a highmeasure of flexibility, I believe we are

probably around four at the moment, but we are definition, that is a significant swing of the pendulumand, however laudable the measures areslipping back from that, whereas some countries

who traditionally have had a very rigid labour individually, when you add them all togetherbusinesses are having to constantly rewrite theirmarket model, like Germany, are making strong

eVorts to try to deregulate and flex up their labour employment policies, retrain their managers, pulldiscretion away from line managers, completelymarkets. I am not suggesting for a moment,

Chairman, thatwe are at risk of being overtaken, but counter intuitive to the way businesses are trying toempower people at the coalface and on the shopwe are seeing that competitive edge being eroded,

and, just to repeat what I said earlier, that floor, back into the corporate centre in this one areain order to make sure they do not end up withcompetitive edge on labour market flexibility makes

up for some of the competitive weaknesses we have variations and end up before employment tribunals.They do find the digestion of directives written inin other areas of industrial policy.Brussels, which are essentially written for the CodeNapoleon legal system and for formal collectiveQ69 Chairman:You have identified, as I understandbargaining at national and sectoral level, essentiallyit, skills, education and transport infrastructure. Letindigestible in a labour market which relies uponus put it the other way then. Are you saying that weindividual agreement between manager andhave not done anything since 1998 to improve skills,employee, that does not have trade unions in four-education and transport?fifths of the private sector for which we speak andMr Cridland: No.where national agreements are virtually, with one ortwo exceptions, not in existence.

Q70 Chairman: Because that would be one of the Chairman: I think that is a good start, as it were.conclusions one could draw from your remark?Mr Cridland: We have made some progress, butthere remain principal areas of weakness. So on Q72Mr Clapham:Mr Cridland, in your reply to thetransport infrastructure, very briefly, we are Chairman’s first question and certainly in thetremendously supportive of the 10-year transport written evidence that you have given, you suggestinvestment plan, but we are trying to deal with 30 or that we in the UK need labour market flexibility in40 years of underinvestment, so we have a long way order to make up the productivity gap and the skillsstill to go. In the educational arena I think you can gap. Would we not be better concentrating on thesesee real improvements in standards, particularly in two things, the skills gap, the productivity gap,primary school, but that has yet to feed through rather than perhaps emphasising the need for furthersignificant improvements in secondary school; but, deregulation?at the same time, the jewel in our crown, the right to Mr Cridland: I think we put all of these competitiveutilise people eVectively in the workplace without factors into the melting pot and see what the mix is,unnecessary rigidities, in hire and fire, in working and what is clear to us is that business is verytime, in contractual relationships, is being eroded. determined to tackle the areas where we are

currently underperforming; and I would not want toleave any impression that that is not an absoluteQ71 Chairman: You have identified the figure of 21priority, but at the same time it cannot aVord to givepieces of legislation. Howmany of the 21 would youground on the areas that make up for thoseregard as acceptable, because, let’s face it, there wasweaknesses. So, restricting myself to labour marketa view in the country at the time of the change ofissues and leaving aside these other questions, forgovernment in 1997 that perhaps the pendulum hadexample infrastructure, simply on labour marketswung too far in one direction. We have heard theissues, businesses in Britain rely upon the flexibilityTUC telling us that it has not swung back far enoughof how they can recruit and utilise labour, workingyet. To what extent do you think that of the 21 . . .hours, work organisation, to make up for the factWe will discuss the national minimum wage in athat skill levels are not as high as they would be inminute. I do not want to go into details, but I wantFrance and Germany. France and Germany haveto get an idea of the extent to which you would saythe benefit of higher skill levels. Theymay havemorewewant nothing or that at least some of themare notflexibility in terms of skills utilisation, but they losethat bad and in a fair society we are entitled tothat advantage because of maybe too high wagehave them?rates, too high restriction on labour marketMr Cridland: I think business would accept thatparticipation. You can see the net result. We aremost of the individual measures that we are talkingbroadly as competitive as those countries. Ourabout are laudable in their own right. I thinkeconomy is doing well, we are not complainingbusiness has two principal concerns. The first is theabout that, but our mix comes out diVerent fromway they have been implemented has often beentheir mix. We achieve more in terms of employmentham-fisted and has made it very diYcult for businessparticipation, in terms of having a labour marketto digest. To take one example there, I would quote

the Working Time Directive, where we do not have that is open to young people, to the unemployed, to




women returners; maybe France and Germany are agency temps, we are not opposed to there being adirective providing equal treatment for agencymore ossified as a labour market, but achieve more

in terms of productivity per person. We have never workers, but we are absolutely opposed to theburden of that employment relationship being putargued in the CBI that there is an Anglo Saxon

labour market that is by definition ideal and a on the host business, who is actually in a commercialrelationship with the agency and does not want tocontinental European labour market which is by

definition dead in the water. There is a patchwork have any employment relationship with the agencytemp who is the responsibility of the agency. So, inquilt of labour markets across the European Union.

Each country at national level and establishment each of those two examples, I hope I have illustrated,the business view does recognise the need forlevel builds on its strengths and tries to tackle

weaknesses. So, yes, we must tackle our labour security, is not saying “no”; it is saying appropriateflexibility and security, but we have red lines andmarket weaknesses, which are principally in the

education and skills areas. The fact that we have lines in the sand beyond which we are not preparedto go, and that is where we diVer from the TUC,seven million adults with basically literacy and

numeracy problems, the fact that 30% of school because I do not think the TUC are committed tolabour market flexibility; I think they are committedleavers have to receive remedial literacy and

numeracy training in their first six months in a job to amodel which would unbalance itself with far toomuch emphasis on security. One can look at theirfrom their employer, having had eleven years full

time education paid by the taxpayer—we have to wish list when the unions met with the Labour Partyin Warwick in July. Their wish list included a wholetackle those problems—but at the same time we

cannot be complacent about losing the bits of range of measures which business felt had been putbehind them 20 years ago to do with overturningflexibility that make us competitive. To give you one

example, if the Agency Temps Directives is agreed, some of the trade union legislation of the ThatcherGovernment, restoring rights to secondaryas I expect my friends from the TUC would wish it

agreed, it will significantly restrict labour market picketing, having day one employment rightsinstead of employment rights after a probationflexibility, so we are not prepared to lose what we

have certainly while we are busy making up for our period, currently one year; a whole series ofproposals which are serious commitments from thedeficiencies in the areas that we are not competitive

in. trade unions which, in our judgment, but they areperfectly entitled to lobby for them, wouldsignificantly restrict the labour market flexibility of

Q73MrClapham: I thinkmy colleagues will come to the UK economy. We also have a Europeanthe Agency Temps Directive at a later time; but I Commission which is committed to a revision of athink we had the same kind of arguments that you Working Time Directive and to a draft Directive onhave just put there when the minimumwage was put Agency Workers, to name but two, which would inforward, very similar arguments.What I want to ask our judgment go significantly too far in removingyou is with regard to comparisons on productivity essential labour market flexibility.and skills, most generally we see comparisons withtheUKrather thanwithEurope, and if onemade thecomparison with Europe, even though one sees Q74 Mr Clapham: Let us return to what you said

about theWorking TimeDirective and relate that tomuch more regulation, I think it does show that onecan have high productivity rates, one can have skills. Has any research been done by your team to

look at whether imposing the opt-out would result inreasonably high employment but at the same timehave this greater form of security; and from what employers concentrating more on skills in order to

make up the gap?you said about the flexibility and security relating itto a peculiar British model, you seem to be not too Mr Cridland: Neil, do you want to go through ourfar away from what the TUC was saying that they survey evidence.would like to see a framework in which there is Mr Bentley: On working time, the main concern issecurity but flexibility as well. Have you discussed the withdrawal of the overtime, that is what is vexingthis with the TUC? Is it an area that there is some our members mostly, and our recent survey showscommonality on? that between 70 and 80% of members would be veryMr Cridland: The devil, as ever, is in the detail, and concerned about withdrawal of the opt-out becausethere is only so far one can get, I think, at the sort of the impact on their business and, in particular,

their ability to meet the demands of customers.of high level concepts. We have no problem with theprinciple of security as long as it is delivered in a Employers are very committed to oVering flexible

working arrangements. Our surveys also show thatbalancewith flexibility. Then I think one has to comedown from that high level to the specifics. As I have 84% are oVering part time working and 30% are

oVering other flexible forms of working. So there ismentioned, we are not opposed to an overall limit onthe number of hours that can be worked and a level definitely a commitment to working time issues in

terms of making sure it works for the business andof paid holiday which is agreed by democraticallyelected politicians. Where we would diVer from the making sure it works for employees. The skills

agenda is also very close to employers’ hearts, andTUC, we believe that essential protection in place isan absolute human right for the individual to decide we have been working very hard at the CBI and also

with Government and with the TUC and the Skillshowmany hours they choose to work. So we can livewith the directive, but we absolutely are committed Alliance to make sure that that rises up the agenda.

As John has just pointed out, we do have a skillsto the right of the individual opt-out. If you take




deficit, we do have a problem with the education Q77 Miss Kirkbride:When we were listening to theTUC’s evidence before you came in their argumentsystem and widely in the economy area and skills

issues and up-skilling and we want to see real was very much that, whilst the 21 pieces oflegislation have come through following more thecommitment from employers make sure that they

are taking those issues seriously; but the employers European social model, there had been strongemployment growth in the UK, and particularly theare spending £23.5 billion a year on skills, and,

as John was saying, you cannot separate the two moremarginal groups in society were less likely to beemployed.Whilst I wouldwant to point out frommyissues. You cannot demarcate skills from other

employment legislation because you need to take the party’s point of view that employment growth wasgreater pre-1997 than it has been post, it wouldviews in the round, take a holistic approach.nevertheless be churlish to say that there has notbeen strong employment growth, because there has.

Q75Mr Clapham: It is precisely because you cannot So from your perspective, how do we employdemarcate that I am asking if there is any evidence arguments against the TUC, who say, “Look, whatthat moving into a situation where there is no is the problem”?withdrawal from the opt-outwould actually result in Mr Cridland: I think we have to look at thea great concentration on achieving the skills to make individual measures. Let me take a diVerent oneup the productivity gap that would disappear as a from the one I have already quoted. If you take theresult of long hours? minimum wage, the real debate about the minimumMr Cridland: I think business is doing everything it wage is not whether it is a good or a bad thing, it iscan to try to tackle that skills gap currently. Let me about the level it is set at. It was brought in by thisgive you one specific piece of evidence fromourmost Government at a prudent level. Everyone acceptsrecent employment survey. We ask every year: what that the level it was brought in at was designed to doare the factors that are most critical to present and as much to help as possible with the minimumfuture competitiveness? Management skills come possible risk, and there is no evidence—and I shouldtop of the list with 62% of respondents, workforce declare an interest; I am a member of the Low Payskills come second on the list with 54% of Commission—but there has been no evidence torespondents, low labour costs is bottom of the list date of a macro impact on employment levels that iswith 12% of respondents. I thinkwhat that says is we negative, so it is something of a success story. Wehave got the flexibility we need; we have not got the will see going forward whether that success story canskills we need; we do not want to lose the flexibility; be maintained, but there is plenty of evidence frombut, you are absolutely right, business needs to do continental Europe, from France and Spain ineverything it can to tackle the skills gap; and particular, that if you set a minimum wage at toobusiness is giving that absolute priority. What high a level it begins to undermine those verybusiness would say in relation to skills is it is employment participation figures. People who arehamstrung at the moment by poor standards of deeply scarred by the eVects of unemployment,attainment of school-leavers and therefore it needs young people in particular, were not well servedreform of the education system to give it a platform when the minimum wage for young people was tooto provide vocational skills on top, but the high in Spain. It had very negative eVect on youthcommitment to up-skill is absolutely at the top of the unemployment. So I think we have to break downlist of competitive priorities. the issues, and at the end of the day it is how theseMr Bentley: Could I add, with that it is all about things are implemented and at what level that makesfunctional flexibility. Without the up-skilling, the real diVerence. Some of these measures have notwithout the skills, you cannot achieve that been well implemented. Others, like the minimumfunctional flexibility where employees do have the wage, have broadly been a success.appropriate skills, where they can adapt workpractices and move between one work practice to

Q78 Miss Kirkbride: Taking another one of theanother work practice, which plays to the pointTUC’s arguments, I think theywere saying that if wearound productivity. We need to have that sort ofhave more employee protection that will boost theadaptability in the workplace.We need tomake sureproductivity rate for people who are happy in theirthat employees have those skills that can react tojobs, presumably, or whatever, and are prepared tothose changing demands internally.work harder, and therefore that was another reasonfor going aheadwith it. Conversely, perhaps you andI would agree that flexible employment markets willQ76 Mr Clapham: So you would be very pleased

with much that has gone on in education since 1997, produce better goods. On the other hand, the simplefact is that we still have a very big productivityparticularly the moves in secondary education to

ensure that people are coming out of schools with gap, having had very flexible labour markets.Nevertheless, having had those flexible labourthe skills that employees require in terms of literacy

and numeracy? markets, they still do not entirely produce the goodsbecause we still have a productivity gap. So how youMr Cridland: We are undoubtedly moving in theanswer that one?right direction. I think business can see greater

progress in primary education than it can currently Mr Cridland: There is no silver bullet for solving theproblems of our national productivity levels. I thinksee in secondary education, although I think

business respects the fact that it takes a while for what is clear is that it is a range of factors and thereis long historical evidence of how those factors buildthese policies to flow through.




up over time. A lot of the reasons behind our seen a 40% increase in its electricity bills this year, itis seeing a commodity price increase, it had virtuallyproductivity performance are not essentially labourno ability to pass price rises on to its customer andmarket issues, they are issues of capital, capitalso anything it wanted to achieve had to be achievedintensity, capital utilisation; they are issues of thethrough improved productivity.financing of industry; they are issues of the extent toMr Bentley: Further on the job protection point, aswhich we have long-term investment, but within thewe were saying earlier, you have to strike a balancelabour market area I think there are manyin protection and security and flexibility, but peoplecompanies in CBI membership that are now globalmust be mindful of the unintended consequences. Ifbusinesses that find the national figures onyou look at, for example, hire and fire regulations inproductivity hard to recognise, because on acountries like Spain, where over a three-monthmatched plant basis they cannot see a significantperiod you are only allowed to make redundant 30diVerence between labourmarket productivity in theemployees, what is the consequence of that? It is highUK and labour market productivity in their Frenchlevels of workers on fixed terms contracts. If you door German factories, so they scratch their head a bitstart to look at increasing protection the unintendedwhen they see the government’s national statistics.consequence is that you start excluding people fromI think we know that there is a tail ofthe labour market, labour market outsiders, youngunderperformance, that our world-class companiespeople and people with disabilities, returningare probably as competitive as their peers in othermothers to work, and we do not want to get into thatcountries but we perhaps have a greater tail ofsituation where you are not promoting theunderperformance in productivity terms, and that inflexibility, which is about job creation and seekingpart may relate to the size of the service sector in thejob opportunities in the firms, not closing peopleUK where you have many more smaller businesses,out.and I think we all struggle to measure productivityMiss Kirkbride: I am quite happy, Chairman, toin the private sector of services. How do you decidepursue some of the remarks that were made aboutwhether putting an extra person into a customerproductivity. I am quite surprised that youfacing occupation is adding to labour costs andchallenged oYcial figures on productivity. It wouldreducing productivity or providing more customerbe quite helpful if you had any information on that?delight? So it is a very complex picture. What I can

say is that when I am out visiting CBI membercompanies, they would not be able to be adding the Q79 Chairman: You can send us a note.value they are to the UK economy today without Mr Cridland:With respect, I do not think we wouldthat flexibility. A week or so ago I visited a sandwich challenge the national figures. We would say that atfactory where we are talking about mass production an establishment level, at a company level, chiefof sandwiches to specifications set in the early hours executives often find the size of the productivity gapof the morning by the major supermarkets, with a hard to recognise, and I think there are very seriousworkforce of four and a half thousand people to get issues about how we measure productivity and howthe exact mix of sandwiches right for that day. That we translate from macro to micro, and I do thinkcan only be done in an area that the company would that we still have productivity measures which arewillingly accept has a lot of mundane and routine most meaningful in a manufacturing environmentactivity by highly motivated staV with a strong where clearly if you do reduce the amount ofcommitment to doing a good job, with high working hours spent on a product you are improvingcommitment to hygiene standards to contract productivity. It is quite hard tomeasure productivityimprovement in what they are doing, with good both in the public sector of services—we see that atcommunication between management and staV, but the moment—but also in the private sector ofwith essential flexibility on the working hours services, where it may be the right thing to do towhereby they can vary the number of people on each increase head count for a fixed level of production ifsandwich production line each day according to that enables you to better meet customer demand inwhat the major supermarkets specify; and the way a supermarket by providing somebody to pack bagsthey flex that is by flexingworking hours and theway at a check-out till or an extra waiter or waitress in athey flex it is by bringing in agency workers on a restaurant. Sowhat I am saying is business is puzzleddaily basis to deal with peaks and troughs in that the productivity gap looks as big as it does. I amdemand; but those bits of flexibility build on a very not disputing that those figures may be the bestproductive permanent work force that I felt, having figures we have available.talked many of them on the production line, werevery committed to what they were doing. That to me

Q80 Chairman: Mind you, it does not make muchis the reality of the modern labour market. So I dodiVerence if you throwmore bodies at them if you donot accept that we are losing out on productivitynot train them to do the job?gains that we could achieve by forcing peopleMr Cridland: Indeed.into a one-size-fits-all solution, higher levels of Chairman: And that is very often the case.employment protection that force employers do

things they are not doing. No employer in anyinternational competitive sector would not be doing Q81RichardBurden: I was going to ask you to defineeverything they can to up-skill everything they can what youmeant by “flexibility”, but I think you haveon a weekly basis to find ways of becoming more been round that track quite a lot. I would like to

pursue with you this issue of constraints onproductive: because that same sandwich factory had




flexibility. Are you saying that any increase in Q84 Richard Burden: Let us just pursue the waythings are implemented. You have used the wordsprotections from what they are for employees is a

threat to flexibility and therefore a bad thing? about the fact that you have got red lines, and one ofthe red lines in relation to the Working TimeMr Cridland: No.Directive was saying that employees should workwith their employers to adopt flexible sensibleQ82 Richard Burden: From where we are now?working arrangements, but your red line was theMr Cridland: We are not saying that. Even fromabsolute right of an individual to say that they wantwhere we are now there are measures which we haveto work more than an average. I understand that.actively supported. To give an example, I wouldAre there any bottom lines on that? Is it providedlook at the age discrimination legislation that willthat an employer can say, “This person has agreedcome in in 2006. We support that in principleit”, actually somebody could be working 50 hours,because we believe that is one area of the labour60 hours, 70 hours, 80 hours, and that is anmarket where security and protection is currentlyabsolute right?not adequate.We have quite strong views about howMr Cridland: Like all absolute rights, it is thenit should be implemented and how we get win-winsprescribed by certain agreed necessities. If there is aand avoid the downside eVect of unnecessaryhealth and safety risk, clearly somebody cannot haveemployment litigation, but that is a measure whichan absolute right to work in a way that puts otherin principle we would like to see come in. On agencycolleagues and customers at risk. We have alwaystemps, in principle we believe there is a need to fill therecognised that with lorry drivers, with airline pilots,gap of employment protection that currently existsand we would recognise that wherever there is afor agency workers. Our concerns about thehealth and safety case, but most of the Workingproposal are the nature of the proposal, not theTime Directive is not a health and safety directive, itprinciple of the proposal. So we certainly are notis a mainstream employment directive. We wouldsaying the status quo is okay; but we could notthen accept there are restrictions related to potentialpossibly have anything else.abuse if an employer, because of an unequal powerrelationship, is getting agreement by some form of

Q83 Richard Burden: That being the case, is it not a coercion. That is clearly unacceptable.We have seenbit sloppy to talk about 21 bits of extra regulation a few examples, but, I would stress, they are aand say, “There is an aggregate eVect here”, on the minority of examples, where employers have askedone hand, and say on the other hand, “Actually it is an individual to sign an opt-out to the Workingnot about whether there is too much or too little, it Time Directive when issuing an invitation to comeis about whether the regulation is right and whether and work for them. I do not think that can beit is applied properly.” Continuing to talk about 21, justified—that is clearly not an equal power issue—does it not encourage sloppy thinking? but where an individual is making a free choice andMr Cridland: It would if we based our whole where they are not oVending one of those health andargument on the aggregate burden. I think the safety examples, just as the Working Time Directiveaggregate burden is really a point about digestion. gives them an absolute right to say, “No, boss, I willSmall firms often say to me that they cannot cope not work any extra time and you cannot make me”,with the amount of extra employment regulation so we believe it should leave them with the right tothat they are having to deal with, they simply cannot say, “Yes, I consent in working this extra overtimekeep up with the number of changes to regulations, because I want to and I want the money and I do notand, indeed, the recent development of having need a trade union or a government or a Europeanregulation days twice a year was designed to help Commission to tell me I cannot.”them with that process of digestion so they couldtimetable when they would need to change their Q85 Richard Burden: So on the opt-out would youpractices. I think the aggregate issue is simply about support a regulation which said that an employer isthe tide of regulation, and I think we need to not allowed to use any pressure on an individual torecognise, particularly when the TUC and other reach an agreement to opt out to work longer thanorganisations are arguing for even more, that we 48 hours? A specific regulation covering that?have had a lot, but, taking that as a headline point, MrCridland: Subject to the points of detail, yes, andyou are absolutely right, it is then a case of how the we have been involved in talks with the DTI which,regulation is designed and implemented, because interestingly, the TUC would not become involvedone of those 21 was the provision in the 2002 with, to try to reach an agreement on perceivedEmployment Act to provide employees with a right abuse. One particular—to request flexible working. That piece of regulation,I think, is a benchmark for how to get things right. I

Q86 Richard Burden: No, no, I am talking about ado not meet anybody in the business communityspecific regulation to cover the rogue employee youwho believes that regulation has done any harm, andwere talking about?I meet a lot of employers who believe it has helpedMr Cridland: Yes, we would, subject to the detail.to provide a frameworkwithin which theirmanagersAbsolutely.can sit down with their work colleagues and agree,

in the way thatNeil was describing, sensible workinghours. It is a million miles away from the disaster we Q87 Richard Burden: That is useful to know. Can I

move on to something that the TUC said, because inhad with the Working Time Directive, which isanother of the 21. terms of the way they were approaching this, they




end up with diVerent conclusions from you but you Department of Trade and Industry on informationand consultation has provided the UK with a muchboth argue the same kind of thing on working time,

and that is that you actually want employers and more sensible basis for implementing that directivein the UK than the default mechanism which weemployees to agree arrangements locally that

promote flexibility but also promote a rise. You end would have had to have accepted, what is writteninto the articles, if we had not sat down and hadup with diVerent conclusions on that. You would

agree with that; that promoting that kind of those talks.discussion locally is actually a good thing?Mr Cridland: Yes, but the diVerence is we believe Q92 Richard Burden: And on working time youthat is achieved by retaining the opt-out and they are would agree for a regulation to come in that woulddetermined to have the opt-out scrapped, which is a require discussion between employer and employeepretty big diVerence. before any opt-out was agreed?

Mr Cridland: We accepted an invitation from theDTI to sit down, they hoped with the TUC, but theQ88 Richard Burden: You end up with diVerent

conclusions on that, but if you think that the process TUC did not attend the talks, to discuss what abusesthere were to the Working Time Directive thatof discussion to agree working hours or, indeed,

other things about the way a business is operating— needed to be addressed by regulation, and wesupport regulations that would deal with that abuse,the prospects for the future, how many jobs there

should be—promoting discussion on those is but I do need to come back to this.actually a good thing?Mr Cridland: Yes, indeed. Q93 Richard Burden: That would include, would it,

joint discussions between employees and/or theirrepresentatives as they existed and the employer inQ89 Richard Burden: So why did you therefore

consider rules that promote that kind of social joint agreement. It would include that?Mr Cridland: It might or it might not. It depends onpartnership to be regulation and therefore

undesirable, for instance Information and whether the trade unions accept the principle of theindividual opt-out.Consultation Directives?

Mr Cridland: We opposed the principle of anInformation and Consultation Directive on an issue Q94 Richard Burden: No. I am asking your viewsof subsidiarity. We did not see why a business about what would be a good thing?employing fifty people in Barnsley should have the Mr Cridland: Our view is that individual workingsame rules on how it talked to its staV as a business hours are a matter for agreement between anemploying fifty people in Barcelona. employer and the individual employee. We are quite

happy that any abuses to that are tackled, but webelieve it is a matter of individual choice. The reasonQ90 Richard Burden: But you said that if it was

domestic law you would think it was a good thing? I amhesitating withmy answer is because if the tradeunions argue that you can have whatever talks youMr Cridland: If it was domestic law we would have

looked at it diVerently, yes. Our principal concern is want on working time but it is between an employerand a trade union and, as a result, you do not needthat the TUC still tend to go to Brussels to force a

labour government to accept legislation, where it is the individual choice of the opt-out, we would nothave agreement with the TUC. We believe thatoutvoted in the European Council, that it cannot get

through domestic discussions between the CBI, the individual opt-out, so long as there is no pressure onthe individual to sign it, is an essential human right.DTI and itself.

Q91 Richard Burden: I want to get that clear. Laws Q95 Judy Mallaber: Following on from that, I ambecoming confused as to when you regardto promote social partnership, information,

consultation, collective bargaining, new laws to something as a regulation, which therefore goes onyour list when you are doing your, I had better notunderpin that and promote it as a way of avoiding

unnecessary regulation, are things that you would say propaganda, when you are making your casethat having 21 regulations is just too much. I am notactually support provided in was done in UK law

rather than in Brussels? quite clear when something becomes a regulationthat has to go in that list and when it is one that doesMr Cridland: Once we lost the battle on having that

directive, we sat down and reached an agreement not count. You came perilously close to saying thatinformation and consultation would have been allwith the TUC and Government in tripartite talks

chaired by the Employment Minister that provided right if it had been introduced through domestic lawbut not because it was introduced through Brussels,the framework for the regulations which will

implement information and consultation. So we are which did not seem to me to fit in with an argumentabout whether it was a bureaucratic explanation ora pragmatic organisation; clearly business will not

vote for newbits of regulation that it does not believe not. Can you maybe explain a bit more clearly?Mr Cridland: My number 21 is simply a factualare necessary; but if democratically elected

politicians make that decision, we will then work statement of howmany major pieces of employmentregulation there have been since 1998. So it is a list.with the trade unions and with government to make

sense of those regulations, and I think it has been The reason for mentioning it is the aggregate burdenon employers. Within that list there are somerecognised byministers that the high level agreement

reached between the CBI, the TUC and the measures which were decisions of this Parliament,




some measures which were decisions of the management skills, because it implied that thatEuropean Council and the European Parliament; company would lose skilled workers who had learntsomemeasures which have been implemented rather how to do that job over many years if they thenwell, some measures which have been implemented needed to change their working hours. Can you sayrather badly; and we need to take each of the 21 some more about whether you feel that all that thatseparately. On each of those we would have a directive has done, all those regulations have done,position on how much of a negative impact they is to encourage the good, productive, encouraginghave had on labour market flexibility. What I have employer anyway and have not done much abouttried to do is illustrate the two extremes with the the more negative approach of some otherexample of the Working Time Directive, which I employers?think has been a bad piece of legislation very badly Mr Cridland: I think the fact that in 8% of cases theimplemented, although there is a sensible piece of request has been turned down is the real signal of thelegislation lurking there, if it had ever been written, success of this regulation. I would have been veryand at the other extreme the right to request flexible disappointed if it had been 30% of cases that hadworking, which I think has been an unqualified been turned down. So in the vast majority of casessuccess. So we are not making an argument that the employer entertains the request of the employee,there are 21 pieces of regulation that should be got but I would argue that in those 8% of cases there willrid of. The CBI is not advocating getting rid of any be objective reasons as to why it was not possible;of those 21. We are saying that some of them have and the reality of the situation is flexibility doescramped our members’ essential labour market apply very diVerently across the economy. It is noflexibility and in each and every case could be surprise that some of the best examples ofimproved. benchmark companies out there doing the most

progressive things on working time flexibility areHigh Street businesses that are consumer facing,Q96 Judy Mallaber: Can I pursue the successfulbecause that is where you get the most obvious win-one that you mentioned a bit further aboutwins. People want to shop, have services provided onthe entitlement to request flexible workinga 24/7 basis. You need to provide staV to meet thatopportunities? Have you any information on therequirement. There are peaks and troughs in thatvolume of requests that have been made to yourdemand and you can get a fit between the customermembers from their staV and also how yourneed and the individual need. So a worker whomembers have responded to those requests?wants to fit his or her hours around childcareMr Bentley: We have the specifics in terms of theresponsibilities might actually, with a partner, benumber of requests made. Over three-quarters haveprepared to do diVerent work, diVerent shiftbeen accepted by employers and only 8% rejected onpatterns, in relation to the customer that meet theobjective business grounds, and what we have seencustomer’s need. It is, I think, rather diVerent in ais a lot ofmembers already had in place processes formore traditional manufacturing environment:discussing flexible working with parents of youngbecause if you have got a more traditional fixedchildren tomake sure that the framework is in place,production line and you need 80 people to turn upto make sure that employees’ needs were metfor the nightshift, you are hamstrung if half a dozenalongside those of the business needs. It has been

taken up very positively. We have seen our results of those people do not want to work beyond halfwayshowing that, DTI results showing that and other through the shift. So what you tend to find in thosesurveys showing that employers have met this piece manufacturing environments is a diVerent form ofof legislation in terms of not just in the letter but also flexibility, a form of flexibility where the whole shiftin the spirit; but it is verymuch because it is based on get together and says, “Actually, we can get all ofa right to request, it is not an absolute right, and our work done an hour earlier and knock oV”, andthere is dialogue and there is accommodation; but, the employer says, “Yes, as long as the productionof course, where employers do feel that they cannot quota is met, fine”, or on a weekly basis, “Perhapsmeet the request, andwe have to be clear that it is not we do not need towork beyond lunch time onFridayalways possible to meet every individual’s request because we have achieved our targets”, but in a fixedfor flexible working, for objective business reasons, manufacturing environment there might be morethen it is right to say no. shift flexibility but less individualised flexibility

because people are not working in the way that theywould be in a shop directly servicing customers on aQ97 Judy Mallaber: There is a right to object andmuch more individualised basis. It will vary, whichreject and you have said it has not created particularis why there has to be a complementary business caseproblems, presumably because employers can justto the case of the individual. What I think is clear issay no, but how far do you think we can push it tothat we would not have had this success that we havemake those employers that maybe do not operate inhad with the right to request five years ago. Wherea very sensible way operate in that way? I recall aregulation works well is where it catches the tide of aprevious inquiry I was on on another Committeechange of view in society. We have all become moreabout part time workers, and we had an employerflexible to whatwe are prepared to accept, employersfrom the textiles industry saying, “It just is notas well as employees. There is greater demand forpossible to introduce part time workers who just doflexible working, there is more willingness bynot understand our production process.” Tome thatemployers to accommodate it. So the regulation wasjust seemed to be an example of rigidity which was

probably not necessarily showing very good fit for the moment because employers are finding




that actually they can break down some of the old- members show that they are oVering part timeworking; 31% are oVering flexitime; 38% are oVeringfashioned barriers between full time work and part

time work and be much more accommodating. I jobshare schemes and 28% career breaks andsabbaticals.1 So CBI members and employersthink five years ago the debate was not anywhere

near as ripe as it now is. generally are going quite far down this road ofthinking about flexibility, oVering flexibility,particularly to address the issues that you haveQ98 Judy Mallaber: What about those employers,raised around labour market outsiders such aslike the ones I have mentioned, who seem to thinkwomen and women returners. They do take verythat because you have got a fixed production line itseriously the issue of gender equality in theis not possible to work part time without evenworkplace and do want to utilise the skills thatlooking at whether you might get two part timewomen have to oVer.We were talking only last weekworkers to cover that area? I have firms in mywith the EOC looking at this issue of genderconstituency who do operate flexibly on productionsegregation in the labour market and how we couldlines and others that clearly cannot envisage such anwork together in terms of overcoming barriers thatidea. There does not seem tome, when I look at theirstill may exist, but employers are very committed toproduction processes, to be much diVerencethe principle of flexibility to make sure that they canbetween them?build on the skills that women have to oVer.Mr Cridland: Each case will vary and needs to be

looked at on its merits, but ultimately thoseQ101 Judy Mallaber: How far in terms of pursuingbusinesses that just slam the door in the face of thethat would you regard parental leave, maternity andemployee and say, “I am not even prepared to thinkpaternity, as being a burden and how far would youabout it”, will lose out in the war for talent, but ifregard them as being a positive contribution to thethey play their cards very badly in the way I have justissues that you have just been talking about?described, they will oVend the regulation, becauseMr Bentley: Returning to paternity leave, there arethe individual has a right to request, they have aindividual issues at play around women who areright to have their request seriously considered, theygoing on maternity leave, when they leave work andhave a right to have written reasons which give awhen they return to work, and the key issue aroundclear business case; and they can go to a tribunal ifmaternity and paternity at this stage in the debate isthey think the employer is just ignoring and refusingaround potentially signalling a return to workto engage, but we cannot get everybody to catch upduring the maternity leave period. Employers arewith the tide; there will always be laggards. I dovery happy, obviously, for women to go oV and havethink overall the fact that only 8% of requests havebabies, but the key issue they are concerned about isbeen denied is a success and one that employers arethe lack of clarity during that leave period as to whenas happy to see work as employees have been.employers can contact the individual to discuss areturn to work and how appropriate it is to do thatQ99 Judy Mallaber: I take it from what you are when the individual is on leave period. An EOCsaying that you would endorse the recent pamphlet investigation into pregnancy just recently hasof the Secretary of State in which she said about highlighted these issues and the EOC would like toemployers that had a happy work force, “Instead of provide more clarity to employers to encourageimposing long and rigid hours on their workforce employers to engage in dialogue with individualsthey understand that by giving their people more who are on maternity leave to allow employers tochoice and control over working hours they achieve plan ahead: because, remember, on maternity leave,higher productivity and better results”. That is an for example, an employer, especially a smallapproach you endorse? employer, may have had to recruit somebody on anMr Cridland: Yes, indeed. agency temp basis or a fixed term basis, and theyhave a responsibility to those individuals as well in

Q100 Judy Mallaber: One of the areas you have terms of forward planning, how long they will needidentified early on about lack of skills, that being one the particular worker to stay in the workplace, andof our biggest problems in terms of productivity, one there needs to be a dialogue with the woman who isof the largest areas where we have an untapped on maternity leave. So while we are happy for thoseresource in terms of developing skills, is amongst provisions to be in place to encourage people to takewomen, and this whole area about flexible working the leave they need to take, the other side is theopportunities is obviously very important to be able responsibility on the individual to actually discussto deal with that, but that also ties in with cutting the with the employer their plans for returning to work.long hours culture. How do you tie all of that intowhat you were saying about the Working Time Q102 Linda Perham: The CBI opposed theDirective? What would you seek to do and minimum wage, the introduction of it. You referredencourage your members to do to enhance the to it earlier as something of a success story. Sowouldopportunities to use the skills of women? you admit that you were wrong to oppose it?MrBentley: It is a very important question you raise, Mr Cridland: No, I think the concern was alwaysbut I think we need to set it in the context of what about the level. We opposed the minimum wageemployers are currently doing to encourage this before the 1997 election because we feared that itflexible working and work-life balance. We have gotthe second highest rate in the EU of part time 1 Note by witness: the figure for career breaks and sabbaticals

is in fact 20%.working (OECD stats). Eighty-four percent of our




would be brought in at too high a level. What we Mr Cridland: Just on the TUC point, it is clearly afact that to date employment figures in the mostwere oVered by the incoming government was the

opportunity for three employers, of whom I remain aVected sectors have gone up, but that data ishistoric, and we will now need to see the impact ofone, to sit on the Low Pay Commission and have

some influence in the discussion as to what was the two 7% plus increases and I just do not know whatthe impact of that will be. In relation to complianceright level. I think the success of the minimum wage

has resulted from the Low Pay Commission finding with the minimum wage, I think at one level theminimum wage has been successful because it had aa level which provides the maximum amount of

protection for the largest number of workers light touch approach to compliance. We havepublicised the figures, we have made the figures verywithout putting their jobs at risk.nationally available with advertising campaigns; wehave enabled people to take complaints to tribunals;Q103 Linda Perham: So you are saying you were notwe have put in place an enforcement teamwithin theopposed to the principle, you were concerned aboutInland Revenue which does spot checks particularlythe level?on employers and sectors it thinks might be suspect;Mr Cridland: The level is the issue. In no electionand overall I think the Inland Revenue would arguesince 1997 has the CBI made any statement that itthat compliance has been successful. The problemwants to see the minimum wage withdrawn.with minimum wages the world over is that thebottom end of the labour market, as you say,

Q104 Linda Perham: You referred earlier to the overlaps with those who simply will not comply, andproblem of the level and, in response to earlier the businesses, the under the railway arches rogueanswers, I think, you said there had been a problem businesses that are not going to pay the minimumin Spain with the level for young workers. Are you wage, are not providing employment contracts, areconfident that that balance can be achieved in the not providing health and safety policies and are verymechanisms we have for looking at it, or do you diYcult to regulate. All I would say is that when onethink there is a danger that it could be set too high, looks at other countries which have had minimumand, if that is the case, where would the indicators wages for decades, you find a problem of non-come?Would it be in a loss of jobs or howwould you compliance. What I think particularly concerns thesee that? CBI is that if, as I hope, we do speak for theMr Cridland: I think the indicators, if there is to be reputable end of the business community, if there isa problem, will now come quite quickly. I think they to be a law, then our small businesses could suVerwill come over the coming winter and into the new unfair competition from small businesses that areyear, and that is because we have had two increases not obeying the law, and there is some evidence, Iin the minimum wage, in October 2003 and October think, of displacement of activity from the formal2004, both in excess of 7% in two consecutive years, regulated economy to the informal unregulatedand that means that companies under quite intense economy because of the minimum wage. If you talkprivate pressure, particularly, for example, in the to hairdressing employers one of the immediateretail and hospitality sectors or in internationally impacts of the minimumwage in hairdressing is thatcompetitive sectors like textiles, have had to increase some people stopworking in hairdressing salons andearnings by roughly double average earnings in two just set up on their own, cutting hair in people’sconsecutive years. We do not know what the impact houses, probably outside the regulated economy. Soof the £4.85 figure of 1 October this year is yet; it will I think there will have been an increase in thebe several months before we can see the impact. Let informal economy, but I would suggest that is trueus hope that companies have been able to in every country which has a minimum wage andaccommodate that increase without a negative there are parts of the economy which the regulatorimpact, but we have taken a risk with this most will never reach.recent increase. We have ratcheted it up and, for thefirst time, many more companies are aVected thanhave previously been aVected. Many of our biggest Q106MrHoyle: It is interesting that you domentionretailers now find that their recruitment rate is not sole traders, because that has always been historicalmuch higher than the minimum wage. Three or four in the hairdressing trade. There is nothing new inyears ago they would not have seen themselves as that, and I think we ought not to go down that line.employers aVected by the minimum wage. So it is Can I bring you back. You said at the moment onbecomingmore of an issue, but I think the jury is out the new proposed wage increase that the jury is out.for several more months as to whether the increase How long is the jury out for at the moment?has slightly overdone it. Mr Cridland: The increase only took place a month

ago. Therefore, it will be a year before the ONS’snational statistics can show us what the impact hasQ105 Linda Perham: The TUC told us that in lowbeen on the wage distribution. An area that CBI ispaid industries in fact the levels of employment haveparticularly concerned about is the impact onactually gone up. I do not know if you have anydiVerentials. When the minimum wage was set at aevidence of this. Is there any evidence of abuse of theprudent level the impact on diVerentials wasminimum wage, that there are employers who arerelativelymodest. By ratcheting it up in real terms bynot paying it, and do you also think that if the levelwhich, if we bring it oV, if it works, fine, we are doinggoes up to what you see to be too high that there willsomething useful for people on low pay, but we areperhaps be an increase in the numbers of people

trying to avoid paying the minimum wage? immediately now impacting on people who do not




feel they are anywhere near the minimum wage on aVected by the minimumwage does not mean that ithas been easy, particularly for small businesses, to£5.00, £6.00 an hour who would expect to have their

diVerentials restored. The traditional approach of accommodate increases in price, in wage costs, whenthey cannot pass those on in prices, and I am sure—the Low Pay Commission since 1999 was to increase

the minimum wage one year and have a pause year I have seen it myself as a Low Pay Commissioner—there has been displacement. Some of thatthe second year and then increase it again the

following year. What the ONS’s figures show is that displacement may be from businesses that, frankly,were not quite viable, some of it may have beencompanies that were under really tight pressure in

the year that the minimum wage went up displacement from smaller business to largerbusinesses in a way that is not entirely healthy for theconcentrated on people at the very bottom and

diVerentials got squeezed. In the year when there economy. So it can be a success but at the same timeit can be quite diYcult to digest. In relation to ourwas a pause year in the minimum wage, or a very

small increase, a 10p increase, they did not do much philosophy for the minimum wage, we believe in aminimumwage which is a floor in the labour marketfor people at the bottom but they restored

diVerentials for people above. One of the things we and therefore we do not think it should be ratchetedup constantly as a way of implementing a nationalare looking out for is a 7% increase two years

running may well have squeezed diVerentials up incomes policy. Indeed, government has a numberof other tools, like tax credits, which it uses tobadly and over the coming months we may find

companies under real pressure to restore provide support to families where it does not believethat their wages are suYcient for their living needs,diVerentials up the wage spectrum in a way that they

cannot aVord because they have not had the time to and that provides a much higher level of supportthan the minimum wage. I think we make a greataccommodate that diVerential increase. I guess we

will know better in a year’s time how serious that mistake, a mistake that perhaps some of ourcolleagues in continental Europe fell into in yearsimpact is.gone by, of trying to use the minimum wage as aform of national incomes policy.Q107 Mr Hoyle: It is interesting that the minimumMr Evans: How about taking the politics out of itwage has helped business in a lot of ways, businessesaltogether then and operate the minimum wage asthat were trying to do the best, were paying goodwe do interest rates and have a body separate to thewages, were being undercut by people who weregovernment that decides what level it should be setpaying very poor wages, and at least we know thereat?is legislation there to protect the good businesses andJudy Mallaber:We do.actually fight those businesses who were trying to

compete on a slave wage economy. Therefore therehave been real bonuses for businesses and we have Q109 Mr Evans: No, but the Government

themselves can implement it when they want toensured that there is a fair and even playing field, andhopefully while that remains we will then stop the play politics.

Mr Cridland: The Low Pay Commission, on whichunscrupulous business. You will never get awayfrom under the arches, because it could be dodgy, I should state again I sit as an employer

commissioner, does make recommendations tobut there are those other businesses that deliberatelyset up to compete by undercutting and paying poor government. It is ultimately a matter for ministers

and Parliament to make the final decision. I think itwages. That has not happened; they have had toensure that they have paid theminimumwage. Sowe is fair to say that over the period since the minimum

wage first report in 1998 the Government hasought to say there are some real bonuses for thosegood employers? adopted virtually all of the Low Pay Commission’s

recommendations and certainly all of the proposalsMr Cridland: Yes, I mentioned very much earlier inmy evidence that the minimum wage was one of the for levels of the wage.success stories and to date business has felt that theimpact has been broadly positive. My comments on Q110Mr Evans:Would you prefer, though, to see itthe future clearly relate to an unknown situation taken completely out of the hands of governmentwhere we need to see the eVect of a much more and this Commission itself stating what thesignificant increase. minimum wage should be and the times at which it

comes in?MrCridland:Weare actually quite comfortablewithQ108 Mr Evans: I am wondering whether you think

that the minimum wage is just an easy tool for the the procedure we have at the moment, because wehave not seen any evidence of undue politicalGovernment to give money to people at no cost to

themselves whatsoever when they announce influence over the operation of the Commission. Soin a sense you are posing me a problem that we haveeverything with all the trumpets going to say our

minimum wage is going to go up? It does not cost not seen evidence of. We certainly believe that anindependent commission made up of employer,them anything, does it, but it does have an impact on

employers? trade union and independent commissioners whoare academics should make an independentMr Cridland: It certainly has had an impact on

employers. I would not claim for a moment, and I judgment of what the economy can bear and thatthis minimum wage should not be a politicalmentioned earlier the diVerence between macro

figures and micro figures . . . Just because the ONS’s football, as it is in the US, where it essentiallybecomes a party-political issue once in a while. Norfigures show that there is growth in a sector that is




should it follow the model that it follows in some Mr Cridland: If we accept that a commission shouldmake an expert judgment based on evidence from allcontinental European countries of a formulaic

increase related to average earnings or other forms parts of the community as to what is the appropriatelevel, then I think we have to have a starting pointof indicators which are not sensitive to changes in

the economic cycle. So at the moment we feel the which says that a minimum wage may have to comedown as well as go up if there was real evidence thatCommission is working well for business.it was being counterproductive to particular groupsof workers. Letme give you an example of that. On 1Q111 Mr Evans: Finally, what do you thinkOctober, for the first time, we brought in aminimumthe impact would be on unemployment if thewage for 16 and 17 year olds. That is a step into theTUC’s recommendation of £6.00 by 2006 wasunknown. It is one, again, that the CBI was quiteimplemented?content to support, but its impact is very diYcult toMr Cridland: I think that would have a veryunderstand. If, talking speculatively, there was realdetrimental impact on low pay sectors. One of theevidence that this had been detrimental to thebiggest challenges we have with the minimum wageemployment interests of teenagers, then we mayis Parliament decided we would have a singlehave to do something about that, but I think it is annational figure. So in my deliberations on the Low“in principle” answer to your question. I think inPayCommission I have to set a figure or recommendpractice we want to avoid a situation where we pusha figure which will work in Derry as well as inthe minimum wage up too high in the first place.Central London, that is as meaningful in Newcastle

as it is on the south coast of England; and diVerentlabour markets have diVerent needs. At the moment Q114 Chairman: I know you talked a lot about theI think we are getting close to a level at which the Working Time Directive, but, as it is on the sheetminimum wage is doing the maximum good it can that we are meant to ask you, let me ask you. Thefor low paid workers before it starts putting people TUC’s point of view on theWorking TimeDirectiveout of business. I would want to see the impact of is that we need it to be fully implemented with nothese two 7% increases over the next year. So I stand opt-outs because people are working for slaveby what I said earlier. CBI is not standing up and labour wages or less than adequate wages here in thesaying the minimum wage is too high, the CBI has UK, and therefore the overtimemerely tops them upacquiesced in the increases that there have been to to a reasonable level. How much truth do you thinkdate, but we are saying that the jury is out on the there is in that argument?£4.85 increase. Let’s see how that goes, but two 7% Mr Cridland: It is not an argument I recogniseincreases are taking us closer to the buVers. I think visiting companies on the ground. I think the TUCthe CBI view would be the sort of figures we have are going to find it very challenging if they were toheard from some trade unions move away from the succeed in having the opt-out removed, and if weintention to have theminimumwage as a floor under lose it we will lose it because the UK Government iswages and bring it into the area of tax benefits, which overruled by its European partners, not because ofis not the appropriate area for a minimumwage and any decision of a democratically elected Parliamentwould be counterproductive, particularly to youth in this country. If we were to lose the opt-out I thinkemployment, to women returners and to those for the trade unions are going to find it very hard towhom the scarring eVects of unemployment are explain to their members why they have lostmost serious. overtime and why they are taking home less money

at the end of the week. If I were a trade unionmember I would find that a curious reason to have aQ112 Chairman:You used the expression “reachingshop steward negotiate on my behalf.the buVers”. You said earlier that part of the

attractiveness of the national minimum wagefor your organisation has been the gradual Q115Mr Hoyle:You have mentioned flexibility andimprovement above inflation. Do you anticipate it you have answered part of the question about pay,arriving at a plateau and then it would attract wage and you have said there are a lot of benefits forinflation, or would it attract price inflation? employers in flexible working arrangements. I justMrCridland:Wedonot thinkwe are yet near a point wonder, the Secretary of State made some newwhere we could adopt a strictly formulaic approach; announcements about the extensions of pay towe think a judgment based on the assessment of the maternity leave and greater paternity leaveeconomy is still very much in the interests of entitlement. What are your views on that as toeveryone. There is one very important thing to whether that comes under flexible workingremember here.We have had a long run of economic conditions?growth; we have not had to live with the minimum Mr Cridland: We are quite prepared to engage inwage being increased in a period of recession or these discussions. As my colleague, Neil Bentley,downturn in the economy; so at the moment I think mentioned a few minutes ago, I think there is a quidwe are still testing out where those buVers are and a pro quo for employers. We need a quid pro quo ifformulaic approach would be counterproductive. there is to be an extension to the arrangements, and

that comes back to Neil’s point about notice period.I was with one of our small manufacturingQ113 Miss Kirkbride: On that point, would it be

appropriate in terms of recession to cut the companies very recently. The owner was deeplyfrustrated: he had a four-person unit where oneminimum wage and would that be your advice to

government? person had gone onmaternity leave. The person had




stressed it was her intention to return and return permanent worker who happens to be at the nextdesk, removes pretty much the whole reason why anquite quickly, but obviously that was a matter for

her, not for him.He therefore had taken the decision employer uses an agency, and it would kill theagency market in the UK. So we support thewith the other three members of the unit not to seek

to replace her. The other three members of the unit principle of the directive, we support the fact it isbased on equal treatment, but we believe thehad therefore worked doubly hard to try to cover.

After sixmonths the individual said actually she now appropriate comparator is the agency’s work force,not the host business. For us, therefore, the currentfelt she would stay oV for the year. At that point he

recruited a temp because they could not go on on directive which would apply the comparator withthe host business after six weeks is whollythat basis. That temp had not worked out very well,

did not have the right skill levels, he had had to let unacceptable, because after a six-week qualifyingperiod any agency temp would need to have clearlythe temp go, but they continued on the expectation

the individual might return. At the end of the the same pay, terms and conditions as people in thehost business. Our preferred route, therefore, is thatyear the individual said she was not going to return.

Let me stress again, that is her entitlement. The only that threshold is pushed up significantly. We suggesta year. The reason we suggest a year is that wouldproblem with that is that the employer had had a

year during which his business operation had been cover agency work which is provided for maternityleave but it would prevent an employer simplydisrupted and he had three other colleagues who felt

they had done their bit to cover but had got pretty keeping somebody on an as an agency temp for avery prolonged period in place of a permanentclose to being exploited as well. All that employer

was asking for is that if a future government intends employment relationship.to extend these arrangements further or providemore funding support to make it more practicable Q118 Linda Perham: I think you have actually saidfor women to have a full year oV, the quid pro quo is you think it would significantly restrict labourthat an employer should have more rights to have a market flexibility if that were the case, if it wentserious dialogue with the individual about when they ahead in that form?might return so that they can plan sensibly whether Mr Cridland: Hugely. I am sometimes asked whichto simply spread the work around or to put is the more important of the two, the Agencysomebody in place on a fixed term or agency basis. Directive or theWorking TimeDirective. It is a veryAt the moment they are not able to have that diYcult question to answer, but agency woulddialogue; they do not feel they can open up that certainly be equal first. I think one of the surprisesconversation. The Labour Party’s proposals in for CBI—and we keep learning in this job as well—terms of extended leave and enhanced payments for is that it is the high value-added businesses which areleave need to be balanced by greater rights for most concerned about agency work: chemicalemployers to know when somebody intends to engineering companies, automotive manufacturers,return. businesses that are dealing with peaks and troughs in

demand by having, say, 10% of their workforceagency temp which they are flexing very regularly inQ116 Mr Hoyle: Allowing for that, in general you

are supportive as long as there is an agreement order to protect the interests of the core workforce.Those companies will simply not bother with agencyreached?

Mr Cridland: Yes. workers if they have to take on the employmentrelationship. They do not want the hassle; it is nottheir intention. What they would do, however,Q117 Linda Perham: Going back to the Temporarywould not be good for employment because theyAgency Workers Directive which we have touchedwould disappear. In our survey, we think, abouton before, I think you said it was the nature not the400,000 agency temp assignments a year wouldprinciple of the proposal. Would you not agree thatdisappear completely, but only 1% of our membersthe principle of it is that agency workers should getsaid that they would recruit an extra member of staVthe same security and rights as other members of theas a result of not being able to use agency workers.workforce?So it would be entirely counterproductive.Mr Cridland: Yes, I would agree with that, but I

think for CBI the employer in that definition is theagency, not the host business within which the Q119 Judy Mallaber: As I asked the TUC I think

should ask you as well what your position is on theagency temp may be allocated for a short period oftime. I come back to my opening comment, that the employment status of home-workers, who can be

grossly exploited in their work and where thereason host employers, user companies, make use ofagency temps is a commercial one, not an employer or person giving them the work also

undercuts, what might be regarded unfairly, otheremployment one. They reach a commercialarrangement with an employment agency, a more responsible employers. I wondered what the

CBI’s view was on that?commercial arrangement whereby they outsourcethe employment relationship to the agency, then say Mr Bentley:We are also concerned about the status

of home-workers, because it is very much an issueto that employer, “By the way, even though youhave reached a commercial arrangement with an about the supply chain and the nature of how work

is passed down through the supply chain. We saidemployment agency, you have now got todemonstrate that you are paying equal pay, equal last year that we were quite happy to sit down with

the DTI and look at this whole question of workerterms and conditions to a full time worker”, a




status and how it could be applied, but as yet we have unreasonably long hours, they presumably shouldnot have any worse conditions. What in practicalnot seen any outcome in terms of taking those

discussions forward, so we are waiting to see. terms are the real things you are scared of for thosekinds of agency workers having the same rights asother workers?Q120 Judy Mallaber: Have you put forward anyMr Cridland: I do agree with the points you make; Iproposals yourself?think they are perfectly valid. I come back to myMr Bentley: No.point that this is essentially a commercial issue. It islike any other form of business outsourcing. Does itQ121 Judy Mallaber: Do you have any ideas forpass an investment appraisal? If a company, BMWproposals you might put forward yourselves?making theMini inOxford can go to an employmentMr Bentley: We need to take members’ views inagency and say, “To meet our variations in demandterms of what the Government is proposing but, inwe need X number of quality, highly skilled agencyterms of how to deal with the issue, we would thentemps, probably engineers, maybe portfoliohave to consult our members and get back toworkers. We need them this week for this demandgovernment on the basis of member views.but we will not need them beyond the end of theMr Cridland: I think the reason we have not taken amonth”, they will do that as a straight commercialdirect lead on this is because we are back to that partissue. If regulations tell them that they have to beof the labour market which is very hard to reachthen responsible for the employment relationship—where, frankly, without being pompous about CBIand answering your question I think is particularlymembership, CBI members are not employing thosepay, that they have tomaintain records on pay levelspeople because they are several levels down theand pay them the same as other people working insupply chain. I have come across this with thetheir factory—they simply will not bother using theminimum wage. You go to Leicester and you hold aagency; they will source labour in other ways. So anmeeting with Asian women home-workers and theirimportant part of our labour market flexibility willrepresentatives in the community about trying tobe lost. The problem with the directive is itsensure they are getting the minimum wage; you talkinappropriateness to the UK labour market. Weto them about the work they are doing, and they arehave the biggest number of agency temps of anystitching skirts or putting together umbrellas forEuropean country. In Greece agency work is stillmaybe 50p an hour, and it is disgraceful, but it is aillegal. In Italy it was onlymade legal a few years agopart of the labour market that is very diYcult toand the market is still very small. Many otherpolice. So I think within the CBI as an organisationEuropean countries, particularly from the EU 15,we do not have the competence to know what theironically see this directive as a liberalising measure,answer is. We recognise the problem and we willwhereas in the UK it would add more rigidity, forwork with the DTI to do whatever we can.the reason I have explained. If the EuropeanCommission could be persuaded to place theQ122 Judy Mallaber: Have your members, from aemployment relationship for all the factors we havemember’s point of view as opposed to thetalked about with the agency, and the agency thenemployee’s point of view, expressed concern,has a strictly commercial relationship with the hostbecause obviously they will have a twofoldbusiness, other than that the host business, ofrelationship, one with those people supplying themcourse, is always responsible for health and safetywho are working at home maybe at the end of theirand, indeed, working time hours restrictions, but thesupply chain and, secondly, they could be inmain employment relationship is with the agency,businesses where they are getting undercut and arewe would not have a problem with this directivesubject to exploitation?going forward.Mr Cridland: Yes, there is that concern.

Q123 Judy Mallaber: So is that something your Q125Miss Kirkbride: It is really interesting how youmembers have expressed concern about? see this. You are saying that the agencies will beMr Cridland: Concern about unfair competition. destroyed by this directive, and, presumably from

what you have said, slightly more at the top end ofskill levels. So where, in your opinion, will theQ124 Richard Burden: On the agency thing, givenbusinesses get the labour that they would otherwiseyou have said that on regulation generally it isbe employing via the agencies? Why is it thatimportant to focus on the practical implementationcatastrophic?of things rather than theory, could I ask you: are notMr Cridland: As I mentioned, only 1% of oursome of the threats to a lot of agency workers, notrespondents in our surveys say they will increasethreats to agency workers, the threats totheir core workforce. I think, by reducing prospectsemployment prospects of agency workers more infor agency work, we will be more likely to extendthis region? For instance, if you take holidays, ifworking hours, because one of the consequences issomebody is working for six, seven weeks, if theythat they will ask people to domore overtime, whichwere an employed worker they would not get muchis maybe not something that they would wish to do;holiday but they might get a day or so pro rata. Ifthey would much prefer to spread the work around,you are talking about unfair dismissal they wouldfor sound business reasons. Also 50% of all agencynot be covered by it anyway. If you are talking aboutworkers move into a permanent job within one yearredundancy, they would not be covered by it

anyway. If you are talking about working of becoming an agency worker. It is good for the




individual to test out what sort of work they want to qualifying period for that to be as high as it possiblycan. Our preference is for a year. Themore you bringdo; it is good for the employer as a probation period.that down the more you reduce opportunities forSo individuals will lose, core workers will probablyagency workers to no good end. Six weeks, which isbe asked to work more hours than they want to, thewhat the European Commission are stuck at, isbusiness will have less flexibility, the agencies will seewholly and completely unacceptable.a loss of business. I cannot see any gain.

Q127 Chairman: One last question. What is theQ126 Mr Clapham: Just to get this straight, you attitude of the CBI towards the relevance and role ofagree in principle, but where you are disagreeing is trade unions in the 21st century? For 20 marks!on the period of time, the six weeks. A little earlier Mr Cridland:We leave it to our member companiesyou used the period of a year, but, given the nature to make their own decision on whether they wish toof temporary work, where it tends to be little above work with trade unions. Some do, some do not. Asthree months, would it not be possible to reduce that we heard earlier, the trade union representation inperiod to say a six-month period? Would you agree the private sector is now less than 20%, so most CBIwith a six-month period? members are not working with trade unions becauseMrCridland: The reason our policy is for a year is to trade unions are simply not there. We are not antry to get some alignment with the debate on anti-trade union organisation; there are many CBImaternity, because a lot of small businesses use members who work very successfully with tradeagency workers as temp cover when key skilled unions. What we learn from the experience of thoseemployees, if they want to come back, are away, and successes is that, just as employers have needed toif the small business was faced with half of that modernise, to face the realities of a globalisedperiod, it being a commercial relationship with the economy, unions need to do too, and unions whichagency, but the other half being an employment modernise and work with businesses in the interestsrelationship, they will find that very diYcult to of their union members are going to be relevant toaccommodate; but, clearly—we are a pragmatic their employers. Unions which do not, unions whichorganisation—if there is scope for any negotiation try to turn the clock back, are not going to beon this, our starting point is it should not be a relevant to the modern labour market.comparator with the host business, it should be Chairman: On that note we will finish. Thank youa comparator within the agency. If it is to be a very much for your evidence. We will be back to you

if there are any points of detail.comparator within the host business, we want the

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Tuesday 30 November 2004

Members present:


Mr Michael Clapham Judy MallaberMr Nigel Evans Sir Robert SmithMr Lindsay Hoyle

Witnesses:Miss Emmeline Owens, Principal Policy Adviser,Mr Lewis Sidnick, Employment Policy Adviserand Mr Francis Toye, Managing Director of Unilink Systems and Software, British Chambers ofCommerce, examined.

Q128 Chairman: Good morning. Miss Owens, Mr Sidnick: I think that the reason that the growthin UK economy is higher than in any other EUperhaps you could introduce your colleagues and we

will get started. country is because we have a much more flexiblelabour market; the reason that our businesses areMiss Owens: I am Emmeline Owens, Principal

Policy Adviser at the British Chambers of competing successfully globally is because we aremonitoring the burdens andwe are trying to keep theCommerce. On my right is Lewis Sidnick, our

Employment PolicyAdviser and tomy left is Francis cost of the burdens down. We are trying to keep theflexibility where other EU countries—for example,Toye, Managing Director of Unilink Systems and

Software. Germany and France—have more restrictions onworking hours and their businesses cannot competeas successfully. It is no coincidence that the UK hasQ129 Chairman: I would like to start this morningthe strongest economic growth in the EU zone.with the Burdens Barometer. Maybe you could tell

us how it is calculated and are there are anyQ132 Chairman:How does such an obvious truth—applications or any similar calculations done acrossif it is true—evade the concerns of the Germans andEurope for similar burdens and how they are dealtthe French?with?Mr Sidnick: Our concern is to make sure that theMissOwens:TheBurdens Barometer, the £30 billionUK economy is competitive and they are nowthat we actually use, is the cost of 35 majorrecognising increasingly the importance of a flexibleregulations in the UK ranging obviously from thelabour market. In France they have had a 35-hourWorking Time Directive through to a range ofworking week and they are realising the restrictionsenvironment regulations and other employmentthat is putting on their business environment and areregulations since 1998. So far as I am aware, thenow trying to go back on their 35-hour workingRegulatory Impact Assessment System we wouldweek. There is a similar situation in Germany.like to see rolled out across the EU. Particularly aI think increasingly other EU countries arefigure that we use—£30 billion—does not actuallyrecognising the importance of a flexible labourinclude the cost of specific policy introductions likemarket and are, in a sense, trying to catch upwith thethe National Minimum Wage; that is a separateUK in that regard.figure of around £13 billion so far as I amaware since

it has been implemented, the actual policy cost.Having said that, our RIA database of 900 Q133 Chairman:Do you think that this is the biggestregulations builds upon this; this is the cost of 35 single problem facing small businesses in Britain?major regulations to business and it has been Mr Sidnick: I think the burden of red tape andincreasing year-on-year since 1998. regulation is the biggest single problem.

Q130 Chairman: Why do you think it has not been Q134 Chairman: Greater than taxation?done in Europe? Mr Sidnick: At the moment our taxation rates areMiss Owens: It is something that we are looking to relatively favourable and currently in the last threesee rolled out. Obviously various cost and benefit to five years the cost of regulation is the area that hasanalyses have been done, certainly in the UK; 40% rocketed. That is what our business members areof these Regulatory Impact Assessments come from saying is their biggest concern, the rising concern ofthe EU legislation. red tape. Our figure shows £30 billion extra costs

since 1997.

Q131 Chairman:Do you not think it may be the casethat in fact the Europeans have a rather more Q135 Chairman: One of the things that could be

charged against small businesses is that their policiesbalanced attitude to this than you have and that theythink that regulation in itself, although it may be a for the development of skills across the board is not

very progressive and not very well developed. Wecost, it may also be a benefit and therefore to be putin this rather biased fashion is perhaps not a often hear about problems relating to skills

shortage. How significant do you think that is in inparticularly helpful way of looking at the costs onbusiness. terms of the performance of your members?



30 November 2004 British Chambers of Commerce

MrSidnick: It is extremely significant. Our quarterly Mr Sidnick: £12.68 billion is employment and therest up to the £30 billion is non-employment.economic survey—which is the largest survey of its

kind—of 6,000 businesses each quarter has shownthat in the last 10 years the number of employers Q140 Chairman: How much of the £12.68 billionwith recruitment diYculties has actually doubled would you regard as acceptable? You have takensince 1994. The skills problem is a big issue but we out the National Minimum Wage, what aboutneed to address that and the Government is going in provisions for four weeks holiday per year, 20 days?the right direction to address it. However, if that is Would you regard that as a burden?addressed it is not an open ticket to increase Mr Sidnick: No. We obviously support paidregulation and look to solve the productivity holiday.problem through that means.

Q141 Chairman: How much does that cost?Q136 Chairman:Within your surveys have you tried Mr Sidnick: The Working Time Directiveto distinguish between shortage of labour as against regulations that we have . . .shortage of skilled labour?Mr Sidnick: A distinction between skilled labour Q142 Chairman: I am sorry, but I do not want aand labour? global sum because the Working Time Directive has

a number of elements, not all of which I wouldimagine you would reject. Let us just stick with theQ137 Chairman: There are some people who look20 days. How much would that cost?for employees in the service industries where if theyMr Sidnick: I do not know an exact figure for the 20can breathe and get out of bed in the morning theydays in isolation, but a figure for the Working Timeare eligible for employment. There are others whoas a whole is approximately £11 billion.require perhaps lab skills, engineering skills and

the like.Mr Sidnick: There is a big problem with basic skills Q143 Chairman: So if you took the Working Timein the UK and that is an area which needs to be Directive out of the £12.68 billion you would be leftaddressed. However, the real problem that with £1.68 billion.businesses are complaining about are high level Mr Sidnick: Yes.skills. It is not just the ability to communicate andoperate computers and read and write properly; it is Q144 Chairman: But you have not broken up thehigh-level skills and that is why we need more Working Time Directive into its constituent partsbusinesses to undertake apprentices. We need a which you concede yourself not all of which are badgreater focus on vocational education through the or unacceptable.system. If we do improve our current skills shortage Mr Sidnick: Often when you look at regulations inour businesses would not say that is a ticket to isolation then they can be seen to be acceptable butimpose more regulation. not when you look at the total across the board.

Mr Toye: In our current financial year—admittedlyit may be exceptional—the maternity regulationsQ138 Chairman: I am sorry, I think you arewill cost us more than our corporation tax.misunderstanding. I am not trying to argue that if

you solve one problem you then over-burden peoplewith another. I am just saying that I am surprised Q145 Chairman: That may be a reflection on yourthat a business organisation like yours should be so profitability.obsessed with the regulation that issues of training Mr Toye: It might be, yes; I accept that. However,and taxation which one would have thought would you asked the question why there was the concernbe central to the delivery of the service or the goods about the regulation and so it does help to put it intothat the business is set up to provide, that somehow the same order of magnitude.these should be a poor second or third in any list Chairman: I think what we are trying to do is get aagainst regulation. picture of the scale of the problem in relation towhatMr Sidnick: Regulation is our big issue because it is was once perhaps a lower flexible labour marketwhat our business members are saying is aVecting than it is now. Some might have argued that it wasthem. Skills is another top issue and there is a critical too flexible, that people had insuYcient rights andskills shortage in the UK which needs to be that the right to have four weeks holiday whichaddressed. These are two problems that are right up probably nobody in this room does not enjoy but aat the top. Yes, skills is a problem and the fact that number of people outside this room did not enjoya number of employers with recruitment diYculties until fairly recently. I think that is where we mighthas doubled over the last 10 years shows the scale of have a cause for concern.the problem. The biggest problem that our businessmembers are saying is the increasing tide of Q146 Mr Clapham: If I could just quickly follow onregulation that they are having to pay for. from the Chairman’s questioning with regard to the

cost of regulation, I note in your submission yourefer to the costs of various regulations but there isQ139 Sir Robert Smith: One question on the

Burdens Barometer: it would be fair to say from little reference—or no reference—to the benefits thatcome. Is that something that you have calculatedyour figures I think that the bulk of the burdens are

non-employment. What is the split again? and is that in your Burdens Barometer calculations?




Miss Owens: I think it says in our submission that Q152 Mr Evans: That is what I am talking about.Mr Sidnick: We did a survey of 1,200 businesses—looking at 135 Regulatory Impact Assessments over

the course of the year to April this year, that we the largest survey on employment this year—acrossthe country and the majority of respondents saiddetermined that the benefits would not outweigh the

costs. That was through our own calculation on the that if the UK’s opt-out of the Working TimeDirective was lost it would adversely impact onRegulatory Impact Assessment.their business.

Q147 Mr Clapham: So there are obviously benefitsQ153Mr Evans:Did they address the flexibility thatthat come from regulation but you are saying that onis contained within averaging?a cost benefit analysis the cost outweighs the others.Mr Sidnick: If the reference period is extended toMiss Owens:On those particular Regulatory Impactaverage it out to a year then that would help, but theAssessments, yes.key which our business members are saying is thatthey need to retain total flexibility to control

Q148 Mr Clapham:Given the fact that we were told working hours and they do not want to applywhen taking evidence from the TUC that we in the reference periods and have to calculate the burden ofUK have less regulation than any other OECD the admin. The key point on this is that it iscountry and yet we see the OECD countries with employees as well who are saying to us, and ourquite robust economies, does that not suggest that members employ five million employees, which isthere are better ways of managing regulation? 30% of the UK workforce, and they are saying theyMiss Owens: Obviously our regulatory burden has want to have the right to work longer to earn moreincreased since 1998, but I think if we look at some money.other European Union countries—for exampleGermany who are looking to de-regulate and

Q154 Mr Evans: So it is the people themselves whocountries like Spain who are introducing moreare making a noise, not just the businesses.flexible rights in the terms of agency work andMr Sidnick: That is right. When we did our surveylooking at their agency market—we are moving in awe had a lot of employers who submitted responsesslightly opposite direction.from their employees and they were saying that theydo not want to cut their working hours; they want to

Q149 Mr Clapham: You mention Germany, but in be free to work beyond 48 hours if they are paidde-regulating are they likely to move to what is properly which, of course, we would support.called flexicurity sowhilst they de-regulate andmoveto greater flexibility at the same time they have built- Q155 Mr Evans: That takes me back to thein security? Chairman’s point initially about burdens, there areMiss Owens:We are obviously not against security no opt-outs in a number of other European Unionin that respect but if you take the example of fixed countries so does this mean that they are at atermworkers’ rights inGermany, they are looking to disadvantage or does this mean that, as is famous—liberalise some of the rules surrounding fixed term almost folklore—with these things, they sign up towork. That is going against the trend in terms of them and then just turn a blind eye to it.some of the legislation that we have brought in in the Mr Toye: If I could add to that, we import productsUK in recent years. from France and I rang up my colleague in France

at seven o’clock in the evening—eight o’clock theirQ150 Mr Clapham: So you would accept that if we time—and they are still working there so it isare going stimulate and motivate a workforce in a obviously a short week or very long hours over away in which it is conducive to creativity, to working couple of days; one or the other.together in partnership with their employer, we needregulations? Q156 Mr Evans: So do you suspect that they haveMiss Owens:We are not against certain regulations signed up to it and are ignoring it whereas if we endper se. We have not opposed, for example, the the opt-out we will enforce it rigidly.Minimum Wage and certain aspects of Working Mr Toye: Yes.Time; it is more the implementation of thoseregulations and the increase in costs over time, for Q157 Mr Evans: Therefore it is not that Britain hasexample the 7.5% rise in the MinimumWage shows. an advantage at the moment, if we end the opt-outIt is the increasing burden, the accumulative burden therewill be a complete disadvantage to British firmsand the administration regulation that we are and businesses and employees.opposed to. MrToye: I do not want to imply, though, that we get

near that 48 hour week either; we do not generally,it is only if we have a major project on and is a veryQ151Mr Evans: I am not a fan of theWorking Time

Directive because of all the things that we say about temporary situation. But yes, I think it is ignored inother countries.flexibility, but do you not think that in the averaging

within the Working Time Directive that there is Mr Sidnick: It is often said that we work longer andwe areworking harder, butworking hours in theUKsuYcient flexibility for that not to hamper business?

Mr Sidnick: I think the key issue on the Working are actually declining. The average working weekhas been reduced by one hour since 1997. In termsTime Directive is the opt-out from the 48 hour

maximum working week. of health and safety—which is what this directive is




based on—theUKhas the third best record in health Q164 Chairman: What about Denmark. That is asmall economy admittedly but has very high levels ofand safety in the entire EU. We do not have health

and safety problems then we should be free to work economic performance but also has high levels ofregulation.the hours we want. That is the message.Mr Sidnick: But then you can refer to the US whichhas a stronger economy and low regulation.Q158 Chairman: In your surveys have you tried to

assess howmany of your members would be aVectedQ165 Chairman: So you could say that it is veryby the removal of the Working Time Directive opt-diYcult to draw any conclusions from theout?information.Mr Sidnick: Our survey asked if it would adverselyMr Sidnick: I think it is broadly accepted that if youimpact upon your business if the opt-out wasimpose the high levels of regulation there will be aremoved and 52% said yes. Within the productionpoint where it starts to aVect your competitiveness.and manufacturing sector 62% said yes. The

majority are fearful that it would aVect theirbusiness if it were removed. Q166 Chairman: All I am saying is that there are

examples—the US one and the Danish one—and itseems that there are others who might well beQ159 Chairman: How does that stack up againststruggling for other reasons altogether.national statistics? I suspect that your survey is aMr Sidnick: Yes, that is true.self-selecting sample. Is that correct?MrToye:The eVect of some of these regulations willMr Sidnick: It is a survey that went to the 60definitely change the UK scene in a way to make itChambers across the country and they send theslightly harder and more expensive for business. Isurvey to their members, so it covers all businesshave two female employees pregnant and I have twosizes and sectors but there is a degree of random onexpectant fathers which amounts to about 20% ofwho responds.our workforce. We can see the cost of theseregulations. I am pleased that we have this from aQ160 Chairman: There is also a degree of self-paternal point of view, but if, for example, maternityselection in the sense that you can decide whether oris extended from six to 12 months we do see genuinenot you wish to send it back.eVects on our business.Mr Sidnick: Yes.

Q167 Chairman: Have you any idea of how manyQ161 Chairman: It is no diVerent from the Dailyemployees are already working on average 48 hoursMirror asking, “Should Becks stay married to hisaweek or less, extrapolating fromyourwide-rangingwife?” or something like that, so there is a certainalbeit self-selective sample?statistical concern about self-selecting samples.MrSidnick:There are some government statistics onMr Sidnick: Yes there is, but when such powerfulthe labour force survey but I do not have those tomessages come back—for example the majority onhand. It is a sizeable number. I could write to youMinimum Wage, 80% say they want a cap now; onwith those.maternity 83% are opposed to extending payment to

twelve months—that sends a message. You canQ168 Chairman:What I am trying to get at is whatquestion the reliability of statistics as always.surprises me is your obsession with this issue. I canunderstand parental leave concerns; these areQ162 Chairman: Basically what you are telling us isperfectly understandable. As far as the other ones, Ithat you do not really have accurate statistics aboutjust wonder if it is quite as big an issue as you wouldthe number of your members who would be aVectedhave us believe. I know it is administratively a painby the Working Time Directive opt-out.in the neck—a lot of things are—but this seems to beMr Sidnick: Not of our entire membership but wean easy target to shoot at rather than a big problemhave a sample.and the two might not necessarily be the same.MrSidnick: It is the issue that our business membersQ163 Chairman:We have already agreed that therekeep coming back to us on so we take what they say.is a diYculty with the quality of the sample. It may

be that everybody who is concerned has written inQ169 Sir Robert Smith:What is the response rate toand that is fine, but we still do not know that for surethe survey? One goes to every member of theso that to base your arguments on samples of thisChamber through the network.nature is, to say the least, statistically dubious. YouMr Sidnick: Yes.cannot tell me in any accurate way the number of

people who would be aVected by the removal of theQ170 Sir Robert Smith: How many come back?opt-out; you just know a lot of people do not like theMr Sidnick: On this survey 1,200 responded but it isidea of having it removed.hard to gauge howmany were actually sent out. It isMr Sidnick: It depends on the way you look atup to eachChamber itself to send it to their membersthe statistics, but what is true is that the UK has theso we do not have a response rate figure. It is sent tostrongest economy in Europe and we also have theall Chambers and they send out a certain number.most flexible labour market in Europe. Those two

together would suggest that things like the WorkingTime opt-our and the Minimum Wage and other Q171 Sir Robert Smith: Do they not send it to all

their members?regulations do play a role. I think that is the point.




Mr Sidnick: No. average earnings growth. There was also a rise in2001 or 2002 of 10%, three times average earningsgrowth. It has now got to the stage where manyQ172 Chairman: Is there a method of establishingbusinesses recruit at a level and around the Nationalwho gets sent it and who does not?Minimum Wage, and around £5, and those are theMr Toye: It is a website and we just get an email; webusinesses that are saying to us that this is a problem.do not know necessarily what the survey is about.It is having an impact on diVerentials further up theYou just pull up the website and answer thechain and it is also becoming an issue for employersquestions.who do not want to be seen necessarily as aMinimum Wage employer but may have no choice.Q173 Chairman: So first you have to be on the net;

secondly you have to be interested enough to fill it in;thirdly, surprisingly enough since it is on the web, Q179 Mr Hoyle:How does that go and how do youyou do not keep statistics as to where they come run it past your own mind when you think 10%, 8%from and which parts of the country and what of £4, yet the same people are saying to you. “Wenumbers? don’t like this” but then having 20%, 25% onMr Sidnick: We do have that; we know the £200,000 a year. Do you not think there is a whiV ofpercentage from each region. hypocrisy in that?

Miss Owens: Our main constituency of businessesQ174 Chairman:What does that mean, a percentage employ between 50 and 100 people. They are SMEsfrom each region? and obviously dependent on the sector—care homeMr Sidnick: We do know how many survey sector, retail sector, manufacturing sector—andresponses each Chamber sends us back. they are employing people in and around the rate of

the National Minimum Wage and if it is not thatnow it soon will be.Q175 Chairman: But you do not know how many

members they have in each region.Mr Sidnick:Yes we do, but it is up to each Chamber Q180 Mr Hoyle: You have not answered theof Commerce to send it to their members as they question. Do you not think there is a whiV ofwish. hypocrisy? The same people who are saying, “We

don’t like paying thisMinimumWage increase at theQ176 Chairman: So it is put out on their website lowest of low wages”, yet they are the same peoplerather than on the national BCC one? who are usually taking 10 and 20% increases onMr Sidnick: It is on both and also a paper version is £200,000 a year. How does that match?What do yousent as well. All forms are used. say to them?

Miss Owens: If you look at average earnings growthQ177 Chairman: If you were really bloody-minded it is not 10 or 20% and if you look at some of theyou could do all three. increases in executive pay some of them have beenMr Sidnick: I would imagine you would only reply high but, as I say, average earnings growth in thisonce. I think a survey of 1,200 business does give an country is about 3%—it is actually higher in theindication of what the current environment is. Our public sector than it is in the private sector whichQES of over 6,000 is the largest survey in the UK, so actually bumps it up—and if we are looking atover 6,000 businesses each quarter which is reliable National Minimum Wage increases at double that,evidence. it is not in line with the rest of the economy.Chairman: I think we will move on, Mr Sidnick. AllI would say is that if I had to depend on that

Q181 Mr Hoyle: But also I think there is always themethodology for canvassing my constituents atfact it has to be taken into account that if you are inelection time I would not have been here for the lastmanufacturing and you are paying a reasonable25 years. That is all I can say.wage and you have a competitor who will always bedragging on the bottom, you are always at aQ178MrHoyle:You have obviously touched on thedisadvantage. Surelywe ought to be forcing those upNational Minimum Wage and I think liketo make sure that the good employers are noteverybody I would like to congratulate the success ofsuVering from bad competition because they are nottheMinimumWage since it has been introduced, butpaying real wages.I think now the question is why do you thinkMiss Owens: I think we have got to the stage noworganisations feel that it ought to be limited, eitherwith the National Minimum Wage that many morecapped or in line with inflation? It is the samebusinesses are paying around that level. It is not justsceptics, presumably, who said that the Minimumthose employees who are being bumped up who areWage will not be successful, it will be detrimental tobeing aVected. Pressure and diVerentials across thebusinesses, businesses will fold overnight. Thatboard mean that business costs have increasednever happened; it still has not happened. Whattremendously. That has come through to us in ourwould you like to say?survey but also through talking to businesses.Miss Owens:We are not opposed in principle to the

MinimumWage. When it was introduced in 1999 at£3.60 it was seen as a reasonable rate to have, but Q182 Mr Hoyle: But good employers and good

businesses are paying above the Minimum Wagerises in recent years—the last couple of rises at 7.5%this year and last year—are more than double the and the fact that the competition is always coming




from those who want to pay the least, surely the Mr Toye: No, I am not. I just have to be aware ofgood employers benefit from having the Minimum where our cost level is, that is all, where the generalWage increase. cost level is because our suppliers will be payingMiss Owens: Many are paying in and around the minimum rates for some things so it increases ourMinimum Wage and frankly it is not something we costs.object to at all. We want a Minimum Wage toprevent exploitation. We are happy with the

Q190 Mr Hoyle: But overall you think it has been aMinimum Wage for 16 and 17 year olds at aroundgood success story, the Minimum Wage.£3 an hour that was introduced in October this year.Mr Toye: Yes.

Q183 Mr Hoyle: What do you think for an adultwith a family? Q191 Chairman: What was the original attitude ofMiss Owens: Increasingly members are telling us the BCC to the National Minimum Wage?that they do not want to see a Minimum Wage Mr Sidnick: We supported the introduction of theabove £5. Minimum Wage as long as it is set at the right

level and the level in 1999 was seen as reasonablebut the level now is creeping to become moreQ184Mr Hoyle:What do you think is a fair rate forunmanageable.a family person?

Miss Owens: At the moment in terms of theMinimum Wage our members are saying to us that

Q192 Chairman: It has been suggested to me—and Ithey do not want to see a MinimumWage above £5.only have anecdotal evidence of this—that small,local employers in my constituency (people in the

Q185 Mr Hoyle: Do you agree with that? catering industry, for example) say, “We like to keepMiss Owens: That is the BCC position, yes. to the Minimum Wage but what we need is time to

get that and therefore we appreciate when theCommission announces that it will be 15 months orQ186MrHoyle:What about those employers whom18 months before the next increase”. They then sayyou represent who pay quite a bit above thethey can accommodate it. What I am at a loss to seeMinimumWage whose competition is coming from

those at the bottom end? How do you justify it? is that you have gone on a bit about diVerentials butMiss Owens: Those who pay above the Minimum I am trying to think of low paid companies that haveWage have to bump up diVerentials for their quite complicated salary scales. Do you normallyemployees; they have to bump up the amount their have a lot of people getting paid the Nationalemployees are being paid above theMinimumWage Minimum Wage and a couple of managementbecause they do not want to be seen necessarily as a grades maybe far higher above that, but it is a fairlyMinimum Wage employer. They have to raise their flat company structure when you are talking abouthourly rate as well. very low paid industries, is it not?

Miss Owens: I think, for example in the retail sector,there are a range of wage rates and certainly whenQ187 Mr Hoyle: So you think there is benefit in thewe have submitted evidence to the Low PayGovernment not subsiding people who are not beingCommission it has come back that several pay ratespaid a real wage through tax credits through all thehave been impacted on and these low costs areother benefits that have to be paid.

Mr Toye: I can see all your points. We pay associated with each level on the pay scale.everybody significantly above the Minimum Wagebut our competition—and I receive at least one

Q193 Chairman:We have never had any expressionsemail a week—is to send our software developmentof concern from the Tescos or the Asdas of thisto India where rates are much lower.world which would tend, on the scale of theiroperation, to have more in the way of rates that

Q188 Mr Hoyle: You are not suggesting, are you, would result in there being a diVerentials problem.that we compete with the wages of a third world As I understand it, the only part of the Britishcountry because that is where we came from in the economy where this diVerentials issue has come outbeginning. We know we cannot compete with third has been in care homes. If you have six people on fiveworld wages or would ever want to compete I am diVerent rates then maybe you have somethingsure—we had better put this on the record—that wrong with your business structure but if you haveyour organisation do not want to compete in the

50 people and they are doing a variety of jobs therethird world.might be a problem there. What sort of businessesMr Toye: Many of our competitors have alreadyare we really talking about here when we talk aboutoutsourced their software development to thosediVerentials?places.Miss Owens: In the retail industry we have had alsoexamples of this impact on diVerentials.

Q189 Mr Hoyle: Can I just clear this up because Ithink it is important for the record? Are you

Q194 Chairman: Maybe you could send us somesuggesting that we should pay the same rates asIndia? evidence on that.




Miss Owens: Yes, of course. Q199 Mr Clapham: So your flexibility refers to akind of structural flexibility of core and peripheralworkers where you have the core workers on maybeQ195 Chairman: The other thing, of course, is that ita 40 hour contract but then you are able to applycould be argued that the Commission does operateflexibility through that in diVerent proportions.on a kind of suck it and see process. Is your view thatMr Toye: Yes.they have got it wrong already, that a fiver a week is

too high?Or that the 8.5% rise which is envisaged forOctober of next year is going to be a step too far? Is Q200 Mr Clapham: But the people who are on part-it a problem at the moment for most of your

time working will fit in to ensure that you are able tomembers or is likely to become a problem next year?produce in the way in which you want to produceMiss Owens:Using the example of the last two risesand would be on similar terms and conditions towe have asked the question, “Will it aVect yourthose who are employed full-time.competitiveness? Will it have an impact on staYngMr Toye: They are in exactly the same position. Welevels?” It has come back at over 50% saying thatwere encouraged to do this by flexible working andrises in the round of 7.5% or higher would certainlywe do not see why that should be made regulatory.have that impact. It has also come back that someWe are doing it anyway and a lot of good employersform of cap would be preferable.are. That would be our argument. We do not needthe regulation in order to do this.

Q196 Mr Clapham: Could I just explore thisargument of flexibility a little further? The real aimof your argument seems to be that there should be no Q201MrClapham: If wemoved to a situation whereregulation at all and no regulation would add to we did not need any regulation but we were able togreater flexibility. Is that correct? That seems to be achieve an understanding of what was required—thewhat you are saying. Mr Sidnick referred earlier to norm, should we say, of working—via negotiation,the surveys that have been done. Is there any that would create a situation of industrialinformation coming in from the surveys that you democracy as, for example, people wrote about inhave conducted which show that that is precisely the 1960s, people like Allan Flanders. However, thewhat your members want: non-regulatory very fact that the industrial democracy (whichflexibility? academics thought was being constructed in theMr Sidnick: It is not about having no regulation; 1960s and 1970s) was wiped away after Mrsthere is a need for regulation and there is a need to Thatcher came to power would tend to suggest thatprotect employees’ rights. What our survey is without regulation you can never really have theshowing is that the last three to five years have kind of enduring stability. Would you agree withshown a significant increase in the amount of that?regulation across a range of areas and that increase Miss Owens: A lot of these regulations we are notis now becoming unmanageable. We have gone very opposed to per se. To use the example of Denmark,fast very quickly and it is becoming diYcult. one of the great strengths of the UK economy is its

labour market flexibility. To use the example ofQ197 Mr Clapham: Let us just take that a step skills, yes we are improving on skills and businessesfurther. For example, if there was little in terms of invest a lot in skills, I think more so thanmany otherregulation in order to achieve flexibility we would be European Union Member States. However, skillsmoving into a situationwhere there would be greater and transport for example are problem areas for ourcollective bargaining. That would add to a situation economy so for labourmarket flexibility we need lessof more industrial democracy.Would you agree that regulation. It is what enables businesses to increasethe trade unions should be freed up in order to be to do business here and it is one of the attractions ofable to bargain more freely in a situation where the UK economy, but increasingly we are seeing itregulation was reduced? no longer as attractive perhaps as it once was.Mr Toye:We have 25 staV. We do not have unionsinvolved. That is not any design on our part.

Q202 Mr Clapham:Would you agree that there wasa multiplicity of combinations of flexible working?Q198 Mr Clapham: You may not have unionsFor example, one takes the construction industry: ifinvolved but the very fact that we have some 7.5you had come through London this morning at sixmillion members of trade unions at the present timeo’clock you would have seen vans picking up foreignmeans thatmany of the terms and conditions and theworkers to take them onto construction sites. Theywage rates that trade unions negotiate actually filterwill be working as peripheral workers. In otherdown to areas where there are no negotiationsindustries we see, for example the service industry, ittaking place.tends to be much more structured but neverthelessMrToye: I would accept that. I think it is quite goodhas core and peripheral workers. There is a need toto have negotiation with your staV whether that bebe able to address diVerent situations in diVerentunions or with staV representatives. That is impliedindustries and therefore a need to be able to ensureby flexibility. If I pick up one specific regulation,that the kind of regulations that are applied areflexible working, we now have four people workingapplied in a way that is going to create a kind ofless than five days a week, one of whom is a parentharmony across the piece. Would you agree that theand the other three are not. I think that is a very

good thing and so do the staV involved. regulations that are required tend to be regulations




that need to be applied across the piece? Therewould UKemploys 27%of the entire EU temporary agencyworkers so it would be particularly damaging tobe regulations that could be applied to the service

industry as well as the construction industry. the UK.Miss Owens: Obviously a lot of employmentregulations do, yes. Q208 Mr Evans:What would you say to those who

would say that coming up with these figures isQ203 Mr Clapham: So at the end of the day your similar to the sort of scare stories about theargument is not that we need no regulation, you are minimum wage? In essence this could come in, evensaying that there needs to be less regulation. If there in its current form, and it will not actually have theneeds to be less regulation which are the regulations impact that you suggest.which we need to ditch? Mr Sidnick: I say that we have to listen in advanceMiss Owens: I think it is more the implementation to what businesses are saying. They run theirregulation, the uncertainty of regulation, the businesses on a day to day basis; they employaccumulative burden. For example, 1 October was temporary workers and they are sayingRed Tape Day, a number of regulations came in, overwhelmingly that this would lead to reducedbusinesses were telling us they were unaware of the hiring and would lead to job losses. I think we needones on unfair dismissal because the guidance came to listen to the views of the businesses.out late in the summer. Initially they thought unfairdismissal was a three-stage process but it turned out Q209 Mr Evans: Would you therefore agree thatto be a far lengthier process. It is the accumulative agencyworkers ought to getmore rights but perhapsand administrative burden regulation rather than not the rights that are contained in the currentregulations for example on part-time work or fixed- directive?time work. We would not be opposed to those Mr Sidnick: That they should not get the rights inregulations. the current directive after a six week period.

Q204Mr Clapham: But you would agree that all the Q210 Mr Evans:What period should it be then?health and safety regulations that are in situ need to Mr Sidnick:We are currently calling for a 12 monthbe retained and probably enhanced. period with other business organisations. We thinkMiss Owens: Health and safety of course is a that would be a satisfactory period where, if you arediVerent area. We can get back to you on that. With working as a temporary agency worker for that longa lot of health and safety a bar is continually raised a period then you should have the same rights. Thatand that again is a problem for businesses. It is an would be a safe period.uncertainty issue. There is a certain level ofregulation and then go back after a year or two and it

Q211 Mr Evans: When your firms employ agencyis increased again, and that is the problem. Similarlyworkers what is the average they employ them for?with some of the maternity and parental leaveIs it six months?regulations we are seeing at the moment and the costMr Sidnick: It is a period of between three to sixof the Minimum Wage.months.

Q205 Mr Evans: Am I right in understanding thatQ212 Mr Evans: How many people would beyou are opposed to the Agency Workers Directive?covered by the 12 month period?Miss Owens: In its current form.Mr Sidnick: The 12 months would cover a largemajority; the vast majority.Q206 Mr Evans:Why is that?Mr Toye: We use them for recruitment. In otherMr Sidnick: The UK has the largest agency marketwords, we do not take people on permanently, wein the EU and the directive in its current form hastake them on as a temporary worker to see how theyadditional rights and responsibilities after a six weekperform over two or three months and then if theyperiod of employment of the agencyworkers and theare successful we recruit them.majority of businesses employ temporary agency

workers for more than six weeks so it would have aQ213 Mr Evans: Can you not tell after five weeks?huge impact on the employment of a large section ofMr Toye: We have thought about this and you dothe workforce. In the UK it would be particularlyneed a bit longer than that because people have notdamaging because we use more temporary workerslearned enough about the job within a five weekthan any other EU country.period.

Q207 Mr Evans: What is going to be the impactthen? Q214 Mr Evans: You can tell if they are useless by

five weeks, though, can you not?Mr Sidnick: It is hard to assess. In a survey that wedid of 1,200 businesses 83% said it would lead to a Mr Toye: Yes. It is the borderline cases where you

think somebody is going to learn a bit more and thenreduced hiring of temporary workers in the country.So 83% of businesses who employ temporary agency actually take the job. Three to six months is a

reasonable period. We recently took somebody onworkers said they would have to employ less if thedirective in its current form came in, which is a whowe had had on temporary employment for three

to four months.strong figure. I have actually got the figure here. The




Q215 Mr Evans: So you would not mind six months Mr Toye: Yes, there are diVerent groups oftemporary workers, you are quite right.yourself, speaking for yourself.

Mr Toye: I would not mind six months, no; that is areasonable length of time. Q224 Chairman: For some it might be appropriate

but for others it is not necessary.Q216 Mr Evans: Speaking as an employer again, if Mr Toye: Yes, in fact to say they are paid equallyit comes in at six weeks what are you going to do? would actually be a disadvantage to some of theseMr Toye: We would probably make hard choices. people.Our recruitment would not be so easy.

Q225 Chairman: Does your organisation have aQ217 Mr Evans: People you might otherwise have view on that perception of the issue, Miss Owens?kept on you are just going to get rid of after six Miss Owens: From our perspective yes. From theweeks. business cost perspective we are not happy with sixMr Toye: If there is any doubt, yes. weeks, we would be happier with six to 12 months.

At the same time it is flexibility on both sides. It isnot just an issue of pay necessarily. In Francis’Q218 Chairman:What is the position at the momentindustry maybe that is the case; in other industries itas far as the ability to dismiss people? As Imay not be the case that necessarily temporaryunderstand it you can do it without reference to aworkers earn a lot more. It is also an issuetribunal in the first 12 months. Is that the case?concerning the labour market itself. A lot of peopleMiss Owens: Unfair dismissal rights come in at 12who come into temporary work are returningmonths.mothers, students looking for more permanent jobs.It is verymuch seen as a route into the labourmarketQ219 Chairman: Is it cheaper to employ agency staV

and if businesses are deciding that after six weeks theor not?cost of having a temporary worker goes up so muchMr Toye: It is more expensive actually because youthat it is a disincentive to keep someone on, that isare paying an agency commission. It is actuallya problem especially given the fact that we have thebeneficial not to generally.second highest rate of agency workers in the EU.

Q220 Chairman: So is it maybe as much a matter forQ226 Chairman:What about the issue that perhapsyou using an agency that you are contracting outpeople deserve a bit of protection?some of the human resource function, given that youMiss Owens: Agency workers do have a lot of rightsare small business.under current legislation. I think under WorkingMr Toye: Yes.Time as well as some of the maternity rights. Again,with unfair dismissal and others at 12 months weQ221 Chairman: The long list would be prepared bywould very much like to see agency workers havingthe agency; you would then make that long list intorights along those lines.a short list.

Mr Toye: Yes.Q227 Chairman: But you would do away with theWorking Time Directive and you would do awayQ222 Chairman: I have heard it said that there is awith some of the more liberal maternity andgroup of workers in Britain who want to be mobile.paternal rights.They canmake a lot ofmoney between, say, OctoberMissOwens:Weare not doing awaywith the currentand January. They get through Christmas and thenregulations as such; we are objecting to extensions ofthey want to go skiing for a couple of monthspaid parental leave and losing the Working Timebecause they have made big bucks. They come backopt-out.after a few weeks and work for another two or three

months. They may well be in IT or specialistQ228 Chairman: You were objecting the last timeengineering work or things of that nature. Theythey were introduced as well.actually have a lifestyle and they actually do not careMiss Owens:We have not objected to the minimumabout workers’ rights, but they are making bigstandards that have been introduced in recent times,bucks. Then there are the others who sign up becausefor example some of the maternity leave regulationsthey have to for a call centre or something like that.or the Right to Request. What we have objected toWould you accept that there are diVering slices ofare the extensions of those regulations.the labour market?

Mr Toye: Absolutely. There are contract IT staV

who earn more than full-time employed IT staV that Q229 Chairman: You are in favour of thingswe know of. happening so long as they do not improve.

Mr Sidnick:We do not want to see an extension ofmaternity from six to 12 months or more legislationQ223 Chairman: So sometimes we are not dealing

with the same things.Would you say that not only is to create rights to request flexible working, on theMinimum Wage going up double national averagethere a debate about time, it might also be about the

quality of work or the rate of pay: that those who are earnings. We support flexible working but thereshould be a right to flexible working. That is theearning a lot may not need to be given the same

rights as those who are at the lower end of the scale. message from our businesses members.




Chairman: I just have to say, chimneysweeps found (although workers can work beyond it). Putplanning-wise and employment-wise there needs toCharles Kingsley a bit of a bore, but that isbe some form of defined area for businesses.another story.Mr Toye: A default is useful to start theconversation, however that is not to say that some of

Q230 Sir Robert Smith: You were talking about the our best workers are in their mid-fifties now so Iemployment side of your barometer and there was would not be at all surprised if they are working£1.68 billion that was not the Working Time beyond 65. We do not need a regulation toDirective. Howmuch of that £1.68 billion is actually particularly change that one way or the other. Thetransposition of EU directives into UK law and how reality is, we cannot aVord any passengers whethermuch is UK-only burden of employment? they are 25 or 75.Miss Owens: I think our figures show around 40%.

Q235 Sir Robert Smith: Do you not think thathaving that age is sending a signal that society is

Q231 Sir Robert Smith: Of the £1.68 million? saying that at that point people are becomingMiss Owens: I will have to get back to you on that. unpredictable employees? Surely employees should

be managed on their intrinsic abilities not on theirage.Q232 Sir Robert Smith: One of the other things youMrToye:You can do it that way and if you do it thatare concerned about is the eVect of removing theway then you will have some dismissals of peoplenational retirement ages. Do you have evidence thatover 65. That is an alternative way and actually I doall the workers have poor performance or is yournot have a problem with that.main motivation that younger workers are cheaper

to employ? What is the driving case against lifting Q236 Sir Robert Smith: In your submission you havethe retirement age? come up with some figures of concerns to back upMiss Owens: Businesses have come back to us and your worries. You say, “It is estimated thatsaid that they very much want the right to retain set employers could be faced with an extra £73 billionretirement ages. We consulted on 65, for example. worth of claims”. How do you calculate theMany normal retirement ages in companies are £73 billion? You relate it to 8,000 extra cases.lower than 65. The average I think is around 60. If Miss Owens: We looked at some estimates fromyou had a set retirement age for many employees it the United States where they abolished agewouldmean that they would be negotiating at a later discrimination or abolished retirement age in thestage with their employer. We are not opposed to 1980s. There was a large increase in tribunal claims.older workers in the workforce. In fact I think theUK has the third highest proportion of older Q237Sir Robert Smith:You put some figures in yourworkers in the EU. Our preferred option is for submission at paragraph 28 that I am trying to get

my head round.employees to reach the age of 65 and come to someMr Sidnick: These figures are from the RIAform of agreement with their employer to workconsultation in consultation with the governmentbeyond 65 and many do.figures of what would be the likely projection. Theyare government figures.

Q233 Sir Robert Smith: How is that age chosen?Miss Owens:Obviously the consultation on the Age Q238 Sir Robert Smith: Have you edited it down?Discrimination legislation meant that the DTI £73 billion worth of claims and 8,000 extra cases.actually looked at something they called the Default You obviously have not got behind those figures.Retirement Age or Set Retirement Age from the Mr Sidnick: No. We took the data from theGovernment and we consulted our members on that government consultation.and 65 came back as a preferable option to

Q239 Sir Robert Smith: One of the big problems weabolishing all retirement ages.keep hearing about is the skills shortage andpresumably someone who has been working all their

Q234 Sir Robert Smith: Surely in a well-managed lives and is still fit and healthy is a skilled asset.environment what is the purpose of setting an Mr Sidnick: An employer would want to keep on aarbitrary age when each person’s skills depends on good skilled worker, particularly because of thetheir own ability rather than their age? skills shortage. We would encourage that employeesMiss Owens: As I say, we are not opposed to people and employers agree to work beyond the age of 65 ifworking beyond the age of 65. Our position is that there is agreement on both sides.the business needs to have some form of certainty to Chairman: Thank you very much. I think we will getbe able to plan for future recruitment and to have back to you on one or two points, but thank you for

your evidence this morning.some sort of point in the relationship defined



Witnesses: Mr Mike Emmott, Adviser, Employment Relations and Mrs Dianah Worman, Adviser,Diversity, Chartered Institute of Personnel and Development, examined.

Q240 Chairman: Good morning Mr Emmott and our competitors, not only in Europe. Is legislationpart of that problem? I think not, Chairman. We doMrsWorman. Perhaps you could just give us a word

on the CIPD. It has gone through one or two not argue that legislation stands in the way of peopleacquiring skills or changing jobs.changes, I think. It used to be the Instituted of

Personnel Management and things like that, butnow you have your charter. Q242 Chairman: From what you are saying then theMr Emmott: It goes from strength to strength, regulatory issue is not the one. One thing you did notChairman. It is essentially the same body that was say in your description of the Institute is that you arealways quite well known as the IPM or the Institute the body of human resource professionals, if I canof Personnel Management and at some point— put it that way. You are part of management; youprobably rather more than 10 years ago—it merged are business people as well as being human resourcewith the Institute of Training and Development professionals. You can have the most gentle, white,because it was seen that the management and the liberal regime you like but if the bottom line does notdevelopment of people was really an activity that work you are out of a job. Youmight be the last, youwas best looked at by that perspective rather than might be the second to last to switch oV the lights,with two discrete organisations. That then became but nonetheless you are involved in that. Asthe Instituted of Personnel and Development. GeoV managers do you think that we are maybe overArmstrong, our Director General, decided it would preoccupied with this regulatory burden stuV?help enhance our credibility and hopefully our Mr Emmott:When you ask our members—who are,influence if wewere chartered.After long discussions as you say, business people—you get a mixedwith the Privy Council OYce and consultation with response which is partly a business response andmembers that process was successfully completed partly reflects their background as peopleabout three or four years ago. We are still the same management and development professionals. Youbody but our numbers have increased. We are tend to get support for the objectives of thecurrently around 120,000 members. We believe we legislation, for example, on the Right to Request orare the biggest organisation in Europe responsible even on Working Time, perhaps a hard case, wherefor themanagement and development of people.We it has always had a symbolic quality that employershave a commercial activity that supplements our identified it early on—and HRwas not exempt frommembership income subscriptions and we are this—as being disproportionate to any perceivedtherefore a relatively solid organisation. We do a lot problem. When we asked people back in the lateof research and we respond to public policy 1990s, our HR members, what they thought of theconsultations. Working Time legislation you got a vote in favour

of: “We would like to see some pressure to reduceWorking Time” but when we said, “Do you like theQ241 Chairman: I just thought it would be useful toregulations?” the answer was, “Not at all; toohave it on the record in that way because we knowbureaucratic”. I think when you ask members theythe usual suspects in respect of small businesses, bigwill be critical, not necessarily critical of thebusinesses and people like that. In your submissionpurposes of the legislation but critical of the way inyou draw distinctions between diVerent elements ofwhich it is being implemented. It is a processlabour market flexibility and I think in yourproblem asmuch as it is a rights issue. People are notestimation the UK does not do too badly. However,critical of the idea of rights; they believe in the idea ofyou have highlighted an area of what you callminimum rights, a platform of rights, a level playingfunctional flexibility and you say that we do not dofield and so on. We are not hostile to legislation inas well there. Perhaps you could explain to us whatprinciple but there are issues of cost which are real;you mean by functional flexibility and also whetherthere are issues of clarity of purpose; there are issuesor not regulation is the reason why we do not do asof quality of guidance which DTI have beenwell in this area as you think we could do given ouraddressing and which we welcome. There are issuesbroad international performance.of enforcement through tribunals and whether thereMr Emmott: Hopefully I can give you quite a shortbetter, cheaper, faster and less destructive ways ofanswer. Functional flexibility we understand simplyresolving workplace conflicts. I am sorry it is not aas the ease with which individual employees shiftclean answer, but members are aware of the cost sidetheir jobs, move from one job to another, acquireand also aware of the values and the benefits if younew skills and become more eVective. Functionalget it right. It is an issue of the quality of theflexibility is something to do with job descriptions,regulation rather than its actual content.job design. There is not a major problem in that area

in the UK. Job descriptions have tended to becomenot redundant but they are much less significant; Q243 Judy Mallaber: You claim that muchthere is a lot more flexibility that management and regulation is unnecessary because most employersindividual employees can exert to design or define do act in the best interest of their employees. If thattheir own jobs. Functional flexibility in the sense of is the case then why should regulation not bemoving around, acquiring skills in the workplace is introduced to ensure that they all do?not a major issue. Insofar as it is an issue I think it is Mr Emmott:We do not object to legislation to pickat the level of education and training and the overall up the long tail; we accept that legislation is aboutmacro situation that the UK workforce is not the exception rather than the rule and it is about

hard cases. I think the downside is that the peopleperhaps as fully qualified as workforces in some of



30 November 2004 Chartered Institute of Personnel and Development

who are doing the right thing anyway can find that elements of a business case which is where thethinking, pioneering organisations will already be inlegislation does not actually support good practice.

As an Institute we are very keen on good practice; we connection with good practice and so on becausethey understand the broader issues. Sometimes thebelieve that employers—certainly our members—

want to implement legislation in a way which is drag eVects with organisations that have not quitegot it because their mindsets are in yesterday’s wayconsistent with doing good business. I do not think

there is a problem in accepting that in some areas of thinking and sometimes our members areindicating that they think law is helpful as a lever ofthere is abuse or some employers do not treat people

very well. What we would assert is that treating change in some circumstances and in others it wouldnot be, it might hinder. I think this crafting of lawpeople well is good business and we think that this

message is generally understood and increasingly and better regulation—designing things to actuallyhelp progress—is where we really need to be at. Thatendorsed by businesses. Businesses that do not treat

people well tend to go out of business more certainly means that the legislation needs to be very wellinformed by those who are seeking to drive progressthan the businesses that do treat people well.as well as those who are trying to hinder it and havea damage limitation mindset.Q244 Judy Mallaber: However, there are those bad

employers. If you take the Winston Churchill quoteonMinimumWage: the bad employer undercuts the Q246 Mr Clapham: In your paper you suggest that

employment regulation is taking up a great deal ofgood, the worst employer undercuts the bad. I amrather confused though. You are saying that management time and resources to the detriment of

the individual company. Do you have any hardregulation is necessary for the good companies, butyou cannot just say that only the bad companies evidence to back that up?

Mr Emmott: We have done a recent survey whichwould be regulated. I am rather puzzled as to whatis good legislation and regulation and what is bad asked about the amount of management time and

cost involved in dealing with conflict at work. I dolegislation and regulation.MrEmmott: I think you are trying to putme in a box not think that the numbers are knock-down

arguments to demonstrate that cost and time arethat I do not particularly recognise. I am saying thatwe accept the need for legislation to tackle abuses. ruinously distracting; I think what they do is just

reinforce the case that DTI research has alreadyWhat we are not always clear about is that thelegislation that is introduced is proportionate and made that there is—and obviously it is true—a

management cost both in implementing legislationeVective in tackling abuse.We are also saying that intackling abuse by bad employers you are actually and particularly in handling employment tribunal

claims. Management time is at a premium inimposing real burdens on all employers that have tobe weighed. What we would like to see is more small organisations; large organisations have

sophisticated HR departments and external legalemphasis on the business case for legislation.Unfortunately it will diVer by size of company and advice on tap. The smaller the organisation, the

bigger the distraction of an incident which canby sector but I do not think that our attitude isinconsistent. As I say, we accept that there should be actually be highly emotional and a lot of evidence

needs to be prepared. You have to find witnesses,a level playing field. We think largely that we have alevel playing field in terms of competitiveness. A lot management people have to say, “When I was there

he said this or she said this” and raking over theof employment regulation is no longer really abouttackling abuses; some of it is almost explicitly about coals. It is hard to put numbers around it. We have

some numbers and I am happy to send you theraising business performance, for example theinformation and consultation regulations are an numbers we have out of our conflict at work survey

earlier this summer. As I say, they are broadlyopportunity, in our view, to improve managementbehaviour and to encourage a more participative consistent with what DTI say. The point is not some

absolute one about statistics; it is about the fact thatclimate. We are comfortable with that as a lever anda symbol for getting more employers to look at managers want to be driving the business and if they

are busy handling conflict—which may indeed bepeople management issues.their fault to a degree or entirely, I am not trying toallocate blame—that sort of activity does not driveQ245 Judy Mallaber: Is your position in eVect thatbusiness and does not help productivity.you just look at things on a case by case basis rather

than have a particular overall view?Mr Emmott: I hope so. We have a pragmatic view. Q247Mr Clapham: I think it would be helpful if you

could send on the information. Could I ask, did theMrs Worman: I think that is right. You have to becareful that whatever you are doing in connection survey diVerentiate at all between the companies

that were unionised and companies that were notwith regulation helps to deliver the kind of changethat business wants in order to progress because at unionised, and were there any conclusions that you

could draw from that?the end of the day we are about organisations beingsuccessful and moving forward in appropriate ways. Mrs Worman:We will have to look at the data, but

there will be data which will enable us to cut that toThose appropriate ways include ways which have asocial implication as well. If you design law which see what the patterns were. If I could make reference

to another piece of work we have recently publishedinterferes with the way business can respond thenyou will get a negative reaction so I think you have to illustrate the issue about regulation in the area of

discrimination, it was a piece of work based onto design legislation which helps to deliver the main




observation of legislation in the discrimination field because that is what employers need to know aboutso that they do not get it wrong. There is that fearwhich is grey and is becoming increasingly complex

and can cause confusion. This document—which we factor about what the impact of law will be.However, the research that we did showed that thewill be happy to send you copies of—looks at the

way in which the regulatory framework either helps issue about having dialogue between the employerand the individual and being solution-focussed wasor hinders. We know from anecdotal evidence with

employers that those who are actually engaged with actually no big deal at the end of the day and therewas a spin-oV benefit. That is an illustration of thethe ideas of moving diversity on as a key business

issue recognise the business case and want to move design of better regulation which actually simplytriggers what you would hope to have in theforward, can find that regulation takes the eye oV

that focus in a way that can hinder the way in which workplace which is good communication betweenthe employer and the individual employee and athey drive issues forward. It is a pointer back to the

need for appropriately designed regulation which contractual arrangement whereby there is fairnessbuilt into it.actually does not send up conflicting messages when

you get diVerent statutes in a similar area not sayingexactly the same thing. Also the way that regulation Q249 Mr Clapham: If we were to drive best practicecould perhaps impede on the ability of an through industry it is quite possible that industryorganisation to flex and respond to changes in the could manage the regulation that it has and at themarketplace in terms of business. One thing we are same time be productive.very conscious of—I am reading the guru in the field Mrs Worman: I think that if you design theof HR, Gary Hamel—is that change itself is regulation to support that delivery, yes. Then theychanging. Other people in the diversity field know would find the use of law as a positive lever to resistthat the only thing that is constant in business is those who have not quite got their heads round thechange. Businesses need to be able to flex their challenges that we face in the modern world.muscles in all sorts of diVerent ways in order tomakesure they can deliver to the marketplace and their

Q250 Mr Clapham: I suppose one of the realexternal customers, but also they need to make surediYculties here is how do you devise a system ofthat their internal customers are dealt with in abeing able to get the information down to the smallsimilar kind of way in terms of values, fairness andemployer and employers generally.so on.Mrs Worman: In the discrimination field there is alot more attention being paid to the communication

Q248 Mr Clapham: Going back to something that of good practice ideas and sharing those experiencesMr Emmott said earlier, I think it was encouraging a and information. There is the “how to” and themore and more participative approach. Is there any guidance that might refer to it and so on. Evenevidence that you have collected in your surveys that government campaigns have achieved quite ashowwhere there is that participative approach, that serious amount of movement. You cannot getregulation is much better managed by the company? success overnight but you can keep plugging awayMr Emmott: We have certainly got plenty of at it.evidence that a combination of good HR practice, Mr Emmott:Whilst we are talking about costs andgood people management practice including a flexibility could I just make two very brief points?consultative climate, participation, job design add One is about the right to request flexible workingup to something which has a beneficial eVect on which was introduced 18 months ago. We have beenbusiness performance. We have quite good evidence wholly supportive of that piece of legislation and wethat things like team working and indeed wider have argued that it should apply to benefit allconsultation processes are part of that. The employees and our survey shows many employersevidence, if I may say so, about the impact of formal already do extend the right to request in practice toconsultation structures is a bit more ambiguous but people other than parents of children under six. Wecertainly our broad line is that themore participative say it is so good because the benefits ratio to costthe culture and themore communication is going on, appears positive. DTI made a big eVort inthe more sharing of decisions, the more you engage consultation with small firms’ bodies, CIPD, CBIemployees by whatevermeans, themore eVective the and TUC to actually shape the right so that it wouldbusiness is.Where regulation kicks in in that process have minimum cost and maximum benefit. I thinkis not something on which we have a very strong almost surprisingly the survey evidence shows thatview, but certainly as I said we take the regulations so far that is the way it is working. I do not want tothat are due to come into eVect early next year on be too euphoric but it was good regulation; weinformation and consultation and it is a big thought it was then and we still think it is and wereminder to boards of directors that command and think the track record shows that. So it is a questioncontrol style of management is not the most eVective of better regulation and not deregulation for us. Theand we think that message is broadly accepted by second point is just to say that when you are lookingmany. at the costs of regulation it is not always the costs onMrs Worman: The work we did on looking at the individual employers. There is a labourmarket issue.ways in which access to parental rights bedded down I recently helped DTI do some research into theirinitially before the introduction of law: there was shared HR pilots for small firms which theresistance on the fact that there was perceived to be Committee may be aware of (but if it is not I would

say that it is something you might ask DTI about).lack of clarity about what employers had to do




Essentially the point about that isDTI put some very who find it most diYcult to pick up permanent jobslimited funding in nine pilot schemes up and down directly so they include women returners, theythe country to support advice on HR and include disabled people or older workers; theyemployment law to firms with fewer than 20 include people who are undergoing a career change.employees. I went out there to help evaluate it and it There is some academic research on this at thewas quite clear that many small employers were European level that I could probably refer you to iffrightened rigid about employment regulation. you were interested. We do not see temporaryWithout recognising what its content was they read employment as some kind of sink activity wherethe Press and they were so worried they would not people are systematically badly treated. Our surveysrecruit anybody outside family and friends. This was about attitudes tend to show that atypical workersnot untypical. This was the smallest employers and including part-timers and temporary workers tendthe one I am thinking about at the moment was in often to be more satisfied with their jobs and at leastretail. A fairly small injection of advice and support equally motivated as other workers. We do not takefrom an experienced HR person or employment the view that agency workers as a group are a grouplawyer raised their game, raised their confidence and of dispossessed and disadvantaged and alienatedclearly in some cases it was encouraging them to people.recruit. I think that is relevant to labour marketflexibility and it says that when you are faced withthis conundrum about how to deal with inexorable Q254 Sir Robert Smith: It would be helpful if youincreases in regulation you can tackle it at base if you could send us that research, please. The Chairmancan persuade smaller employers that they have the

dealt with the previous witnesses at the other end ofconfidence and the ability with a bit of help tothe scale with the high earners who see the agencieshandle it.as a way of managing their employment. I supposethey could be dealt with by some kind of cut oV on

Q251 Mr Clapham: Given what you have just said earning levels or something.there, Mr Emmott, and bearing in mind the work Mr Emmott: If you look at the lower end of thethat you did, what kind of mechanism do we require market the basic minimum protections alreadyto really reach out to those employers who are apply to agency workers. We often discuss agenciesfrightened of change?

as if the workers are totally lacking in protection butMr Emmott: On the strength of those findings IWorking Time, Minimum Wage, holidays alreadywould say use existing sector bodies or local peopleapply to them. I do accept that the people at the topwho can gain the confidence of small employers. Iend who prefer a lifestyle associated with agencywould also have to say that an element of funding iswork andwho can actually earnmore quite often areprobably essential becausemost small businesses saya diVerent group but my main concern is that if thethe reason they do not have HR people is becausethreshold in terms of employment service orthey cannot aVord it and they do not have enoughengagement is set too low youwill discourage a greatknowledge of what is being oVered. A bit of start-updeal of activity and workplace flexibility that isfunding would be useful.intended to tide employers over the peaks andtroughs in demand and/or help recruit people who,Q252 Mr Clapham: Can I ask about the tick-boxwhen first seen, the employer is unwilling to take onapproach to compliance. You were suggesting inpermanently.your memorandum that that in itself takes the focus

oV the intention of the regulations. Is thereevidence—and I would think that there is—to

Q255 Sir Robert Smith: How are the temporarysuggest that that is the case?workers treated in terms of access to training andMrs Worman: We certainly discuss it in there andcareer development?certainly when you have conversations withMr Emmott: If they are seen as temporary workersemployers that is exactly what it is. It takes so muchcareer development is not an issue for the employertime. Mike has referred to the amount of timethat is using them. Somebody who chooses a careerinvested in understanding the technicalities of it allas a temp and wishes to stick with that is going toand we have limited time in business to deliver thehave to make their own career in any case andday job. A tick-box approach is: “well we have donechoose their jobs with care and probably bring theas much as we can in that area, we will be okay if webasic skills or acquire them in the course of aare challenged, therefore we go back to the day job”,succession of jobs. You cannot talk about careersyes, there are plenty of conversations about that

happening. easily in terms of agency workers. We totally accept,incidentally, that after, say 12 months, it becomes afiction to suggest that agency workers are anythingQ253 Sir Robert Smith: On the Agency Workersother than long term employees and the publicDirective you are concerned about the role it plays insector is particularly guilty for reasons of its own intaking people from temporary to permanent work.recruiting and hanging on to people oV the books.Mr Emmott: Yes, we are. We take a view somewhatWe do not support that, but we do think that tosimilar to the Chambers whowere giving evidence toreduce the volume of agency work in theUK contextyou a moment or two ago. I think we would add towould actually be an unwelcome and unfortunatethat that the sort of people who use temporary work

as a way into full-time employment are often those development.




Q256 Sir Robert Smith: You suggested that the cost Mr Emmott: There is a risk that that will occurunless the Low Pay Commission continues to followof employment regulation will merely be passed

onto workers in the form of lower wages. the admirable policy it has done of being somewhatcautious. I agree, you only find in the end that it hasMr Emmott:As a non-economist, Sir Robert, mightdamaged once damage has been inflicted. I do notI duck on that one and say that the paper had beenthink we wish to suggest that the Low Paywritten to tackle your issues of flexibility and give, ifCommission should adopt that tactic because I thinkyou like, an economic gloss informed by anthe damage would take some time to undo.We haveawareness of HR issues. I am not really competentconfidence in the Low Pay Commission; it hasto take on Stephen Nickell. He talks about the longcertainly done a good job so far.run and I would not wish to go down that track. He

makes a number of assumptions about therelationship between profits and the workers’ share Q261 Mr Evans: What rate do you think thein terms of wages and it is a piece of economic Minimum Wage should be set at?analysis that I have no wish to take issue with but I Mr Emmott:We do not have a view of our own. Weam afraid I cannot sustain for your benefit. do not ask our members. We regard it as not a

particularly HR view; it is a political balance that weare happy to see the LowPayCommission deal with.Q257 Sir Robert Smith: There was one other thing

that we raised with the previous witnesses, theQ262 Mr Evans: Do you not make any submissionsnormal retirement age. Do you have a view on that?to them?Mrs Worman: We do have a view on that inMr Emmott:We have not done, no.connection with the expected legislation on age. We

believe that it should be an open ended situationQ263 Mr Evans: The TUC thinks it should beregarding when you leave your employment becauseabout £6.employers and individuals need to have more choiceMr Emmott: We have not made any publicand more flexibility in terms of accessing talent andcomments and we are not likely to on the level of theindividuals wanting to continue to earn moneyMinimum Wage.because they need to or because they want to make a

contribution.We have a skills shortage and evidenceQ264 Mr Evans: Do you think it might hit somecontinues to show there is a skill shortage. Notsectors more than others?everybody wants to finish work and retire when youMrEmmott: It is in the nature of national legislationget up to that cliV edge decision making and so on.that applies to all employees that some sectors willThere are very many diVerent reasons why peoplebe worse aVected. Obviously those that employ largewill want to continue to work. The key reasons whynumbers of low paid workers will be more aVected.businesses will find having an artificial final period

of time does not make sense is because theQ265 Mr Evans: Moving onto another regulationdemographic pattern changes, we are all livingthen, the Working Time Directive and the opt-out.longer, there are skill shortages and so on, and theWhat is your view on that?shrinking proportion of younger people (only a 1.7Mr Emmott: A lot of opted-out workers are notbirth rate in the UK). So to have a final situationlikely to workmore than 48 hours over any extendedmakes no sense in the longer term to the future aboutperiod. I think our view is that many employers havehow you access talent. We believe that having aused the opt-out simply to protect themselves fromdefault age is just postponing the challenge. Let usany issue or debate on issues of Working Time. Ourstart now by undoing all those unnecessary barrierssurveys show that about half of people workingto facilitate choice on both sides in a way that ismore than 48 hours consistently say they do soreasonable and fair.entirely voluntarily. Obviously some people will beless enthusiastic than others.

Q258 Mr Evans: In your view why didunemployment not rise sharply when the Minimum Q266 Mr Evans: That leaves another half, does itWage came in? not?MrsWorman: Because it did not impact on what the Mr Emmott: Yes, absolutely. I was just about tomarket would bear. accept that that leaves a half who feel some sort of

pressure. That does not mean that that other half isnecessarily abused; it may just feel there is moreQ259 Mr Evans: At the current level is it impactingwork to do than they feel comfortable with. It mayyet?be that they want to look after their colleagues andMrs Worman: I do not think we have any evidencefeel the pressure from them or it may be that they areof that and I think testing themarketplace is the onlyworried that their employer is going to go out ofway in which you can actually get a better view onbusiness unless they work long hours. I am simplywhat that should be.stating, Mr Evans, that there is a good deal ofvoluntary long hours working and our concern

Q260 Mr Evans: The only way therefore to tell about the operation of the Working Timewhether it is going to have an impact is by increasing Regulation would be primarily if it criminalised allit by more than the rate of inflation until it starts those people working more than a fixed number of

hours per week.to bite.




Q267 Mr Evans: You do not think there is suYcient Q270 Mr Evans: Do you think that if this comes itwill make British firms less competitive?flexibility then if they opt-out on this averaging

system. Mr Emmott: I think at the margin it will requiresome changes in working patterns. Some of thoseMr Emmott: I think there is quite a lot of flexibilitymay be beneficial in the end; some of themwill be lesscertainly on scope. Who is an autonomous worker?beneficial. I do not think the impact of losing theIf I choose to come in at nine o’clock and leave at 10opt-out will be quite as large as perhaps is sometimeso’clock at night and never ask my boss if he is happyfeared, but I think the point about the opt-out is thatwith that, am I autonomous? There is flexibility butit has totemic significance. It was an early piecethere are also issues about the averaging period andof European legislation that was seen to bewe would support a longer averaging period than isdisproportionate to the problem. I think in practicecurrently built into the directive because all theit may have slightly less impact if we lost the opt-out.health evidence is that it is long term long hours

working that does the damage and, just as a sideQ271 Mr Evans: Who is going to suVer most, theissue, less damage if it is willing and voluntary longemployer or the employee?term long hours working. The problem aboutMr Emmott: That is very hard to say. I think clearlyflexibility in this context is that the possible changessome employees would lose out. I cannot tell you, Ito the directive have identified workplaceam sorry. I have not really thought that through.negotiation as the key element by which flexibility

should be maintained, if it is maintained. TheQ272 Chairman: Could I just ask one last question?problem in the UKworkplace in the private sector isYou very skilfully avoided answering questions onthat there is a relatively modest trade union presencethe National Minimum Wage in a quantitativeand relatively little negotiation on these issues.nature, but could I ask a question of a qualitativeThere is reluctance on both sides I think for non-character? It has been suggested to us by previousunionised workplaces tomake a reality of the idea ofwitnesses this morning that with the upwardnon-union representation. Flexibility at Europeanpressure on wages—the Americans call it the risinglevel is going to be very diYcult for the UK to takeboat syndrome—the diVerentials will be aVected. Inadvantage of. That is a worry we have.theory one can understand quite clearly what thatmeans but as practitioners what is your view about

Q268 Mr Evans:Who does the long hours? Is it the diVerentials and the National Minimum Wage?low skilled people? Mr Emmott: I think that it is one of those issues youMr Emmott: It is two groups. It is low paid workers only find out about properly when you have actuallyand in some cases it is institutionalised over-time but made the shift. If you think back to the 1960s andin any case it is people who are not paid very much 1970s when diVerentials were a real issue whenper hour and who need to put the hours in in order companies tended to have pay structures and whento get by. At the other end of the scale, if I may say they were still to some extent industry-basedso, it is people like you and me who do not count the structures, I think the diVerential argument washours and do not get paid in relation to the extra stronger than it is now. I think it is hard to anticipatehours we do but we are committed, we enjoy our how significant increases in the MinimumWage—ifwork and there are a lot of us. they occur—would be interpreted by other

employees. You only have to look at the railways tosee the old issue about relative pay and conditions

Q269 Mr Evans: There is a general feeling as well still applies to a degree, particularly in industriesthat if this comes in some people will get two jobs where pay structures are visible and systematic. Iand work so much in one and so much in another. think I have to say the dangers of damage areMr Emmott: There are real enforcement issues and probably slightly less direct than they would havethat is an issue now. Which employer is supposed to been 30 years ago but they have not disappeared.be ensuring that an individual employee looks after Mrs Worman: It certainly was not our policyhim or herself? I think I wouldworry aboutWorking recommendation. In fact we said the opposite, thatTime and I am sure the unions have had this the Minimum Wage should not lead to diVerentialsproblem—although you can ask them yourselves— being enhanced. That was the guidance we gave tothat the whole issue of regulation of Working Time members.has never caught fire with the individuals who aresupposed to be suVering. We know that a lot of Q273 Mr Evans: What about the impact of a £10people feel uncomfortable about work pressure, Minimum Wage?work intensity and so on but there are—as you know Mr Emmott: I think that would be seen as aand you have been asking our predecessors today— symptom of the Government having flipped, really.issues about work/life balance. We are wholly in Mr Evans: So you are prepared to comment on itfavour of tackling work/life balance as an issue; we then!are less comfortable that you can do it through the Chairman: On that note, thank you very much for

your help.Working Time Regulation.



Witnesses: Mr Peter Schofield, Director of Employment and Legal AVairs, Mr Stephen Radley, ChiefEconomist and Mr David Yeandle, Deputy Director of Employment AVairs, Engineering Employers’Federation, examined.

Q274 Chairman: Good morning. Mr Schofield, diYcult to explain in a simple outline. Again, theGovernment in its publicity said that the Disputewould you like to introduce your colleagues, please?

Mr Schofield: Certainly. On my left is David Resolution Regulations are as simple as one, two,three but it took us 104 pages to explain them to ourYeandle who is Deputy Director of Employment

Policy and onmy right is Stephen Radley who is our members in this publication. Just in case you thinkit is us suVering from verbal diarrhoea it took otherChief Economist.publishers 133 pages to explain the DisputeResolution Regulations. We do what we can and weQ275 Chairman: In your evidence you have referredoVer a helpline which members can access at anyto the cost of compliance with regulations but dotime at no cost above their original membership feeyou have much evidence of the amount ofand we do represent them in employment tribunals.management time that is being diverted amongst

your membership? Is there a sense that smallbusinesses have to divert attention whereas large Q277 Chairman: It would be right to say that you

oVer that kind of service to the engineering/businesses just give it to the HR department?MrSchofield:There is no doubt that large businesses manufacturing industry; is that replicated by other

trade associations do you know?do give it to the HR department but that does notmean to say that there is not a lot of management MrSchofield:There are others who do similar things

but perhaps not to the extent that we do. Wetime then being devoted by the HR department andthat comes itself with a cost to the business, at least certainly, amongst trade and employer bodies,

represent in tribunals far more than any other suchin opportunity cost. Small businesses where HRpersonnel issues are devolved to somebody who bodies, for example. We have something like 60

employment lawyers employed throughout thehas some other responsibility—operational orcommercial or financial responsibility—clearly they country which is far more, by a long way, than any

other employer body.are going to be diverted from their task. I have to saythat we have limited evidence—and it is anecdotal—about the amounts of time. In relation to, for Q278 Mr Clapham:Mr Schofield, could I just ask aexample, the Dispute Resolution Regulation which couple of questions about investment. You suggestcame in in October, we did ask informally some of in your paper that employment regulations areour member companies about their own estimate of deterring UK companies from increasinghow much time they put in to introducing these investment. Is there any hard evidence to supportregulations into their workplaces to compare it with that assertion?the estimate that the Regulatory Impact Assessment Mr Schofield: I will pass that question straight to thehad made, which was an estimate of between half an economist.hour and four hours management time that would Mr Radley: The evidence you have seen is drawngo in per company in implementing these from amajor productivity survey we did, in this caseregulations. Anecdotally from those that we asked, talking to 600 companies in France, Germany andthat seemed to be a gross underestimate as we rather the UK. We have also done previous researchsuspected it might be and companies were telling us comparing with the United States. I would also bemore like a day and a half to five-plus days of drawing on some forthcoming research which wemanagement time to implement those regulations. will be publishingwhich is looking at the competitive

challenges companies face and how this isinfluencing investment decisions in terms ofQ276 Chairman: Do you oVer much in the way of

assistance? You are quite a big organisation. investing here or investing in other parts of theworld. The context in which companies answer theseHistorically your functions have changed. I

remember the days of old at least in my house it was questions was that they faced increasingly intensechallenges over the last few years in terms of aa term of abuse because my father was an

engineering shop steward. You have moved out of downturn in world markets and overvaluedcurrency and a step change in the intensity ofthe area of wage negotiations and the facilitation of

that and you provide help and advice and executive competition that is still occurring. It is also a timewhen the issue of management has become moredocuments to your members.

Mr Schofield: Yes, we do. I have brought some complex in terms of the range of competition, therange of customers, managing the dispersedvisual aids along with me. This is a lawyer’s book on

employment law. There are 2,200 pages of networks across the world and also managing amore complex supply chain. Our evidence showsemployment legislation in this book which is more

than any employment lawyer can know, never mind that compared to companies in France andGermany manufacturers in this country sawa manager of an engineering firm. It is a huge

amount and 40-plus% has come in since 1998. We regulation as negative for their plans to increaseinvestment in this country. In France and Germanytried to digest it in simple, easy to understand terms

for our members and this book is, as we speak, being it is seen as a positive factor although verymarginally so. Our interpretation of this is the factdelivered to them. They are given this book

annually. It has no jargon and it is very simple but it that over the last few years employers have had todigest an enormous amount of legislation, much ofis still 600 pages of the basics. A lot of the time it

says, “Call your EEF Association” because it is too it in the employment area and that has actually



30 November 2004 Engineering Employers’ Federation

distracted management time from other eVorts such are already discovering that once upon a time theas raising levels of investment and other things that legislator spoke on the subject and that was it, butthey need to do in their companies to improve their now—like Arnold Schwarzenegger—it will be back.productivity and competitiveness. Having spoken onWorking Time Regulation, it will

come back and speak again on Working Time. Itseems to suggest that it is a function of regulating atQ279 Mr Clapham: So it is fair to say that there is athat detailed level that you necessarily have to reviewmultiplicity of factors involved. That leads me to mystandards that you have set and you may increasenext question which is, why does it not deter foreignthem over time. The reason business is squealing, ifcompanies in the sameway?You have answered thatyou like, is that there is a great deal of regulation in ato some degree, Mr Radley. You say it is one ofshort period of time aVecting things that have neverperception that foreign companies perceivebeen aVected before by legislation, or not since 30regulation in a much more constructive andyears ago with the unfair dismissal regulations, onpositive way.the 19th Century Truck Acts. The individualMr Radley: I think it is very much the issue ofemployment relationship has not been so directlyactually adapting. If we are looking at companies

that are based in France and Germany, they have aVected and businesses notice now how much timehad much of this legislation on the statute books for and eVort they are having to put into adhering to thesome time so they have not had to adapt to such a legislation.large amount of legislation in such a short period oftime. It is a factor of the environment companieswork in and less a cultural factor amongst managers Q281 Chairman: I am intrigued by this because Ibecause if you actually probe a little bit deeper into have been in this House for quite a while now and Iour survey evidence and look at the diVerence remember the changes in Industrial Relationsbetween UK owned companies in the UK and legislation every two years in the 1980s. It was theforeign owned companies in theUK in terms of their salami slice approach that was adopted and there itattitude to regulation and how it impacts on was not so much imposing on employers asinvestment, there is no diVerence at all. restricting workers’ rights, so that does not impose a

burden on employers but it does detract fromworkers’ rights and that is not going to be a problemQ280MrClapham: In your submission you did stateformanagement.However, whenworkers’ rights arequite clearly that your survey found that despite a

greater labour market regulation in France and enhanced it is at the expense of management time.Germany companies operating in these countries Mr Schofield: You are absolutely right. It is at theview regulation positively. expense of management time because it is an issueMr Radley: If you are looking at France and that they have not had to grapple with before. I doGermany and other parts of the Continent not say that the Conservative salami slice approachspecifically, there is the issue of being more is something that we are not seeing now in fact. Inaccustomed to regulation. If you are looking at the the trade union arena I think we are now seeing thespecific question of investment, what you tend to mirror image in that we are now finding the 1999find in the UK traditionally is that companies are Employment Relations Act added to by the 2004actually responding to changes in demand by Employment Relations Act. Who knows what isactually changing levels of employment in their next? It is quite possible that we are seeing the samecompany. In France, Germany and other parts of thing but in mirror image. What I am suggesting isEurope that has been less of a tradition because they that when it comes to the individual employmenthave been more accustomed to more regulations in relationship once you decide to start regulatingthe employment area and so there, response has those details you cannot stop. You are not going totended to be to have a more capital intensive mix set forever the one standard and you are going towithin their companies. keep coming back and employers are saying that itMr Schofield: Could I just add that it is this is a lot in a very short time.unprecedented period that we are going through of

Mr Yeandle: If I could just supplement that, I thinka lot of legislation in a short period. It is historicallyback to before I joined the EEF I was a humanunprecedented. We have not had such a quantity ofresources manager in a large multinationallegislation over a short period and unlike other pastengineering company in the 1970s and 1980s and Iemployment regulation it has concentrated verydo not recall, despite the fact that there was—asmuch on the detail of the employmentyou rightly pointed out, Chairman—a lot ofrelationship—on the wages, on the hours, onemployment legislation in the 1980s, the directholidays and so on—so it directly aVects everyimpact of that did not requireme, as amember of thebusiness’s relationship with its employees. A lot of itpersonnel function, to get involved. The legislationis complex and uncertain; some of it is poorlyfrankly had very little, if any, impact on the vastthought through legislation, poorly drafted; some ofmajority of companies. It was much more aboutit comes from Europe and there is an abdication ofmanaging the trade unions in a sense. What we areresponsibility I would say on the part of thenow seeing is legislation that is directly impacting, asGovernment sometimes to simply copy out thePeter has said, on that individual contractualdirective and say, “We don’t know what it means;relationship and it does mean that people who arewe’ll leave it to the employer to find out what it

means”. Then there is a final phenomenon that we in human resources departments or personnel




departments are actually, on a day-to-day basis, However, in saying that flexibility has diminishedwhat are you suggesting our response should be?Arehaving to get involved in the practicalities of the

legislation. you saying that we should respond with furtherderegulation?Mr Radley: If you look at those surveys they areQ282 Mr Clapham: I hear what you say, Mrthose published by the DTI on their competitivenessYeandle, but I recall that in the 1980s there wereindicators. They are based on businesses’authors of books just as voluminous as the two thatperceptions around the world. What they show isMr Schofield has there. I am thinking in terms ofsomething of a deterioration in the UK whereasJeremyMcMullen and his book on employment lawsome other countries actually have perceptionsand I think that is a book that is updated and, if mywhich have improved over that period of time. Theymemory serves me correctly, it is a book that is stillstill show that the British position is relativelyupdated today. So there was certainly the same kindfavourable tomany other parts of the world. I wouldof approach but from the other side of industry. Iwant to reiterate what we have said already, that wejust want to go back to the point that Mr Schofieldwould want to be putting the emphasis on themade because it seems to me that if we are saying—quality of regulation: better regulation, betterand there is evidence in your submission—that therecommunicated, better timed; all those sorts ofis a more positive approach taken by companies infactors. In terms of the issues facing our members inFrance and Germany and that is more likely to leadterms of the competitive environment: in terms ofto better management and regulation than here,wanting to keep the UK attractive as a place towhere we tend to see an antithesis to regulation thatattract foreign direct investment into the country, inactually can manifest itself in a way of thinking thatterms of helping manufacturers make the case towe are not going to make it work.invest here rather than other parts of the world, it isMr Schofield: If there is an antithesis to legislation Ia range of factors we have to influence. Regulationbelieve it is because of the quantity in the short timeis one of them, but it is also taxation, the cost base;and the quality of the legislation we have to dealit is skills, it is transport, planning, innovation. Allwith. The CIPD has already said to you and I amthose factors as well are just as important.sure that everyone that has spoken to you has

probably mentioned the Right to Request FlexibleWorking as an example of legislation that works but Q285 Judy Mallaber: Are you suggesting that we

should be deregulating that as one of those factors?was eVective in raising the issue in the minds both ofemployees and employers and getting both sides to Mr Schofield: I do not think it is any part of our

suggestion that we should be deregulating. There arerecognise that there was a question there that neededto be tackled in promoting dialogue and it is certainly a lot of parts of employment regulation

that I could point to and say, “That could have beenlegislation that works. Legislation, on the otherhand, that is a blunt instrument—take Dispute done better”. Frankly, we are pragmatic. It is very

diYcult to take away rights once they are grantedResolution as an example—requires of the good andthe bad employer alike a great deal of management and we are not suggesting that. We are suggesting

that before you add further to the rights just thinktime to change practices, many of which areperfectly acceptable and have hitherto been perfectly carefully about the burdens you are placing on

businesses to copewith these rights andwhether theyacceptable practices. That is the sort of thing thatcompanies object to. I do not say that employers are really necessary and how you can regulate in a

way that meets the approval of all sides, like theobject to good regulation which they can manage;the problem is managing the quantity and the flexible working and like the information and

consultation regulations.quality of the legislation that we have had.

Q283 Mr Clapham: I hear what you say but the Q286 Judy Mallaber: Do you not accept that attimes there seems to have been an incrediblyanswer to the question: “Why do foreign companies

not have the same problem with regulation?” taken tortuous and lengthy process of discussion withdiVerent elements in industry, including employers’from your submission would be that they have a

much more positive attitude. organisations. It sometimes seems to have gone onendlessly.Mr Schofield: I am suggesting to you that the

negative attitude comes from the experience that Mr Schofield: There are lots and lots of discussionsbut there are diVerent processes. Having beenbusiness is now undergoing and it might be that were

things diVerent British business would have a more involved in the consultations on all of the legislationand the employment legislation that has come in,positive reaction: if it had been paced, if it had been

better drafted, if it had been more carefully focussed there are diVerent processes adopted for diVerentpieces of legislation. Some are better models thanon the problems in some cases.others. We accept that we are asked and consulted,but there are better models.Q284 Judy Mallaber: You have noted in your

submission that the UK’s position in various tablesof labour market flexibility has diminished recently Q287 Sir Robert Smith:Can the consultation in itself

not be a burden?although I note that those studies will obviouslydepend on the person being surveyed as to their Mr Schofield: It can be for an organisation like ours

which is not heavily resourced in that area. It can beattitude to what flexibility is and I think two of thosethree surveys were surveys of business opinion. for our members because with the introduction of




employment legislation twice a year then there is relatively modest impact on the vast majority of ourmembers. It certainly had a relatively modest impactclearly a burden on us at the consultative stage

because there is legislation piling up to be introduced in terms of a direct impact because a lot of ourmembers’ employees aremore highly paid than someon 6 April and 1 October annually. We do not say

that is a bad thing; the virtue of that is that it does other sectors of the economy, but it was alwaysgoing to have—and has had—an indirect impact. Adraw attention to employers of all sizes that there are

new rules that they are going to have to observe. lot of the bought-in services that our membershave—things like security, catering, cleaning;However, there is a downside in terms of trying to

get our members’ views on new proposals when occupations that nowadays are not part and parcelof the company’s operations but are bought inthere are half a dozen new proposals all at once.

MrYeandle: If I could just pick up a point whichwas services—are classically labour intensive labouroperations and classically often paid at the lower endmade about consultation being a burden, it clearly

is; there is a lot of it going on and it takes a long time. of the wage structure. Therefore the NationalMinimum Wage has impacted directly into thoseI do not think that should be seen as a criticism that

actually getting legislation better has taken a sectors so there has been a knock-on eVect in termsof cost. I think that is one of the reasonswhy in termslong time. These are diYcult and complex issues.

You are trying to develop legislation in a whole of the recent presentations that we have given andevidence that we have submitted to the Low Payrange of fields that have to be capable of being

dealt with by large and small companies, by Commission on a number of occasions—certainlythe last two or three occasions that we havecompanies with very diVerent employee relations

cultures, with companies that recognise trade unions submitted evidence to the Low Pay Commission—we have argued quite strongly that we have got to aand do not recognise trade unions. I do not envy the

role of the legislator to come up with legislation that stage now where rather than it be left solely to theLow Pay Commission and the Government tois properly balanced that can achieve all of those

things. determine what happens—and we have seen thevariations in increases in the National MinimumWage that have occurred over the last three or fourQ288 Sir Robert Smith: Going back to the earlieryears—we think we are at a stage where we need tocomparisons with the culture in other countries,have a formula so that employers who are aVectedregulation that has some permanency, presumably ifeither directly or indirectly can have greaterpeople have some confidence that they know whatconfidence and certainty about what that impact isthe environment is they are more likely to be able togoing to be and can plan accordingly. Therefore wecope and adapt in it.have argued quite strongly in the last two or threeMr Schofield: Indeed, and we have had unfairsets of evidence that we have submitted that theredismissal laws for 30 years but it took quite a longnow should be a formula that ensures that thetime before employers really got to grips with the fullNational Minimum Wage moves forward and thatramifications of unfair dismissal law. A lot of it waswe believe will provide a degree of certainty and helpwithin the secret knowledge of employment lawyersthe planning of companies both in terms of thefor a long time and you had to consult them beforeindirect and the direct impact that it has on theiryou knew it, but gradually the basic principles ofbusinesses.how to handle all sorts of employment issues became

better known. The problem here is that you areQ290 Chairman: How long did you say?scarcely on top of maternity rights, for example—Mr Yeandle: The last two or three occasions thatone of our HR directors and one of our memberswe have submitted evidence to the Low Paysaid to me yesterday, “I have to look it up every timeCommission we have said that in order to get greaterwe have a pregnant employee because I can’tcertainty about the impact that it is going to have onremember it”—you just about get on top of it and itour members, we feel that a formula should be usedhas changed again.and we have said that that formula should be basedon movements in basic rates of pay across the

Q289 Sir Robert Smith: Can I go to one specific economy.assessment and that is the cost of the minimumwageso far?

Q291 Sir Robert Smith: Projected forever forward.Mr Yeandle: Can I make a general comment firstMr Yeandle: Yes. That should be the way it movesabout the National Minimum Wage? I thinkforward.perhaps unlike some other employer bodies we were

not as a matter of principle opposed to the conceptof a National Minimum Wage; we were concerned Q292 Chairman: Is there not a danger in

automaticity of this kind that you could have inabout the potential burden it could impose. Indeed,I think it would be fair to say that a number of our times of inflation a ratchet eVect?

Mr Yeandle: There is always that danger. In a sensemembers were supportive of the concept of aNational Minimum Wage because they felt it was arguably you have that irrespective of whether you

have a formula or you do not have a formula. If yousomething that would achieve an element of a levelplaying field. I think that was very much our look at the way the increases have gone up the

figures have been substantially above both basicphilosophical position when the NationalMinimumWage came in. I think in terms of its impact, when it rates of pay within our sector and the vast majority

of other sectors and indeed way above averagestarted oV the National Minimum Wage had a




earnings. That is why it is now beginning to have— because they want to work the sorts of hours thatalthough not much—an impact at the bottom end of there are available. If the individual opt-out was tothe pay structure even within engineering and go it would have quite an important impact on amanufacturing. large number of companies. That would probably be

minimised or be reduced if we moved towards theconcept of averaging working time over 52 weekQ293 Chairman: It has been said that this is veryperiods, but that will not solve the problem.We havemuch a suck it and see process and that the size of theexamples of companies that, as you are probablysweetie is rather bigger to suck this time than before.aware, today can on a collective basis agree toThey have not had a bad strike rate so far, the Lowaverage working time over 52 weeks. That does notPay Commission, have they?

Mr Yeandle: I am not being critical of what they happen very often but it does happen and I amhave done so far. In fact, I think the process that they certainly aware of companies where they havehad is actually quite a good one. I think the process agreed with their trade unions to average workingof having representatives from employers, trade time over 52 weeks. Even in those situations it isunions and, indeed, knowledgeable academics sometimes necessary to have a few people—sitting around a table particularly to set the initial specialist skills perhaps—who have agreed to signlevel and various other aspects around. The the individual opt-out because the nature of thatNational Minimum Wage was a good process. I business is such that workload peaks and troughsthink it is a process that could be looked at in other mean that even despite a 52 week averaging periodareas. It is a good process, but I think we have got to there will sometimes be occasions when the demandsa stage now where, if you look at the rates of of the business, the need to meet particular targetsincreases that there have been, it is very diYcult for and demanding customers, does mean that peoplemanagers today, given the variation that we have will need toworkmore hours than 48 hours per weekhad in terms of recommendations from the Low Pay averaged over 52 weeks.Commission, to know how they can plan future payincreases, what is the impact on the NationalMinimum Wage going to be in direct and indirect Q296 Judy Mallaber: You have mentioned theterms into the future. They do not like that positive impact regulation can have on productivity.uncertainty; it creates a problem for them. Could that not be so with the Working Time

Directive particularly in relation to family friendlyQ294 Sir Robert Smith: There are a lot of people legislation and, of all things, the long hours cultureemploying people who are on the minimum wage that we have whichmay be based just on the fact thatproviding services through contracts to others, have people are paid very low hourly rates actually has athey been able in any way to build an element into detrimental eVect on family life and is possibly atheir contracts that can adjust the price depending pressure against some groups of employees beingon the minimum wage? able to take on the job even though they have skillsMr Yeandle: I do not know the answer to that a business might wish to use.question; I have not gone into that sort of detail. It

Mr Yeandle: There is no doubt that we do have awould not surprise me if some of them have done,record in theUKof having relatively long hours, butparticularly those who are in a strong marketI think those hours are starting to come down. Wecompetitive position, but I am not aware of theequally have an extremely good record of a lot ofdetail of it.people working shorter hours. We have far moreexperience of part-time work and short hours

Q295 Judy Mallaber: Moving on, what would the working in our country than they do in most otherimpact of the removal of the opt-out from the countries. My experience both in my domestic lifeWorking Time Directive have on your members? and talking to companies is that there are quite a lotMr Yeandle: It certainly would have quite a of situations where families make a decision for asignificant impact.Working time is classically one of

period of time that one of the partners will workthose areas of legislation which is very, veryrelatively long hours and the other partner will workcomplicated and we certainly feel that any changesrelatively short hours. That is a decision that theythat are made to the Directive need to be done in amake as a family in terms of the way they want toway that actually copes with issues such as dealingmanage their work/life balance. I thinkwe have to bewith diVerent companies with diVerent types ofvery careful that by putting heavy penalties at thearrangements and, indeed, properly balances thetop end which might actually reduce those hours, itprotection of the individuals with not providingmight make it more diYcult for companies to be asheavy burdens on employers or undermining theflexible as I believe they currently are in terms offlexibility of the labour market. We recognise that ispart-time work and allowing people to work shorta diYcult challenge both for European legislatorshours. Whilst I think it would be fair to say that theand to UK legislators. So far as your specificvast majority of those situations where you have aquestion is concerned, certainly there are a largepartner working long hours and a partner workingnumber of EEF members who do make use of it andshort hours, it is the man who is working those longtheir employees make use of it. It is something that ishours, I am certainly aware of examples where itvery much entered into voluntarily; we have no realworks the other way round. It often depends on theevidence that there any pressures put on individuals.

A lot of people do sign the individual opt-out earning ability of the respective partners. If it so




happens that the woman is the better earner then she move more easily to a 52 week averaging period thatwould be something that more and more companiesmay well be the person who works those longer

hours and her partner works the shorter hours. would see as an attractive way of running theirbusinesses and thereby improving their productivityperformance.Q297 Judy Mallaber: But there is evidence that a

number of those part-time workers would like towork longer part-time hours and that question of Q298 Sir Robert Smith: You list a lot of legislation

here and all of it makes sense apart from one: theflexibility is totally there. I know from experience oftalking to firms in my constituency that resistance is Human Rights Act.

Mr Schofield: At the moment we are representing aoften based not actually onwhat looks like the needsof their process but just on attitudes of the member company who is being taken to the Court of

Appeal in relation to Sunday working directly underemployers. Do you not think that some form offurther regulation might encourage a greater the Human Rights Act, so it can impact.flexibility and a greater preparedness to look atdiVerent patterns that might work better for them? Q299 Sir Robert Smith:Without the Human Rights

Act they would have been taken to the EuropeanMr Yeandle: I think one thing that would certainlyencourage that would be moving to a 52 week Court.

Mr Schofield: They would perhaps have taken theaveraging. It has been something of a surprise to methat we did not find more enthusiasm for the annual United Kingdom Government to Strasbourg but

they would not have taken our member company tohours concept. It is a very useful way for companiesto manage their workforces. I quite expected when appeal in the Court of Appeal.

Chairman: Thank you very much, gentlemen. Thatthe Working Time Directive came in that we wouldsee more companies moving to an annualised hours has been very helpful. If we need additional

information or any evidence we will get back to you.approach which is a much more flexible way ofmanaging working time. I think now that if we could Thank you.

Witnesses: Mr Alan Tyrell QC, Chairman, Employment Committee and Mr Stephen Alambritis, Head ofPress and Parliamentary AVairs, Federation of Small Businesses, examined.

Q300 Chairman: Thank you for coming along this legislation. The complexity and the ferocity of thespeed of the change have caught them oV-guard inmorning, gentlemen. Mr Alambritis, we know you

of old, but perhaps you could introduce yourself and terms of the legislation. The other point they arebeginning to make is the nature of the employmentyour colleague.regulations based not on collective bargaining butMr Alambritis: I am Stephen Alambritis, Head ofon the individual rights for a certain class of worker,Parliamentary AVairs at the Federation of Smallthose with children. We have had parental leave,Businesses. With me I have Alan Tyrell QC whomaternity leave, statutory maternity pay made moreis the Chairman of our Employment AVairsgenerous and what our members are saying is, “ICommittee.have all kinds of staV, both with child caring dutiesand without and I am just getting some resentment

Q301Chairman:You have expressed yourmembers’ from my members of staV who do not have childrenconcerns with employment regulation in the UK, when they see someone coming on board and withinbut where does it stand in the kind of hierarchy of a year they are changing their hours of work”. Thatyour complaints or your concerns? Where does it is the kind of message that is coming back from thestand in relation to taxation, access to finance, members in terms of the regulations. We do provideavailability of training? How significant is it as a them with a free legal advice line 24 hours a day.barrier to growth, as it were? There are over 150,000 calls a year. We are like theMr Alambritis: It is up there with those items you ACAS for small firms. We defend them in court inhavementioned along with administration of the tax employment tribunals but only if they have done itsystem, the level of the tax system; late payment is a properly and come to us first. Those calls—as Alanproblem they report to us; skills shortage as well and will say—have begun to go up in terms of the type ofthe cost of training. However, in the last few years calls predominantly on employment regulations.the ferocity, the complexity and the change oflegislation—especially employment legislation—has

Q302 Chairman: You are almost saying that if youincreasingly been reported by the members, 50% ofare of child bearing age, if you have children, try andwhom are employers employing on average less thanavoid a small business as a potential employer.five people. We represent the small employer. When

we look at ourmembers put together—all 184,000 of Mr Alambritis:What we are saying is that from theemployer’s viewpoint they are the ones who maythem—they employ one and quarter million people.

Theywant to employ; small businesses have been the have to pick up the resentment in terms of the rightfor a certain class of worker and not for anothernew job creators. It is the large companies who are

shedding labour or pushing labour abroad to class. When we surveyed our members they havebeen employing in equal parts in terms of male andcheaper clients so in the typical small firm it is the

owner/manager who needs to deal with the new female and age; we could not see any discrimination



30 November 2004 Federation of Small Businesses

there. It is the fact that they themselves need to deal United Kingdom.We just need to be that step aheadto make sure we do not over-regulate and start towith the regulation, the legislation and they have just

been caught oV-guard by the ferocity and the lose out on jobs.number of changes. Also, ministers have a penchantfor saying, “We are introducing this regulation and Q305 Mr Clapham:We had the Chartered Institutewe will review it within two years to see how it is of Personnel and Development who cited evidencegoing”. That brings a bit of instability again. It is the to us that the UK scores highly against moreferocity and the complexity. measures of labour market flexibility but lags in

terms of functional flexibility due to a lack of skills.Given your deregulation agenda, how would thatQ303 Mr Clapham: Mr Alambritis, you suggest infacilitate functional flexibility?your submission that employment regulation hasMr Alambritis: I think the agenda for us is alsoreduced labour market flexibility, but you alsoreregulation.Wewould like to see less of regulationssuggest that the UK has one of the most flexiblebut also let us look at the regulations and seelabour markets in Europe and the G7 as well as thewhether we can deregulate, revisit them, do them inOECD. Why then does there seem to be a greatera diVerent way. Think small first. I think if we canconcern with the volume of regulation here in thehave a regulation or a piece of legislation in theUK?employment field that thinks small first and that isMr Alambritis: I think it is because we have a largerhow it is introduced, then surely it will be okay fornumber of smaller employers. If we look at the mapthe Asdas and the Tescos of this world. To pick yourof employment and employers, we have about 1.2point up onAsda, in terms of the patriotic side of themillion employers in the UK registered for PAYE;UK economy, we do like to say that it is the smallonly 9,000 of them are large employers employingbusiness side that is the more patriotic in terms ofmore than 200 people. The vast majority—97%—investing locally, retaining locally and employingare small, tiny employers so when legislation comeslocal people, whereas it is the larger company thatin we tend to get a bigger outcry in the UK abouthas a global duty andwill go towherever it is cheaperemployment legislation because we have a largerand they have their call centres abroad. I think ournumber of smaller employers. We want to keep thatmembers are concerned about the cost of training,flexibility; we want to keep the UK up there in termsparticularly in terms of time and they are seeingof that flexibility. The Small Business Service—thesome skill shortages. I think we have a proposal forGovernment’s own service, although the Smallthat self-employed person to take on that firstBusiness Council led by William Sargent isemployee as sole trader initiative where theindependent of it—has estimated that normally self-Government can step in and say, “If you are self-employed people (of which there are 2.8 million)employed, if you are thinking of taking on your firstabout 7% like to employ an extra person each yearemployee, we will make it easier for you by having aand they are beginning to suggest that we may bekind ofHouse of Commons fees oYce andwewill doforegoing 200,000 new jobs if the employment all the work for you. You just tell us who you areregulations are starting to put oV self-employed going to employ and we will sort out the maternity,people from taking on that extra person. So it is the sick pay and so on.” Just that first employee; thatsomething that they are teasing out at themoment in first step into employment to get them in there

their annual report that came out last week. We do because there has been a lot of legislation. They areget a lot of start-ups who are saying that it is one beginning to say, “I would rather carry on with thegood game to be self-employed, sole trader, in existing staV I’ve got. I’ve read that there is thischarge of your own destiny, do what you want when legislation and that legislation and that is coming up.youwant and howyouwant; it is just a bit of another I will just stay where I am.” We do not want thatgame to be an employer today. There is a lot more because the job creation potential will be from theinvolved. The job creation potential is definitely smaller firms not from the larger ones.there.

Q306MrClapham:When you have taken soundingsQ304 Mr Clapham: So you would disagree with the from your members, have any of them suggestedview that there is a cultural aspect to this. On the that there is a benefit as well as a cost to regulationContinent—for example France and Germany— and have you taken that into account?they have a much more positive approach to Mr Alambritis: They do welcome regulations in theregulation whereas in the UK it is a more negative competition field to regulate to make sure largeapproach and hence regulation is not managed as companies do not unfairly compete against them.well by companies in the UK. They welcome regulation to ensure level playingMr Alambritis: In the European Union they have field, regulations to ensure they are paid on time.what is called Public Law Status where businesses They do see—and they did see—the benefit of theare registered with amajor body that negotiates with introduction of the Minimum Wage at a sensiblegovernment on regulations. Businesses are brought level in terms of being undercut by rogue companies;into the argument and into the debate from day one. rogue employers are paying pitifully lower money.Let us not forget theGerman business sector and the They do see that view but because of the 20 or so newFrench business sector are beginning to make some major pieces of employment legislation over the lastnoises about the complexity of legislation holding few years they are seeing just that side in terms of too

much legislation too soon.them back when they compare themselves with the




Q307 Sir Robert Smith: Do you have any figures or Q310 Sir Robert Smith: A previous witness had justone concern that it can lead to a peak of consultationany more evidence to back up how much resourcesin the run-up. Do you share their concern?have been diverted away from constructive activitiesMr Alambritis: We would rather the certainty ofby the business and towards compliance with theknowing when something is coming in becauseregulations?although we have 185,000 members, there are 1.2Mr Alambritis: The administration time taken tomillion small employers out there and we do have adeal with both employment regulations and taxtendency to seek certainty and stability. It will alsoissues as well is averaging about 30 hours a monthhelp ACAS in their guidelines. I know that Michaelfor an entrepreneur on their own on their kitchentalked about not going down the regulatory routetable at home after the factory has closed or the shopbut bring in unions in terms of negotiation. Wehas closed. That was about 20 hours a few years agowould also say that if we can avoid the regulatoryso the hours have increased. In terms of taking theirroute or the legislation but bring in ACAS and if aeye oV the ball and having to attend employmentminister is thinking of a new regulation in thetribunals, we have gone from 40,000 employmentemployment field, talk to ACAS and see whethertribunals in 1990 to 120,000 in 2002; it is starting toACAS can come in and help direct, cajole, have ago up again. That takes their eye oV the ball becausecode of practice. We would like to see ACAS at leastthey have to spend an awful lot of time to attend andresourced a bit better for the new world of work.to defend themselves.Whatwe do as an organisation

is to provide them with that legal advice and thatprotection and insurance against the unpredictable Q311 Judy Mallaber: You call for small businessesnature of running a business, which could be a tax to be granted exemptions from much regulation. Iassessment or an employment tribunal case. They understand the arguments but is there not a dangerare saying that they are having to spend a bit more that that will just create a divided labour market

with poor pay and conditions for employees who aretime just doing government paperwork, just makingemployed in the small business sector?sure they have it right, making sure the notice is upMr Alambritis: The argument is well made: whyon the board, making sure they have sat down andshould someone who works in a smaller firm havemet oYcially and had it taped. They have this thingfewer rights than someone who works in a largerat the back of their minds that they need to trace andfirm. It is well made and exemptions over the yearstrap everything in their discussions with theirhave begun to peter away but they are a useful indexemployees to make sure they do not technically fallin terms of allowing businesses to grow andfoul of something. Even though morally or legallyhopefully will grow to go over the exemptionthey are in the right, if technically they have donethreshold, whether it is 20 or five or 10 and then takesomething wrong by not issuing the relevant noticeon board those duties. We do feel that in theirat a given time then they know they might fall foulinfancy there is some scope for toying with the ideaof the law. They are saying they are spending moreof exemption. The classic exemption is trade uniontime on making sure they are up with the law.recognition: firms with under 21 workers do nothave to recognise a trade union. We rather like that,but if you talk to the trade unions themselves they doQ308 Sir Robert Smith: Was that 30 hour figurenot see much scope in going into all these tiny firmsfrom a members’ survey?to see whether they want a trade union recognitionMr Alambritis: It is from one of the income dataagreement. So there is some scope there. It could beservices or peninsular law services, but I can chase it that exemptions have a higher place in the fiscalfor you and send you a note. side—on tax, on VAT, on company regulations—and you could veer exemptions toward that area asa quid pro quo for reducing exemptions in the

Q309 Sir Robert Smith: Thank you. You are employment field because there you are talkingobviously concerned about the volume of new about real people and their rights.We would have toregulations.Will the introduction of regulation days discuss that with government. So you have anwhen the new regulations all take eVect together exemption on tax—VAT, corporation—AGM,make it a slightly more manageable process in that whether you have to hold a physical AGM—andpeople will not have them sort of dripping onto then you barter with exemptions on the other side.them? There is scope for exemptions in terms of allowing aMr Alambritis: We have welcomed the concept of young fledgling business to grow. One idea we havecommon commencement dates in employment is for regulations to have a delayed mechanism forregulations in October andApril. A lot of businesses small firms. The regulation is announced, it comes inend their accounts somewhere around the end of the for the larger firms for about sixmonths to a year butfinancial year around 6 April. The first one took not quite yet for smaller firms. In the meantime—place in October of this year but unfortunately quite hopefully through the supply chain, hopefullya lot of other legislation was tacked onto it in that through government information and through FSBrespect and that is why it came to be known as “Red and other organisations—we are telling smallTapeDay”. Again we need to express our preference businesses that this legislation is in place, it does notfor less regulation but where there does need to be quite apply to you just yet but it will in six months’regulation if businesses know when it is coming they or a year’s time, get ready. In the meantime the

Government can look at the glitches in thecan look out for it. I think that is very important.




regulation as it applies to the large firm in terms of right might cost on its own a very small amount ofthe legislation and perhaps can accommodate it or money, but if you add them all together you mighttwitch it by having a sunset clause which means they be pushing a firm under. That is the last thing thecan review it after a year or two years to see whether employees of the firm want and they usuallyit is meeting the mischief or achieving the benefit. It understand that.would mean bringing in the smaller companies abit later.

Q314 Sir Robert Smith: The Chartered Institute ofPersonnel and Development talked to us about aQ312 Judy Mallaber: That is interesting but is therepilot being run by the DTI of human resources fornot a danger that exemptions for small businessesfirms under 20. Is that a pilot you have hadcould mean that your fledgling businesses set oV

knowledge of or involvement in?with bad habits and that actually a regulatoryMr Tyrell: Yes, increasingly we work closely withenvironment—so long as it is done in a way that isthe CIPD as more and more of their members areuser friendly, which is one of your arguments—willpersonnel oYcers in slightly smaller, medium sizedenable them to concentrate on having the right set ofcompanies. What we would like to see is the Jobattitudes and principles and practices and thenCentre Plus government agencies having moreconcentrate on actually working eYciently andthought to helping a small employer in terms ofproductively within that environment?recruitment, in terms of retention, in terms of findingMr Alambritis: We do not see it that way. A lot ofa maternity replacement. The large companies arethe regulations our members are doing anyway. Onactually very professional but are also very confidentparental leave, paternity leave, on flexibility at workin replacing a maternity leaver with someone for ain particular a lot of ourmembers said that this is notyear or a year and a half. For the smaller firmhaving any impact on us whatsoever because wereplacing someone for a short period of time theyalready do this kind of thing.find it diYcult. So we would welcome a pilot schemewhereby something like CIPD, ACAS, along with

Q313 Judy Mallaber: So it is the ones that are bad business organisations could come in and hold thethat we are trying to stop and they are the ones that hand of the small employer on short term leavercould be undercutting the small businesses who are replacements. That would be very helpful.competing with them down the road who areoperating well.Mr Alambritis: The ones that are bad are hopefully Q315 Judy Mallaber: That is an interesting idea.are very few. Unlike the Chambers of Commerce we You are keen to retain the opt-out in the Workinghave not had a barometer or an index or a costing of Time Directive. You say that the 17 week averagingall the regulations because we feel that for our period does not allow suYcient flexibility. Is thatmembers it is the cumulative impact of the right?regulations they have to deal with that is the burden

Mr Tyrell: The new Commission proposals are aon them. Each one is plausible but it is thegreat advance on the original proposals and by andcumulative impact that could catch out a smalllarge we think that small business, ourmembers, willemployer who would decide not to employ eitherbe able to live with the new proposals. This dependsany more or any new staV and just seek somehowever to a great extent on the use the relevantreflection or some time when there are not too manysecretary of state in the member state—in our casenew employment regulations, so everyone couldthe DTI—makes of the options that these newcatch up.proposals give. For example, the new proposalMr Tyrell: May I add to that answer, please? Thesuggests a reference period of 12 months to averagemain problem is cumulative eVect. With a largeyour 48 hours a week over a 12 month period. If ourcompany you have a personnel manager and aSecretary of State adopted that option then I cannotpersonnel department who can take on thesesee that any small business is going to have anycumulative eVects much better than the smallreason to have any anxieties. It would bebusiness can. If the stage is reachedwhere the burdeninconceivable that any small business would workon a small businessman in trying to run his little firmtheir workers 48 hours a week for an entire 12in the way that Stephen has indicated earlier on themonths. The time they would work over 48 hours iskitchen table on a Sunday morning, the weightunder ordinary seasonal pressure or a particularlybecomes such that he cannot do any of it properly.large order that has come in. We think that the newIf you are looking at a new right and asking whetherproposals ought to be all right. We notice that smallthere should be a small business exemption, youbusinesses are going to be able to retain the opt-outhave to bear in mind that that regulation must bebut we are concerned about the 65 hour a week limitproportionate. What might be proportionate forand that is not subject to any reference period at thelarge firms in terms of cost, compliance and so on,moment. If the 65 hours were also geared to awill not be proportionate for a small firm. That is thereference period then we would be happy with thebig diVerence. The small firms always have tonew proposals as they have now emerged. I think theremember and bear at the back of their minds thatproblem is going to be to get our own Governmentsome of them live quite near the line when it comesto hold the Commission proposals in the Council ofto solvency. Last year there were 43,000

bankruptcies of small businesses. Every additional Ministers.




Q316 JudyMallaber:Although you are happier with employers have reached a level where they arecontent with each other. I know there will bethose proposals you still want to retain the opt-out.

Are you against any limit on working hours; do you problems in minor sectors, in certain sweatindustries; no-one supports that and it should bewant complete flexibility?

MrTyrell:Quite frankly we do not really think there looked at very closely. However, we do feel thatemployment relations and health and safety at workis a need for a limit on working hours in the small

businesses because we know that the time when they are now quite good within the UK industrial sceneand in the small firm sector.have to work hard is really seasonal work.

Q317 JudyMallaber: So it is not that 48 hours is too Q320 Sir Robert Smith: You said in principle thatlow a limit, it is more to do with the averaging out your members actually welcomed the minimumand so on. wage, but what view do you have now on how itMr Tyrell: The 48 hours is the maximum that is should go forward in terms of its level?allowed and is going to be allowed but the question Mr Alambritis: The term we are using is “pockets ofis over how long a period will it be calculated. unease” beginning to appear. That is the term we

using, that is coming from our members. Pockets ofQ318 JudyMallaber:Are you saying that you would unease sectorally—leisure, tourism, catering sector,prefer there to be no limit on working hours at all? cleaning sector—and pockets of unease regionally—Mr Alambritis: What we are saying is that the north-west, north-east, Scotland, Wales—are justquestion of working hours, particularly in a smaller beginning to feed through. We do regularly talk tobusiness, is best determined by a fair negotiation and consult with the Low Pay Commission but ourwith this application legislation in place between the members are beginning to report those slightemployer and the employee. If we are arguing that pockets of unease with the latest rises. We feel thatthere should be protection for workers working long if we do hit the £5mark then there should be anotherhours—48 hours and then they have to register if re-think, along with the Low Pay Commission,they want to work more than 48 hours—on the about how to take it forward after the £5 an hourgrounds of health and safety, then let us not forget mark is reached. Certainly when the Nationalthe self-employed person who may work 60, 70, 80 Minimum Wage was introduced at £3.60 the vasthours of their own volition because their work and majority of our members were paying £4.60 and as ittheir business demand it. We are happy with the has been creeping up the members have been payingproposals from the Commission with the reference over, but the level of over is beginning to decrease.point; we are happy with the opt-out. I do not think They have met the minimumwage; they were payingthat what we are saying is that there should not be above the National Minimum Wage, but we areany protection whatsoever, but where protection is getting those pockets of unease being reported back.put in there should be flexibility, acknowledging thatwithin the small firm they will get it together and

Q321 Chairman: One last thing we might want tothey will work those hours where everyone will pulllook at is that in a number of respects the regulationstogether. It is an exciting timewithin a small firm, forcome from Europe. They are framed in accordanceexample, if it gets a huge contract from its local

authority and everyone has to pull together, work with European traditions rather than UK. We haveslightly longer hours. That flexibility allows the a legislative tradition in this country which results inbusiness to take advantage and perhaps, if the legislation being clear and specific; you know wherecontract goes well, to employ an extra person. In a you stand, you know how to perform against it. Theprint firm, for example, they would argue the case European approach tends to be rather morethat they need that flexibility in terms of hours. generalised and open-ended and it is for the courts

to define it simplistically. How would your membersprefer to have it? Prescriptive in the UK style orQ319 Judy Mallaber: I can understand theopen-ended in the European style, definedexcitement you are talking about when you getultimately by courts? If you have to have it, whichsomething coming on and the business is doing wellone would you choose?and everybody wants to pull together, but that canMr Tyrell: We want it as clear and concise asalso be quite a pressure in a small business on thepossible and that is what our members want. Theyindividual tomuck in even if it just does not suit theirwant to be able to read down a sheet of paper andlives at all. How confident are you that the voluntarysay, “This is what I’ve got to do” instead of havingopt-out is genuinely voluntary and that people areso much of the stuV that comes from Europe thatnot, in eVect, forced to opt-out.you have to wade through and try to weigh upMr Alambritis: We are very confident that ourexactly what it means and not being able to turn themembers certainly have not forced their workers towords that they are reading into specific action. Thatsign the opt-out. The opt-out was advertised withis what really bothers them. It also bothers them thatour members in a big way when the legislation cameit is not all that easy to get clear advice on the matterin. We have seen no evidence of workers—certainlybecause if they ring the appropriate number foramongst our membership—being forced to workadvice, again they are likely to be referred to amore than 48 hours against their will. Obviously theguidance or something that might be several pagesTUC may have a diVerent viewpoint. We feel thatlong. The answer to your question is, we prefer ourindustrial relations in the UK are at their best for a

number of years and that workers and their own system.




Q322 Chairman: The diYculty is that since we are in Mr Tyrell:We want it to be essentially practical sothey know exactly what they have to do.Europe and some of the employment regulation

comes out of Europe. Our civil servants are quite Chairman: I am not sure if we are ever going to getto the bottom of this one, but we just wanted to haveoften criticised for being too specific, for trying to

have gold-plated or copper-bottomed (whichever an idea as to what you saw as the nature of theregulations that we have to address. I do not thinkmetaphor is appropriate). You want it clear and

specific but not over-prescriptive. Is that right? we have any further questions. Thank you verymuch. The session is closed.Mr Tyrell: That is right, yes.

Q323 Chairman: Is that the philosopher’s stone, doyou think?



Monday 20 December 2004

Members present:


Mr Roger Berry Judy MallaberRichard Burden Linda PerhamMr Michael Clapham Sir Robert Smith

Witnesses: Mr Paddy Lillis, Deputy General Secretary, Mr Graham Markall, Head of Research andEconomics, and Ms Ruth Stoney, Deputy Head of Research and Political OYcer, Union of Shop,Distributive, and Allied Workers (USDAW), examined.

Q324 Chairman: Well good afternoon, Mr Lillis. I Booker Cash & Carry, have made a very deliberateattempt to distance themselves from the very ideabelieve you are in substitution forMrHannett today

but perhaps you could introduce yourself and your and the image of being a minimum wage employerand have bumped up their basic hourly rates even forteam and we will get started.

Mr Lillis: Firstly, could I give John’s apologies. the lowest grades to £5 an hour, a very symbolic sum,and put some clear water between themselves andUnfortunately, he has had to go to a funeral this

morning and asked me to stand in. On my right is the minimumwage itself. I think you asked for somesuggestion of numbers. We cannot be clear aboutGraham Markall, who is the Head of our Research

Department, at our head oYce, and on my left is that because we do not knowwith any precision howmany people are within particular grades within anyRuth Stoney, who is our Political OYcer, again

based at our head oYce. one employer’s payroll, but I would have thought itnumbers several thousand of our members who willhave benefited from a rise to £5. On the bottom rateQ325 Chairman: I think you are aware that we haveof the retail cooperative societies, for example, thatbeen looking at the flexibility of the labourmarket inwould represent a percentage increase of 10% toUK and one of the obvious areas that we have been10.5%. That is a significant percentage rise and alooking at has been the National Minimum Wagesignificant money sum for people, so I think it isbecause in some respects it could be argued that thispossible to argue that they have benefited directly forprovides a floor for wages, and therefore it couldthe latest increase in the minimum wage by a figureconceivably diminish the flexibility of the labourin excess of the minimum wage itself.market. There are other arguments of course, but

this is one that has been raised by some of thewitnesses, although it has to be said that so far I Q326 Chairman: In the retail industry how manythink all of the evidence has suggested that the workers, roughly, are covered by union-negotiatedNational Minimum Wage is yet to aVect agreements, either by you or other organisations?employment or for that matter wage inflation Mr Markall:Well, only about 10%. Approximatelyoverall, although there was a suggestion in one piece 90% of retail workers are organised by no-one. Weof evidence we received to that eVect. When we organise the vast, vast majority of the 10% who areinvited youwewere conscious that youwere perhaps organised. You would expect us to say that but it isone of the organisations which probably had within true statistically. There are one or two other unionsits membership the highest proportion of people in who have what we would describe as a toehold butthe low wage bracket that were aVected by the we are known, for good reason, as the shop workers’National MinimumWage and we wondered if, for a trade union and we have about 240,000 shopstart, you could maybe give us an indication of how workers in membership of the trade union.many of your members have benefited from theNational Minimum Wage and perhaps, if

Q327 Chairman: If 240,000 is 10% then we areappropriate, rises over and above that which havetalking about nearly 2,400,000 million?been triggered oV, or whatever metaphor you wantMr Markall: Yes.to use, in that area?

Mr Markall: Thank you very much. First of all, Iwould say that this is probably the first year, with the Q328 Chairman:Of the other 2.1 million, howmany

of them are covered but are not members, if yourise to £4.85 an hour from October, that ourmembers have felt anything like a direct impact in knowwhat I mean, in the sense that you do not have

100% union coverage?any wider sense of cause and eVect. In previousyears, minimum wage increases have been Mr Markall: Okay. The membership we have—the

240,000—are actually sited with a handful of verysuYciently modest and from a suYciently low basenot to impact on voluntary arrangements that have large employers. The majority of our members

are with the likes of Tesco, Sainsbury, theobtained across our agreements with the employerswith whomwe negotiate. This year, however, I think Co-op Societies, Morrison Safeway, Kwik Save,

Somerfield. Those are the employers where we havethere has been a noticeable and evident diVerence inthat several of the employers we deal with, notably our principal membership, plus some non-food

employers like Woolworth’s and Argos as well, butin the retail cooperative societies and companies like



20 December 2004 Union of Shop, Distributive, and Allied Workers

principally our interests and our membership is in us that they need to look further at it next year. Sothe retail food sector andwithin that in the very large they are in the process of not just smoothing butmultiple food retail environment. flattening.

Q329 Mr Clapham: Given the 240,000 membership,Q335 Sir Robert Smith: Was that something thatwhich is about 10% of the total workforce, are anywas going to happen anyway, regardless of theof the employers putting up barriers to you beingminimum wage?able to organise in their organisations?Mr Markall: Yes and there is a heavy emphasis onMrMarkall: It is hard to describe it as a barrier butfunctional flexibility on the shop floor.they can be demanding. In other words, if theirMr Lillis: That is probably the key. It is flexibilitybusiness is to sell food, with great success, and ourand reducing the grades down. They become multi-business is to sell trade union membership, they

expect us to do our job and them to do theirs. I skilled, which gives the employer a degree ofwould not call it a barrier but I think they operate flexibility in terms of managing their stores andwith a fairly clear division of labour, although we shops and again it assists us in terms of pushing theobviously argue strenuously that it is in their lower rates of pay up.interests to help us recruit people into the union.They rely on us speaking with authority for “theirpeople”, as they put it, and the best way to do that is Q336 Linda Perham: Just for a moment going backto have them join us. It is in their interests as well as to what we were saying earlier about yourours. That is our view. membership being 10% of retail workers; how does

that aVect your ability to engage in collectivebargaining?Q330 Chairman: I take it from what you are saying

that ASDA is not organised? Mr Markall: It means that we have to beMr Markall: Not by ourselves. extraordinarily resourceful and highly skilled

advocates, quite seriously. I know there was astereotype of trade union negotiators as brawny,Q331 Chairman: It is organised by someone else, istable thumpers, and employers having to roll over.it?In fact, what we have had to do for many, manyMr Markall: I think the GMB have someyears is to argue from the base of reason, justice,membership there.fairness and good business sense, which is the onlyway we have managed to gain any headway in anQ332 Chairman:What I was getting to was whetherenvironment in which we do not have what someor not ASDA under the Wal-Mart umbrella waspeople would call conventional trade union muscle.behaving like its American counterpart.We also have, by design, a very broad bargainingMr Lillis: Certainly there are indications that that isagenda so that whilst we recognise that handsomethe case and that Wal-Mart is trying to introduce anpay rises are exceptional and almost unheard of inAmericanism into the way they run their stores here.the retail environment because of employerThere is still a vast turnover in their employees. Justresistance, we have learnt for a long time now toto come back to the other question on getting access;bargain across a broader agenda of what matters tothe 24/7 culture also creates problems for us becauseour members (not to say that pay is not important)the vast majority of the retail workers are part-timewhich is about worker-centred flexibility, aboutworkers working 24/7. Again we have limitedwork-life balance, about family-friendly issues,resource as an organisation so that puts some barrier

up as well. about the kind of environment in which people feelvalued and central rather than peripheral anddisposable. Those kinds of gains are as important toQ333 Sir Robert Smith: Just following on with aour people as, frankly, a rather modest increase in aquestion about the impact over and above therather modest rate. At low rates of inflation a two orspecific people aVected by the minimum wage. You3% increase on £5 is not a lot of money, it is pence.mentioned how some employers already this yearSo whilst it remains important it is not going to turnhave seen that their base will be slightly up. Haspeople’s heads and we have to think morethere been any impact further up pay grades becauseimaginatively and extensively about what we can dothe basic levels have come up? Has there been anyto improve working life in those areas.reference back?

Mr Markall: No, in fact the trend is the reverse. Mr Lillis:On the 10% membership point, obviouslydiVerent companies have higher degrees ofmembership. In some companies we have 50–60%Q334 Sir Robert Smith: Flattened?membership. We have entered into quite a fewMr Markall: More than flattened. It has almostpartnership arrangements with employers, asdemolished grading structures on the shop floor.Graham has just said, handling all aspects of theThe Co-operative Retail Societies have done thatemployment situation not just on pay. We arethis year, Sainsbury’s, Kwik Save and Somerfieldlooking to assist the employer to develop and in thathave done that already, and Tesco’s are in thesense bring that trust into the relationship. Treat theprocess of doing it. They narrowed the diVerentialemployees fairly, treat themwith a decent wage, andbetween the two major shop floor grades this year,

at our suggestion by the way, and are agreeing with hopefully it will pay dividends for you in the end.




Q337 Linda Perham: Thank you. You note in your industry are still extremely low paid in comparisonevidence that employment in retail actually rose with most people. As Graham just pointed out, tofollowing the 2003 minimum wage increase by reach a £5 minimum wage rate with the Co-op and86,000 in three months. Do you accept that there one or two other employers has been quitemight come a point where employment might suVer? significant for us but, keep it in perspective, it is stillI do not know whether you have got any research a low wage for the 21st century.that suggests what point that would be, whether youjust go for the trial and error approach where therate is pushed up until employment is actually going Q340 Chairman: You say that the industry isto be aVected? expanding. The experience of a lot of us is that theMr Markall: We do not have any. No-one has a supermarket comes to town and the wee shops closecrystal ball on this. because people find it more convenient, easier to

park, they can do all their shopping under oneroof—the one payment covers everything sort ofQ338 Linda Perham: Not even any projections?approach. By definition, yourmembers are recruitedMrMarkall:No, I do not think we speculate in thatand organised in the big employers, so you associateway. What I would say is I think we would celebrateretailing with the large units. The public sometimesthe way in which the Low Pay Commission has goneassociate them with the smaller units. They do notabout its business in that key role of hearing from allalways necessarily associate themwithmany feelingsthe interested parties from all kinds of angles aboutof loyalty, one has to say, nevertheless we getwhat would and would not suYce, and what wouldcomplaints that it is theNationalMinimumWage orand would not be threatening in terms of jobs andit is the supermarket that is killing oV the townviability of businesses. Their watch word has beencentre because the wee shops are closing and that incaution. I think their record to date is clear to see, itfact all you are getting is a substitution eVect withhas been massively successful, it has been flawless,labour going from the small shop keepers to thejobs have been gained not lost. We place our faith insupermarkets. Would that be a reasonable criticismtheir decision-making capacity and the mechanismto make of the expansion of retailing in the UK?itself for delivering decent but reasonable rises in theMr Lillis: If you look at it, the vast majority of theminimum wage which have not impacted onlarge retailers have taken over most of the smalleremployment. I am not sure there is anybody, apart

from people who may have a vested interest in retailers that tend to have stores of what we wouldtalking down the minimumwage, that could reliably see as the convenience/corner store type shops. Yes,point to a theoretical scenario in which jobsmight be four or five big players are basically swallowinglost, bearing inmind people do come to the Low Pay everything up so in that sense you are right, but thenCommission and to this Committee, I am sure, againwhen people go to shop the big employers havetalking about the potential job-destroying eVects of got the bargaining power in terms of the supplythe minimum wage, but they would say that chain and buying in cheap and at the end of the daywouldn’t they. Labour costs are a significant element people going to the Tescos, the Sainsburys, theof business costs particularly in the retail sector, and Somerfields, the Quicksaves and the Safeways of thearenas like the Low Pay Commission are one of the world and competition is what is putting the smallerfew who can hope to obtain any kind of purchase on ones out of business.their costs in the future. They cannot haggle with the Mr Markall:We have always called for a balancedcompetition. They cannot aVect interest rates but policy around planning and planning guidance onthey can at least hope to try to impact on rises in the retail development. We have put in submissions tominimum wage and contain their own costs in that the Department for the Environment on that frontway. I do not blame them for doing that but I think over the years as well. We are simply calling for alltheir speculation needs to be treated with some retailers of all shapes and sizes to be able to competecaution here. eVectively. Donot forget thatmany of ourmembers,

quite apart from where they work, which as youcorrectly say is in large retail units, actually shopQ339 Linda Perham: You say the way they havelocally and rely on small retail outlets. They aredealt with things up to now has been flawless but youconsumers as well as producers and they have nodo not think the minimum wage is at the right level,interest in seeing suburban high streets go to thethough, you think it could be higher, do you not?wall, either as consumers or ratepayers because thatMr Markall: Yes.has a knock-on eVect for the local authority and itsMrLillis:Absolutely higher. As an organisation it isinfrastructure.We have always called for a balancedcertainly in not in our interests to be asking for aapproach to shopping policy and strategy and notridiculously high rate for the National Minimumunduly to favour the large retail employer. In fact,Wage. We do not want to be in a position where wesome of our most recent campaigns, including oneare threatening jobs, but all the evidence, as youthat Ruth has been involved in, are around violencehave just mentioned, points to increasing theat work and trying to strip that sense of fear andnumber of jobs. The retail industry in this country isintimidation away from local shopping centresstill continuing to expand and still has for 2005–06through more proactive involvement from localquite an ambitious expansion plan for most of theauthorities and other authorities to give viability andtop retail companies, so they are still making huge

profits. Our members and employees within the vitality to smaller environments.




Q341 Sir Robert Smith: One point on the private sector, and in most companies where weorganise we do have a 16 and 17 year old youth rateemployment side of retail is how much of it has

grown on the back of the credit boom? If the Bank because those people are not as productive as a 18year old who can take on more responsibilityof England is keen to rein that in and if the attempt

is to reduce the burden of debt that people are taking particularly around sales of alcohol and the sort ofresponsibility where you have to be 18. We believeon, will that turn that employment rise into a dip?

MrMarkall: I do not know the answer to that, to be that the £3 an hour rate is far too low and we wouldlike to see that increased to be 80% of the adult rateperfectly honest with you. All I would say is that the

kind of employers we are mostly involved with are of the minimum wage, which of course should bepaid at 18, but we do not feel that it is justified tothe retail food employers and food expenditure is

not particularly credit based. argue completely for the full adult rate at 16 in mostcircumstances.

Q342 Mr Berry: USDAW opposes a lowerminimum wage for 18 to 21 year olds, as indeed do Q344 Mr Berry: You have mentioned that it may

well be desirable that 16 and 17 year olds should bemany others. What eVect do you think there wouldbe in the sectors where you are organised of having in education or training. Do you think a higher wage

for 16 and 17 years olds or indeed 18 to 21 year olds,a uniform National Minimum Wage from age 18upwards? What diVerence would it make? would deter young people from continuing in

education? One argument against the NationalMs Stoney:At the moment in the companies that weorganise, practically every single one of them has the MinimumWage has always been that if you increase

the price of labour people lose their jobs. We haveadult rates paid from 18, as has always been the case.What we are very concerned about is what has been discussed that one and we have all got our own

conclusions on that, no doubt. The other argumenthappening since the introduction of the 18 to 21 yearold rate in some very large companies within the has been that for young people in particular what

happens is that because you are paying them a littleservice sector—and we particularly looked at thefast food outlets such as McDonald’s, Burger King bit more this will deter them from continuing in full-

time education or training. Do you think thatand KFC and in retail the firms such as Dixons andCurrys and the Labour Force Survey also found that argument holds any validity?

MsStoney: I think the fact of thematter is that it hasquite a few of the pub retailers have brought in 18 to21 year old rates simply because they can and these not. Whilst we are up to about 16% of 18 to 21 years

who are now being paid some sort of youth rate thatcompanies employ significant numbers of youngpeople—which is they have started to pay them a is less than the adult rate of the minimum rate, you

have still got 85% of them being paid over and abovelowwage rate in order to oVset the costs of the rise inthe adult rate in the minimum wage. This is actually the full adult rate of the minimum wage, and in the

last few years, as you know, we have seen massivehaving quite a serious detrimental eVect on theyoung people. A lot of them are in full-time increases in the number of 18 to 20 year olds who are

staying on in full-time education. Basically the factseducation and trying towork their way through theireducation and the less they are paid the longer hours of the matter do not bear it out. Young people know

there is a direct correlation between the skills thatthey have to work and the more of an impact it hason their studies, so that is one of the problems but they have got and the wages that they can command

at the end of that.also once you start introducing pay scales accordingto age you are saying to people, “We are employing Mr Berry: Thank you very much.you because you are young.” It is in low skilled andunskilled work and there is no incentive on the Q345 Chairman: Do you think there is a case for aemployer to train or on the employee to be trained if starter rate in the sense that young people could bethey simply get a pay rise when they reach the age of leaving school at 18 and they are no better or worse22 rather than because they have improved their than the youngsters of 16 in terms of theirskills and performance at work. experience? I can appreciate you see this almost

exclusively through the retailing prism and in thecontext of the supermarket and the flexibility of notQ343Mr Berry: You do support, as I understand it,

16 and 17 year olds being on a minimum wage that being able to sell let’s say liquor might well be adrawback and it may be it can be interpreted as justis less than the national minimum wage. You

welcome the extension of the principle to 16 to 17 a movement of cases of drink about the place, orsomething like that. We will leave that aside, but isyear olds. You perfectly reasonably said £3 is too

low and I think you have argued for 80% of the there a case that says, well, we are taking on greenlabour, should their starting rate be based on timeNational Minimum Wage. Why would you not

make the same argument for 16 and 17 year olds as rather than age, six months or something like that?Mr Lillis: The vast majority of the agreements thatyou would make for those who are 18 to 21?

Ms Stoney: In general, we accept the Government’s we deal with have that already in them regardless ofwhat age you come in. Theywill have a three-month,argument and that of many people that ideally 16

and 17 year olds should be in full-time education or six-month or nine-month probationary period untilyou are upskilled. So that is already there andtraining. What we do try and do is base our

recommendations to the Low Pay Commission very recognised within the industry.While you are sayingyou would put in for the minimum wage for themuch on what we can bargain for in the service

sector in low paid, low skilled industries; and in the younger ones at the minimum rate of pay within the




minimum wage is still extremely low. Most of the McDonald’s grouping, the people who are not beingemployed 21-plus and being taken on at the loweremployers that we are dealing with are paying above

the minimumwage for their starter rate and after six rate?months they are getting about 30% more than what Mr Lillis: I am sure we can get something for you.the initial rate of pay is. Ms Stoney: We have got figures generally on 18 toMs Stoney: There is a development rate at the 21 year olds and the proportions of those who are onmoment for six months but that is very little used youth rates. For those companies, because we do notbecause so few employers, certainly in our sectors, organise for them, then obviously they are not goingbring in the level of training and qualifications that to give us their employment figures, I am afraid, sopeople would need to have to qualify to go on that we could not get those.development rate. If some sort of starter rate came Chairman: Okay, but I will tell you what you couldin, be it for young people or older ones as well, we do, if you could just identify in a letter all of thewould very much like to see it being linked to skills companies whom you suspect are employing peopleand training because, unfortunately, there is far too at the youth rate in preference to the adult ratelittle of that that goes on. because obviously if this is a shift in recruitment it

might be possible for us to write to them and askthem if there is a change in recruitment as aQ346 Mr Clapham: Do you have any links with consequence of the change in the Nationalsome of the bigger companies with regards to the Minimum Wage and, if that the case, how manytraining and education of younger people coming people have been aVected by their step change ininto retailing? recruitment policy, if as you say it is the case. As IMr Markall: If you mean vocational training in the say, we have no reason to disbelieve you but withoutconventional sense we have some involvement (and any evidence all we have are your assertions and weit is not my sphere) with the skills councils and with need to get a bit more. I understand why you cannotthe designers of the syllabus and so on. We have give us that because you are not in a position toalways had that for many years. I think where we quantify it but we will try and get some numbers byhave more contemporary experience, if you like, is way of letter. It might cause their HR directors somearound the whole lifelong learning question. That is problems over Christmas but we will worry aboutnot restricted to young workers nor necessarily that later!workers who have been particularly unskilled,

although the core element of the lifelong learningagenda is around basic skills and core skills. So it is Q349 Richard Burden: I would also like to ask you athe lifelong learning agenda that has actually taken bit about areas where you are probably going tooV amongst our membership rather than a have diYculty quantifying things in the answer. I doconventional vocational training agenda. understand that the biggest concentration of trade

unionism is in the larger chains and that is where thevast bulk of your membership is, but in terms ofQ347 Mr Clapham: So you have had a good either the small single shops, the chains ofresponse from your membership. What about the independents, the smaller chains, and so on, do youemployers? have any sense beyond the issue of the youth rateMr Markall: To be fair, there are a number of about what impact the National Minimum Wageemployers who have seized upon that opportunity has been having in that kind of sector, thethemselves, not so many in retail to date but retail is convenience food sector?the target industry for us next year. We have cut ourMr Markall: We do not have original data of ourteeth in areas of distribution and food manufacture,own. It is not the sort of enterprise we would engagewhere we also have a base, which has a much morein to see what is going on in areas where ourconventionally organised format, so there is anmembers, by and large, do not work and which weagenda out there around learning and skills but it isare not primarily interested in, but what we do do ispossibly not the conventional one in terms ofkeep a watchful eye on the DTI’s Small Businessvocational training and qualifications and so on.Unit to see what is happening to small businessesMrLillis: It is fair to say that the retailers have takenthere and on their Insolvency Service to see what isto it as well and we have run a few pilots this yearhappening with business failure and see if thatwithin the lifelong learning agenda and it has been athrows any light on the claim that small andhuge success, so we are looking to see that increasemedium-sized businesses are suVering, perhapsfor 2005–06. Also most of our lifelong learning hasterminally, from the impact of the Nationaltaken place in the distribution, warehousing andMinimumWage. It makes quite interesting reading.factory environments where it is easier to organise as70% of small businesses do not employ anyone soopposed to retail, so there is a lot of work going onwhen you hear the small business voice go up youthere between ourselves and the employers in a jointneed to bear in mind that they are speaking in termseVort to have a system of upskilling people.of the employment eVects for a 30% minority of thesmall business lobby for a start. That is the firstpoint. Secondly, if you look at the figures from theQ348 Chairman: Could I ask you if you have thisDTI’s Insolvency Service about what is going oninformation, you may not have it, but do you havewith company failure at the moment, you will seeany figures, or could you get some, for the peoplethat themost current quarter’s figures are lower thanwho have been in this category that seem to be

not being recruited, the KFC/Currys/Dixons/ the one before, this year’s figures are lower than the




equivalent period last year and all the most recent Ms Stoney: There will often be a proportion ofagency workers on sites where we have got a unionyears’ figures are lower than anything in the years

leading up to the introduction of the minimumwage agreement and Paddy in the field has done a lot ofwork on bringing those people into organisation.before it even impacted. Clearly it can be contested

what the causal factors are there, but I think it is very Mr Lillis:We have been fairly successful in the last12 to 18 months with getting union agreements withdiYcult to maintain that the minimum wage is

damaging business to the extent of creating business agencies, not necessarily because they wanted tohave agreements with us but because they werefailure when you look at data like that. Indeed, from

time to time the Insolvency Service runs surveys of pushed into it on the basis of the bad publicityaround them. An instance would be a big foodfailed businesses to get their account of what on

earth went wrong and you have to look very hard (in manufacturing company in South Wales and theSouth West of England who was recruiting migrantfact it is impossible) to find the minimum wage cited

as a reason for their business failure. They cite bad workers from Portugal and Spain through anagency. In fact they were paying them aboutdebts, they cite tax liabilities, they cite rents, they cite

business rates, and most important of all they cite £2.10 an hour after they had deducted theiraccommodation where they had six to 10 peoplethe competition. So the biggest threat to small and

medium-sized retail businesses is large retail living in one house (of course with the sanitaryproblems and everything else that goes with it) andbusinesses, not the National Minimum Wage.had deducted their fares. So it was quite anexploitative practice and we said to the employerQ350 Richard Burden:Okay, so in terms of businesswhom we had an agreement with that bringing infailure you do not see any evidence of a correlation?agency people is not acceptable, which resulted inMr Markall: No.getting meetings with the agency themselves andbeing able to arrive at an agreement which protectedQ351 Richard Burden: What about in terms ofthose agency workers but also protected ouremployment levels amongst the 30% of smallermembers, the core employees, so that it would notbusinesses that do employ others? Have you seenundermine the agreed rates in the particularany citing of evidence there?factories we are talking about. We can do good byMr Markall: Again in the survey that the DTIgetting involved with some of these agencies andcommissioned only last year into small businesses ongetting an agreement in place, which not onlya range of fronts, including their employment profileprotects the agency workers and migrant workersand practices, when they asked small businesses whobut also protects our own workers in this countryemployed no-one why they employed no-one, to beand ensures that they are not having their wagesfair they had some vague notion about red tape butundermined.they could not specify what theymeant andwhen the

minimum wage and Working Time Regulationswere prompted to them only 3% of people who Q354 Richard Burden: Have you seen or sensed an

increase in the employment of migrant or agencyemployed no-one said that was the reason why theyemployed no-one, so it does not seem to be a major workers?

Mr Lillis: Certainly on the food manufacturing sidedisincentive to employment.there is a high percentage of agency workers who aremigrant workers and in the lower skilled areas asQ352 Richard Burden: Can we come on to the otherwell, which we keep a close watch on, especially inside of that equation, that is the question ofthe areas where we have got agreements because itcompliance in areas that you do not organise in.can, as I said, undermine our collective agreementsHave you got any sense of how far non-complianceif they are paying a lower rate of pay, and that is notmay be an issue, particularly amongst smallerin anybody’s interests.retail outlets?

Mr Markall: I think Ruth has something to sayabout that. Q355Richard Burden:The way that you tackled thatMs Stoney: Obviously, as Graham says, we cannot was to use the route you already had, in other wordsmonitor what is going on in companies where we do a recognition agreement with the company to getnot organise andwe do not have a foothold. It is very through to the agency. Getting back to the issue ofimportant that the minimum wage is properly smaller shops and retailers, is there anything youenforced. Where we do encounter problems with think could be done to, first of all, generate morecompliance with the minimum wage it tends to be information about the extent of compliance, andaround not the retail sector but the non-retail, larger perhaps actually generate higher rates ofworkplaces where agency workers are used, either compliance? Do you have any contacts with, say,where there are UK workers or more especially chains like Spar or trade associations like thewhere there are migrant workers having unlawful Association of Convenience Stores? Do you have adeductions from their wages or not being given dialogue with them?proper holiday pay and entitlement, and those are Mr Lillis: Your department writes to them fromthe problems that we encounter with compliance time to time.with the minimum wage. Mr Markall: Ruth, do you want to talk about that?

Ms Stoney: We do tend to have dialogue withassociations like the Association of ConvenienceQ353 Richard Burden: That is an area in which you

organise? Stores, and through them we will look at policies on




the minimumwage. I think there is quite a high level Q358 Judy Mallaber: You say it is a reference pointnot a prescription, but I recall the arguments whenof awareness about the level of the minimum wageit was argued that the minimum wage be set at two-which is very helpful. Obviously there is more thatthirds of average earnings and the illogicality of thatcan be done to bring that message home to peoplebecause it just raised the average earnings level.who work for small employers. Often there are notMr Markall: No, it would not. It was a medianvery many of them and there is very little tradeaverage not a mean average.organisation or back-up anywhere in the sector to

support them if they are looking to increase theirwages and they feel they have got a problem, but Q359 JudyMallaber:We could go back over historygenerally it is not something that we would work on. and it is quite a long time ago, but on the argument

about using the median, are you saying that issomething that although you would presumably say

Q356 Richard Burden: Is there anything extra that the Low Pay Commission should still haveyou feel needs to be done by government or anyone discretion, that you would like them to take that aselse to either increase knowledge or awareness or to a specific formula that they should look at?improve mechanisms for ensuring compliance? MrMarkall: Yes, I think it is worth putting into theMs Stoney: I think that ensuring compliance and pot, but I would be wary of doing anything thatensuring that employers keep proper records would smacks of prescription or of in any sensebe extremely helpful all the way through, both on downgrading or devaluing the role of the Low Paythings like the minimum wage but also when it Commission and that kind of mechanism. I think forcomes to keeping benefits in place, that sort of thing. those of us who campaigned in advance of the 1997

General Election, at a time when we were talkingChairman: Judy Mallaber?about a formulaic approach there was a great periodof enlightenmentwhen the idea of a government thatwas acting like “Big Brother” andwaving a stick andQ357 Judy Mallaber: My apologies for being latetelling employers by prescription what it should doand missing the earlier part of evidence. I will pick itwas not a terribly clever thing to do and theup in the transcript. It is snowing inDerbyshire! Youmechanism that the Low Pay Commission oVers,seem to be suggesting in your evidence, although Iwhich is a tripartite mechanism with employers andam not altogether clear, that maybe the Nationalrepresentatives having the opportunity to make aMinimum Wage should be tied to median malecase and have a hearing but then most importantlyearnings. Is that an actual recommendation you aretake ownership of the outcome, is absolutely crucial,making and, if so, could you explain why thatand I think when we talk about median levels at thewould be?moment it is simply as a reference point trying toMr Markall: The question arises almostguide the debate.commonsensically when we talk to the Low Pay

Commission or in general; “what do you think theminimum wage should be?” rather than just higher, Q360 Judy Mallaber: So did you pick that as aand we cited the median not as a prescription but as suggestion to be looked at because it seemed to be ata reference point and we located the reference point about the right level of pay or because you thoughtin the oldWages Council orders. TheWagesCouncil there was actually a logic to using a median?system governed pay and conditions in what used to MrMarkall: There was a logic. As I said, we had tobe called the ‘sweating trades’ for decades until they try to find a point of reference in our mind and a

realistic anchor to answer the question; “what dowere largely abolished in the mid 1980s and entirelyyou think it should be?” We chose that anchorabolished a few years later in the early 1990s. Theybecause it was the kind of proportion that used toused to provide for certain basic rates of pay, amongprevail all down the years, certainly until the Wageother things. They tended to be pitched at aroundCouncils were lost. There seemed no good reasonthe proportion of the median that we recommendednot to address that as a way forward going into thein our submission to the Low Pay Commission, sofuture, not least because it repaired the damage thatall we were trying to do was actually repair some ofhad been done.the damage that was done to people with the

abolition of the Wages Council and use the WagesCouncil type of rate as a reference point. Bearing in Q361 Judy Mallaber: On the Low Pay Commissionmind that the unions are often accused of thinking itself, you obviously like that approach; are thereof a number and doubling it and making it up as we ways in which they work which you would like to seego along, we actually tried to anchor ourselves in them do diVerently or are you pretty satisfied withwhat had been the basic levels of protection some the mechanisms that they use and the work thatyears ago and refresh them, and that gave us a figure they do?in the range that we cited to the Low Pay MrMarkall:This is a fair question.We are delightedCommission, which is not to say we dispute the role with what they have done so far. We may say go aof the Low Pay Commission and that forum in bit further, go a bit further, but I do not thinkrecommending a minimum wage. We absolutely anyone could detract from the way they havechampion the Low Pay Commission but we have to operated, the caution they have exercised and thestart somewhere when it comes to talking to them prudence they have brought to bear. I think the fact

that the Government has embraced, by and largeabout what we think is fair and reasonable.




(not entirely) what the Low Pay Commission or is it more the psychological type of injuries? Isstress a problem? If so, are these physical andhas had to say, certainly on adult rates, is a

recommendation of their way of working. psychological injuries, shall we say, more relative inthe larger companies than the smaller companies?Mr Lillis: Also what they have done for the million

of workers not covered by collective agreements Mr Markall: With respect, I am going to pass toRuth to answer this because she has headed up anwith trade unions. It has helped bring their wages up

so that has been a big positive as well. enormous campaign around this question that bearson the kind of pressures and stresses that people areunder in the retail environment. Can I do that?Q362 Chairman: Two small things there. One, to

what extent do the views you have just expressedenjoy currency with other unions in the TUC Q365 Mr Clapham: Yes, certainly.

Ms Stoney: Our Freedom from Fear campaign hasbecause your evidence is a wee bit diVerent fromwhat we have seen from the TUC? looked very much at the massive issue of violence

and threats and abuse against shop workers. It is aMrMarkall:TheTUC is a confederation and peoplehave diVerent priorities. Some will talk about a job that involves an incredible amount of skill in

dealing with the public, and in dealing not only withmoney sum, some will talk about a formula. We areprincipally a supporter of the Low Pay Commission criminals who try and target retail but also with

aggressive and abusive customers, and those stressesand that way of working.place enormous psychological strain on people. Wehave had a lot of evidence and I do not thinkwe haveQ363 Chairman: One other question, your membersfound a single shop worker who has not suVeredwho are currently in these jobs are very often on thecertainly from verbal abuse during their working lifeminimum wage, so what is the point in being in aand many of them suVer this on a daily basis, and itunion if their wages are going up anyway? They aremakes it a very diYcult part of the job. It is also anot going to go up by very much but what is thevery strenuous job. Within a four-hour shift, apoint of being in a union, or is that a question Icheck-out operator will lift a tonne from a sittingshould not be asking?position, and this has very serious implications for aMrMarkall: The answer is something I wear as a bitlot of our members with manual handling injuries,of a medal really. It is because being in a union isand particularly for women who are pregnant it isabout a lot more than your basic rate of pay. All thea very serious problem. There are both thesurveys that engage people about why they do or dopsychological and stress pressures, particularly onnot join a trade union show that the people who jointhe violence and abuse side, for people indo so for protection and defence at work, and thatmanagement roles. Retail management is one of thehas always been so and it still is, and that is about amost stressful occupations you can have because youlot more than basic pay, particularly in an arenaare dealing not only with the pressures of a verywhere anything like a handsome pay deal is unheardcompetitive sector but with aggressive and abusiveof. We are talking about percentage points abovepeople as well.inflation for the most part in retail, and not

something that is going to have people turningcartwheels. What we have to do, as I think I Q366MrClapham:Can I ask in relation to what you

said there about pregnant woman et cetera in thementioned earlier, is to extend our bargainingagenda to the whole range of fronts that matter to seated position at many of the check-outs, have you

had any input at all into the design of seating so thatpeople, and they do matter. We listen to what ourmembers say, strangely enough. For donkeys’ years people get more ergonomically designed seating?

Mr Lillis: Yes, our own health and safetythey have been saying, “I cannot get someone tomind my kids and get to work reliably.” “I hate it department has workedwithmost of the big retailers

over a number of years in terms of design, involvingwhen they are ill and there is nothing I can do aboutit.” “I don’t like the way my manager keeps employees and members in that, so in particular we

work closely with the likes of Tesco’s on the designchoppingmy hours.” Those are the kind of issues wehave to engage in as much as anything else. of any product that is going to be used by staV, so yes

there is quite a bit of co-operation. It is inMr Lillis: Those are some of the bread and butterissues but the other point I would make is USDAW everybody’s interest.as a union has continued to grow year-on-year by a10,000 or 12,000 net increase. Even with the Q367 Mr Clapham: What about common lawturnover we have of 60,000 or 70,000 members, we damages, do you refer cases to your solicitors? Is itare still getting a net increase of between 10,000 and one of the issues, for example, that you are able to12,000 each year, so there is evidence that people campaign on?continue to join unions as opposed to not. Mr Lillis: I think for the vast majority of the trade

union movement in terms of free legal services, it isone of the big pluses that people have because of theQ364 Mr Clapham: Before I turn to the Working

TimeDirective could I just ask a question in terms of high cost of legal services. If you join a union thereis a free legal service there. I think compensationwhat you had to say there, Mr Markall, about trade

unions being muchmore than wage rates, relating to recovered last year was just over £1 million for ourmembers. We do not want to be having to recoverthe health and safety of retail workers. Is health and

safety an issue and, if it is, is it more an issue related that, we do not want our members injured, but it isa fact of life, it does happen.to physical injuries such as the lifting type of injuries




Q368 Mr Clapham: Can I turn now to the Working This was among a body of muscular, male driverswhere the stereotype would tell you not to expectTime Directive. Do you have any information on

how it is impacting on your members? that kind of feedback. There was clearly some veryreal impact and damage being done to their lives byMr Markall: We have conducted two pieces of

survey research in the last 12 months, one with our the kinds of hours and shift patterns they wereexpected to work.road transport drivers. They are the people who

drive the very large vehicles who will be covered bythe Road Transport Directive next March but who Q372 Sir Robert Smith: How is the current practicehad been entirely excluded from the scope of the progressing? There is quite a lot of talk aboutWorking Time Regulations until August 2003 when enlightened employers working round people’sthey were only partially included, so in terms of the school day or family commitments and flexiblelength of the workingweek for a heavy goods vehicle rostering especially in the retail sector. There is talkdriver, who are even now completely unregulated, of that; I just wondered how much of a reality it is.there is regulation on driving time but not working Ms Stoney: Just to come in on that, I am workingtime. We conducted a survey of them about 12 currently on USDAW’s Parents and Carersmonths ago to see what their experiences of the long campaign, so we are looking at a lot of these issues.hours working were and we also conducted a survey Obviously in retail and the service sector as a wholevery much more recently in August/September of it is a major problem in that the busiest times are atthis year of people in what we broadly term “white the weekends and in the evenings when particularlycollar” occupations where we felt long hours of people with parental responsibilities have the mostworking may have been an issue, and the way in problems in being able to work and they want andwhich they accessed or were refused access to the need to spend their time with their children. So thereopt-out and how those long hours came about and are serious problems around that. A lot of retailunder what conditions and so on and so on. I am contracts are now being changed so that people dohappy to pass that information to the Committee or have to be quite flexible around when they work andto try and encapsulate that for you as well if you the experience varies company to company. We arehave got time. finding that a lot of companies are needing to bring

in flexible hours contracts where people work froma core of a low number of hours and then have to flexQ369 Mr Clapham: That would be helpful. Can I

just ask in relation to the opt-out, did your surveys up at times when it is busiest in the run up toChristmas but that then they are struggling whenfind that employees were coming under any undue

pressure to opt out? they are on low pay in those low hours. In the bestcases then—and it may vary from store to store andMrMarkall:Of both groups, about 30% told us they

felt they had been put under pressure to work long manager to manager—people may be able to inputthemselves when they are able to work and the storehours. Road transport drivers could not have been

put under pressure to opt out because it simply was will try wherever possible to work round that, butobviously in the worst case scenarios it is far morenot relevant for them, they were not covered in the

first place, but both groups felt pressure towork long prescriptive about when they are rostered to workand it is much more diYcult for them to swap shiftshours and in the case of the white collar workers to

opt out of any 48-hour control. So there was some and to change.clear evidence that that was happening. Somethinglike a quarter of the white collar people believed Q373 Sir Robert Smith: So flexibleworking is gettingwhen they entered the job that working long hours worse for people. You are saying in the good storewas a condition of employment. That is not to say with the good manager there is an input from thethe employer was hoodwinking them but maybe person aVected who can maybe take advantage ofsaying they did not know any better, and certainly the flexibility but in the bad or medium store with anthere was a problem there. okay manager?

Ms Stoney: In our members’ experience, flexibility isa dirty word because it is flexibility in the interests ofQ370 Mr Clapham: And that is contained in the

surveys that you did and you are going to let us the employer not of the employee.have them?Mr Markall: Absolutely. Q374 Sir Robert Smith: What is the trend at the

moment? Is it getting worse for the employee or—Ms Stoney: I think we would find that it is definitelyQ371 Sir Robert Smith: Can I expand on the

working experience. How much of it is also about getting worse because of the increased competitionin retail. Because retail customers tend to swap andthe anti-social hours rather than the length of hours

that people are having to work in the 24-hour change and use their market power, then the amountof time that specific stores are able to allocate onlifestyle?

MrMarkall: The two can be one and the same thing their staV often depends on the turnover, either inthe precedingweeks or in the period going up to that,very often and certainly the evidence of the drivers

that reported to us about the impact on their social so a manager will never know how many personhours they can oVer until they know what theand family lives was quite extraordinary and some of

it was very moving. The extent to which their turnover of the store has been and then they have tocreate their rotas and shifts based on that number ofrelationships had collapsed, their children had

grown up and they had never seen them, and so on. person hours and it can go up or down from week




to week, which creates serious problems with when it comes down to the shop floor level there areimmense pressures on everyone, and the corporateinteraction with the benefits system as well as forpolicy goes out the window.people with caring responsibilities and people just

trying to pay their mortgages from week to weekQ376 JudyMallaber:Can I just ask on that last issuewhere they have got a varying amount of income.whether you have managed to do any analysis ofThey will quite often try and take second jobs butresponses by employers to requests for using the newthat is very diYcult to fit in where your hours areflexibility in terms of having children? Have youvarying. This is one of the reasons why jobdone any analysis of what the response has been andsatisfaction is decreasing because people have muchhow far that has been taken up by large stores?less control over their hours and their pay.Ms Stoney: We are currently trying to analyse andget evidence from our members who have requestedflexible working on what the response has been.Q375 Mr Clapham: Are there any employers thatObviously in general people are more likely to comestand out as being much more, shall we say,to a trade union if they have been refused a requestcompassionate than the others?but we are certainly getting very high levels ofMr Markall: What Ruth said is accurate but whatrequests being refused and our union reps, who areyou may find is it is in the nature of large retailtrying to support people in the workplace in bothbusinesses that you could have a very progressivesuccessful and unsuccessful requests for flexiblepolicy at corporate level, and there are employersworking, particularly for mothers who are returningwho fit that model, but by the time it finds its way onto work after having a baby, are finding that thereto what could be several 100 shop floors, if it is aare very high levels of refusal of people’s requests tolarge retail enterprise, with goodness knows howwork flexibly, and the figures that the DTI havemany thousands of management teams, the messagebrought out of 90% of requests being accepted isgets a little wobbly and the practice is rathercertainly not our experience and we are looking todiVerent. It is true to say that there are somebring together a body of evidence of when thatemployers now who are keen to understand whatpolicy is refused to show what our members’they call “their people” better, to make it easier toexperience has been.work for the “business concern”, as they put it and Judy Mallaber: Thank you.to be more attentive—very ambitiously on paper—

to the needs and interests of the vast number of Q377 Chairman: I live in Edinburgh, a city of nearlypeople who are on their payroll. It is easy to be half a million people and they have four or five bigcynical but they are only doing and saying what supermarket chains. Do people move within thegenerations of trade union people have told them: chains or do they move from one company totreat your people well and you will get a more stable, another? The “voting with their feet” syndrome. Doless costly and more productive workforce, and at you have instances of people who go from, let’s say,least at corporate level some of them are trying to Tesco’s to Sainsbury’s because they are not gettingembrace that message. It is easy to be cynical. They the flexible working in the one and they might get ithave colonised everything else. They have colonised in the other. If you have membership in one thethe clock 24 hours, they have colonised out of town, names will crop up again so does your databasethey have colonised the competition. They are now throw up that sort of information?

Mr Lillis: Our database does not throw it up.turning to the last body of people where they canHowever, we are in the process of doing work ongain a competitive edge and it is the most diYcultthat because clearly with 60,000 or 70,000 turnoverbody of people, the people with hearts and minds.in our ownmembership in the retail sector it is in ourNonetheless, some of them are extremely intent oninterests to try and reduce those numbers. Certainlymaking sure they win those hearts and minds andas a local oYcial going round a store you will meetthat is what we are in the business of helping thempeople in Tesco’s who have left and six to eightto do.weeks later you will meet them in Sainsbury’s or youMrLillis:The fact we launched a Parents andCarerswill meet them somewhere else. They tend to havecampaign for 2005 and beyond is in some respects tobreaks for specific reasons. They will leave for threetest some of the corporate policies that they have onor four months and then go to another retailer butflexible working. One of the core issues that impactsmost of them tend to stay in the retail environment.for us is the high turnover of staV in retail, which

puts immense pressure on the managers in running Q378 Chairman: Okay. I think that has coveredtheir businesses. Again, it is a two-way process, it is virtually everything. I think there are one or twohaving to work together to get solutions not in terms points we would like you to get back to us on but weof flexibility one way just for the employer, but will be in touch with you. We will probably not beflexibility to ensure that our members, their putting pen to paper until early in the NewYear andemployees, have the flexibility for their care and duty if you wanted to send in anything that your researchto their families, their children, the elderly, the has thrown up we would be very grateful and verydisabled, and bring that in.We can all work together happy to receive it.to that end. Some of the big retailers are working Mr Lillis:We will certainly do that.

Chairman: Thank you very much.quite closely with us on this. I thinkGraham is right,



Tuesday 18 January 2005

Members present:


Mr Roger Berry Miss Julie KirkbrideRichard Burden Judy MallaberMr Michael Clapham Sir Robert Smith

Witness: Mr David Arkless, Senior Vice President and Executive Board Member, Manpower, examined.

Q379 Chairman: Good morning, Mr Arkless, and come from the UK originally. I spent much of mycareer with Hewlett Packard and also a consultingwelcome. Perhaps you could start this morning by

telling us a wee bit about Manpower and about the company which was acquired by Manpower.Initially I was responsible for running Europekind of people with whom you deal in the course of

your activities. in Manpower in global marketing and thenour mergers and acquisitions strategy andMr Arkless: Thank you for the invitation this

morning. Secondly, sorry if I look slightly implementation for four years, and on completingmost of the acquisitions that we wanted last yearthreadbare but I broke six ribs on Sunday so if I look

a little bit tired it is because I have not slept and this we created a new function in the corporationcalled corporate aVairs which is responsibleis my first outing.for governmental relationships, internationalrelationships, thought leadership, ManpowerQ380 Chairman: We will try and not make youFoundation and corporate governance.laugh then!

Mr Arkless: Please do not make me laugh or sneezeor cough. Any of those are not welcome! Q382 Chairman: Fine. One small point, what sort of

share of the market (or it may be markets) do youhave in the United Kingdom? How do you stand inQ381 Chairman: Thank you very much for coming.the pecking order amongst comparable agencies?Mr Arkless: My pleasure. I will tell you a little bitMrArkless:We are just about the largest in the UK.about Manpower. Manpower is a global human

resource and specifically staYng company. We havebeen around for 50 years. We are an American Q383 Chairman:We have been talking to a number

of people about various aspects of the flexible labourcorporation quoted on Wall Street under the tickersymbolMAN.We have had various representations market and how European Directives are

intervening and changing the character of it, and thein the US to change our name fromManpower, butas it is a generic term we stick with it. We are present one that we really wanted to discuss with you this

morningwas theAgencyWorkingDirective becausein around about 80 countries. Our traditionalbusiness was temporary services. We started in the we have had somewhat of an apocalyptic forecast

from the CBI, the lead employers’ organisation, andUS and then spread to Europe in the1950s and1960s.Over the last 10 to 12 years we have diversified we just wondered what your take was on AWD as it

is currently being promoted or looking?our business significantly and become a $14 billionrevenue corporation and we have moved very much Mr Arkless:We have got the benefit of looking into

both the European economy and the Unitedaway from traditional temporary services/high streetstaYng into managed services, executive search, Kingdom’s economic performance from the outside

to a certain extent. Although the UK is a significantplacement, selection services, psychometric testingand assessment, oV-shoring, out-sourcing, in- market for us changes in legislation of this nature—

AWD—would not be Apocalypse Now. There aresourcing, co-sourcing, managed services. Just pickone of the phrases that you know and love and we do some good things in the AWD. There are some very

good things happening in European legislation withmost of it. Our business today is characterised at thetop level by relationships with large global regard to labour employment and social policy.

However, there are some parts of most of bits ofcorporations which represent around about 40% ofour revenues. These kinds of arrangements involve a European employment legislation that have been

tabled or reconsidered at the moment that arefull range of human resource services, fromorganisation, consulting, human resource strategy, inadvisable and will not help assist or promote

European productivity and growth. My first vieworganisation re-engineering, through to theprovision of appropriate skilled people in the right whenever I look at a given labour market or

economy—and I am an adviser to the Chineseplace at the right time in the right configuration inmany countries in the world. Naturally our focus government, India, Australia, the United States’

State Department and a number of otherover the last three to four years has been workingwith large corporations in shifting work on a global organisations on employment strategy and policy—

is to say what is working and what is not working. Itbasis or reconfiguring it within corporations. That isManpower. What do I do? I have been with seems tome that it is pretty inadvisable to break stuV

that is not broken already. Why fix things that areManpower about 14 years. I am a Geordie Swissbecause I have lived in Switzerland for 20 years but not broken. When I look at the UK and the 50



18 January 2005 Manpower

quarters of economic growth, the 12 years that you assignments but we are also a responsible employer.The placement of an employee of ours into anotherhave outstripped euroland in terms of growth, I

think some of that is to do with the particular nature company does not take away our responsibility totreat that employee correctly, and to give them theof flexibility which I think contributes to

productivity in theUnited Kingdom. Inmy opinion, right benefits, the right skills and the right training.Where I think the problem could lie within thisthe UK labour market is one of the most

appropriately flexible markets in the world. It is not sector, if indeed there is a formalised sector becausethere are all sorts of services provided, is with certainlike France, it is not like the US, it is not like the

Netherlands; it is in many ways a unique market organisations and companies that do not treat theirpeople as employees with employment contracts andwhich we think today actually operates very well. If

youwould likeme to focus onAWDand come down give them all of the rights and benefits of beingemployed. I have the same concern as you in thatto issues that are of concern to organisations like

ours—and bear in mind we are talking about the full area. Because these people are not employed by anagency or a contractor and where they are put intorange of human resource services here not just the

provision of temporary workers—it would be a company, I believe the person could be treated likea commodity and they can be traded around like aconcerns over things like user pay, concerns over

implementation of measures with regard to commodity. When an employee belongs to anagency like Manpower they are our employee andequivalence of compensation, benefits packages,

and it would be the application of qualification we take that as a serious commitment to theindividual and to the organisations into which weperiods, what thatmeans, how they get implemented

and the consequent impact upon what is a pretty place our people. I think that is one of the criticalissues in this whole raft of legislation. One of thehealthy economy in the United Kingdom.most destructive issues would be to erode theChairman: Thank you. Richard?potential for us to be an employer because we takethat as one of our more serious responsibilities.

Q384Richard Burden:Obviously youwould take theview that agency work contributes to flexibility of

Q385 Richard Burden: I think my colleagues willthe economy and through that to productivity.explore the issue about whether the employer shouldHowever, the point is also made from a number ofbe the agency or the undertaking that isquarters that it can also contribute to discouragingcommissioning the agency and also the concerns youemployers frommaking a long-term commitment tohave about aspects of agency working directly, but Itheir staV or taking on permanent staV that theywas interested that you said there that there are partsmight otherwise do and that that in itself would beof it that you actually welcome and that you do seeto the detriment of longer term productivity. Howthe need for protection for temporary workers in awould you respond to that?number of areas. Could you say a bit more aboutMr Arkless: I think it is tough to characterise awhich are the bits that you welcome and also howgrouping called ‘employers’ firstly because you havethose concerns that you have outlined aboutmany, many diVerent configurations of employmentexploitation could actually be met other thanand employers, many of which operate in diVerentthrough the Directive as it is? How would youways. They say that the power house or the engine ofprotect workers?economic growth in any country is small tomedium-Mr Arkless: On the last one, you are opening up asized enterprises. If you look throughout the UK atwhole series of discussions with regard tothe variation in the behaviour and the characteristicscontractual treatment and the structuring ofof those companies, they diVer vastly. Then you stepemployment but I will get to that in a minute. If weup to large corporations and global corporations. Itlook at the parts that we welcome, we believe thatismy estimation from looking at theUKandEuropeevery—what we call productive and potential—that we have got to look at employers in a numberparticipant in the workforce has a right to be trainedof segments. First of all, large corporations thatand developed, have a lifetime career and to gainhave pretty good strategic planning, tacticalmeaningful, additive work. That is one of our coreimplementation, who understand what the relativevalues and principles. Along with that we believebenefit of flexibility is and its impact on productivityand we have signed up to many, many international,and the usefulness of a contingent or flexibleglobal, United Nations, International Labour OYceworkforce. Some large organisations plan this stuV

pretty well. It is my experience that when we get into projects and initiatives to ensure that workers arenot exploited on a global basis and in Europe.private enterprises of a small, creative nature that

there is a whole variety of approaches to engaging Exploitation takes many forms. It takes the form ofeconomic exploitation and we are concerned abouttheworkforce. It is clear—and it is one of the reasons

that I welcome some of the measures in the AWD— that. It takes the form of exclusion which is a kind ofexploitation, excluding people from the workforce.that abuses in any part of the workforce in Europe

are possible by employers. We are fully in favour of We believe that people should be adequatelyrepresented by an employer fully and if they so wishprotecting workers and ensuring that employers

fulfil commitments to employees. Remember, by a union, and that is completely their right, andwe believe that the inter-relationship betweenManpower are an employer and we are in fact the

world’s largest employer employing more than 3.5 government, unions and employers is absolutelycritical to the eVective functioning of the labourmillion people full time worldwide every year. That

might be quite a lot of millions in terms of market, so with regard to representation we believe




that should be guaranteed. With regard to basic agency commissioning there or a reputable agencyhuman rights, basic work rights, we believe that commissioning there, are you saying there should bethose have got to be written into every form of no regulation at all from the Agency WorkingEuropean legislation. What we welcome about the Directive to the user undertaking, it should all be toAWD is the potential control of the shady part of the the agency itself?industry in Europe because it does exist. Potentially, MrArkless:Wewould like to see the acceptance thatthere are hundreds of thousands of small agency agencies are employers and fully-fledged employers.providers throughout Europe that really cannot act That is my number one principle. With regard toand do not act in the best interests of employees and that, I think that would clear a lot of the lower-leveldo not act as employers, so we welcome the control operators that we do not think give the right kind ofof the sector at an appropriate level. We also commitment to employees out of this sector if it waswelcome the potential spread of the provision of incumbent upon agencies to be the employer ofagency workers’ services across the public and individuals, which is not the case right now. Someprivate sector in almost every industry segment, agencies, as you know, deal with people just on awhich is a part of the provision of the AWD, so placement as an agent basis, so forcing a situationbroadening the presence of employer-based agency where the agency must be the employer is beneficialwork across Europe is good. It is no secret to any of and that would help a lot of the poor behaviour atyou that the European economy is not doing as well the bottom end of this industry. Your secondas it should and parts of the European economy are question?characterised by extremely long-term job tenure inpermanent jobs and very highmeasures of social andjob protection for employees. I also find it strange

Q387 Richard Burden:My second question concernsthat when you compare Europe with some otherwhether or not it is one of the poor performers, thecontinents like North America you would say thatcowboys, or whether it is a reputable agency incomparing the two models of employment—therespect of user undertaking as the place where thesocial protection model in Europe generally and theemployee is actually placed. Are you saying thatjob creation model in North America generally—there should be no legislation at all regulating thatone would assume that European workers feel moreend of the relationship, that it should all be to theconfident of keeping their jobs and remaining inagency or that there should be some and it is just nottheir jobs whereas in places like North America,the regulation that is implied in the Directive?where you can be given one day’s notice and maybeMr Arkless: I think that I would focus regulating ofif you are lucky you will get four or five days’ pay,the sectormostly on the agency end. I think there areyou would think that people in the workforce incertain things that are absolutely required as anNorth America would be insecure. It is just theextension of employment law throughout Europeopposite. I brought a small report that we prepared,at the user end because we are all aware ofwhich you might be interested in, called Getting

Europe to Work which we prepared in partnership unsatisfactory situations in terms of long-termwith the European Policy Centre of which we are contracting employment where there is noboard members which says let’s look at the most equivalency in organisations of pay, salary, benefitseVective employment models in the world, let’s look and there have been quite a lot of cases mentioned inat the ones that make workers feel more secure and, the press, in the international press, in US courtcontrary to popular opinion, long-term job tenure cases, andCongressional investigations into transferdoes not make workers feel secure. What makes of undertakings and such like, so I think there is aworkers feel secure is the capability of finding new requirement for control at both ends of thisjobs at the right kind of levels. Finding new jobs provision in the supply and demand spectrum,generally means creating jobs and flexibility really absolutely.does help promote economic growth which createsjobs and I would be pleased to give you this reportat the end. I can send it to you electronically. I think Q388 Sir Robert Smith: Taking you on from there init states a very important case not just for the UK terms of the demand for control at both ends—andbut for Europe with regard to future employment in a way you have shown quite an enthusiasm forlegislation. Sorry, to get back to your question. The certain rights—what sort of qualification periodissues that we welcome are the control of the sector would you be seeing because the debate seems togenerally and, secondly, the potential application of revolve around that?flexibility in many more areas from which we are Mr Arkless: I think an interesting place to start is toexcluded at the moment. look at current practice and use of flexible labour.

The average temporary contract worker has anassignment of longer than six weeks on average andQ386 Richard Burden: I am still not clear in terms ofless than a year. It would seem logical to me thatthe regulations what you see as being beneficial inthere is some responsibility for a user employer in thethe sector to deal with the cowboys—and I do notend to, quite rightly, determine that this job isknow if you used the word “cowboys” but that waspermanent or it is not. Given the statistics ofimplication of what you are saying. First of all, whatutilisation of flexible workers, I think a logical timewould that look like, what is the regulation that youperiod to give the employer to decide that is 12see as appropriate there and, secondly, in relation to

the user undertaking where there is a “cowboy” months.




Q389 Sir Robert Smith: I think you have answered construction and light industrial processmanufacturing and then a smaller proportion ofmost of the other questions already. If the

qualification period is 12 months that would pretty administrative staV. So it is driven very mucharound Europe by the application of employmentwell cover it and then after the 12 months subject to

the caveats you have made? law by various governments and certain interestingregulations and rules.Mr Arkless: I would say that anyone would be able

to decide whether a job is permanent within thatkind of period of time. The interesting thing is

Q391 Chairman: Before you come in Robert, just onpeople say that 12 months is almost a lifetime todaythis point then would you say that a European-widein work. Indeed it is, but there are many flexibleDirective can really be capable of addressing localcontracts for work that corporations pick up inlabour market situations one country againstsmall- and medium-sized companies where theanother or within one country on that basis? Is it aabsolute requirement can take up to a year to fulfilbit ambitious?the contract and many of the ones that we getMr Arkless: I think it is extremely ambitious and ifinvolved with are of that nature where a techI look at the raft of legislation—AWD, Workingcompany takes a special contract that needs a specialTime Directive, the Services Directive and a fewpiece of something developing or a specialother more eccentric pieces of legislation that areproductivity increase for a period of time, not just onbeing written and tabled at the moment—I woulda seasonal basis but over a period to complete asay virtually impossible for uniform application.contract, and we think to remain competitive weWhy do we see so many opt-outs, why do we seeneed that kind of flexibility but indeed at the end annegotiations on sidelining diVerent pieces ofemployer really has to say, “Okay, it is time thislegislation? I think what we are struggling for inperson became a permanent employee.”Europe is a sensible and balanced view ofSir Robert Smith: Thank you.employment growth. We are really struggling withit. Germany is a disaster. It has the highest total costenvelope of labour in Europe, is the worst onQ390 Chairman: You hinted there that there areemployment and the worst on job creation. They arediVerent types of people whom you employ. What isgoing backwards. If we have got any kind of uniformthe breakdown of your range of worker clients andemployment strategy in Europe, please, let’s apply ithow many of them are in better paid, high tech jobsto Germany, and it might help the rest of us.which might fall into the category you described

there, and how many of them are people who arefilling in for others, who are on holiday relief, who Q392 Sir Robert Smith: On that diVerent kind ofare by their nature almost itinerant, they are in for work you do, would the people at the very high-six, eight, 10 weeks and then move on somewhere earning end prefer not to be called employees? Youelse? were saying that all people whom an agency placesMr Arkless: I am not a great fan of the word should be employed by the agency. Are there not‘itinerant’ but I know what you mean. The certain people with certain very specialist, high-proportion of short-term assignments—replacing value skills that would prefer not to be working forsomebody on vacation or where somebody has you?resigned today until you find a permanent employee Mr Arkless: Those people tend to place themselveswhich is usually what I call light industrial level into the individual contractor status so they do notprocess workers, admin, support staV—has fallen normally even come to an organisation like oursquite rapidly over the last five to six years in the because there are plenty of jobs for a highly qualifiedbusiness, which is why we have specialist and specialist information technology or financialinformation technology divisions like Elan in the services expert in the City and around the UK andUKwhich only supply high-end ITworkers. I would what they tend to do is get involved in their ownsay the split today on light industrial admin peculiar form of internet-based labour arbitrage andcompared to what you would regard as higher paid, there are labour exchanges for high-level qualifiedmore technical domain expertise-type workers is domain experts in the UK and elsewhere and theyaround 60:40 but then it is split very much into tend to operate in a world that we do not touch. Icustomer segments where the business we do for think that is another area that needs a very, veryinstancewith our largest global customers does tend, close look by any legislators that are developingstrangely enough, to be at the more specialist and labour legislation because the individual contractormore highly technical and qualified end of the scale area is one of the areas where I would look to forwhereas our SME business in a place like the UK more regulation because the area in general gives thedoes tend to have a slightly larger proportion of potential for lots of abuse in terms of working hours,administrative, oYce support and light industrial in terms of treatment of the contractor, in terms ofwork. Again if you compared the UK to a place like the return treatment of the supply into the userFrance which is our largest revenue country in the company, so it is a very interesting area and a bigworld (not America which is where we are based and one.headquartered) every day we might put 175,000people to work in France, and most of them inFrance because of the nature of French regulation Q393 Chairman: It seems to be an area that is soand the structure of industry, with their 35-hour specialised and highly paid that you do not get

involved in it. Is that correct?working week, tend to be in agriculture,




MrArkless:We get involved in all sorts of areas that person’s performance and general ability to do thejob. If you look at the complexity of how you judgeare highly paid and specialist—research level PhD

scientists, a search for Phillips in Eindhoven for that it is usually the following items if you look atany job evaluation performance scheme. It is ainstance, lab technicians for Hewlett Packard

laboratories. There are all sorts of high-level jobs we mixture of job knowledge, a set of competences to dothe job, some domain experience in a wider area anddo get involved in but usually those relationships are

characterised not by the individuals who work in knowledge of the company itself and its operatingsystems. I have had many employers throughoutthem for us into the user company but by what the

user company wants, and typically a user company Europe say to me, “There is no way I am going topay your contractor or temporary in my companywould say, “I have got this special technical project

that is going to last six months. I cannot use these the same pay rate as my person that is on holiday”.I say, “Why, because they have got all thehigh level people afterwards. I want them to be your

employee, Manpower, so that you can cycle them competences?”, and the user would say, “Yes, butthey do not have the network, they do not have theback into a university to domore research or you can

cycle them into another company that requires relationships, they do not understand our culture,they do not have the experience”. I know that therespecialist or domain expertise.”are thoughts about building into this in terms of userpay a potential set of pay scales which is fraught with

Q394Mr Clapham:One of the interesting aspects of the same danger. All employers will do is stretch thethe UK economy and an aspect we have not been pay scales. If you say, “Okay. This person comes inable to remedy despite legislation in the 1970s is, of at the bottom quartile of the relevant pay scale forcourse, equal pay. How would you interpret the the user pay of that job”, theywill just stretch the payAWD’s reference to equal pay? scales. You can find an updater to stretch pay scalesMr Arkless: This is a corking one. I love this. We wherever youwant. I see diYculty in working out forcould be a couple of hours on this one. In short, I a comparison with the user company the correct paythink the notion of user pay is terrifically diYcult to rate and the administration, the bureaucracy, to beimplement. For my sins I spent three years running able to enforce that and control it. Secondly, whata compensation benefits consulting firm so I used to should determine the pay rate is supply and demandget heavily into how you assess a rate on a market, and we know that every day by transacting peoplehow you internalise it into the company and then from one place to another. We know what the payhow you determine internal equivalences. I cannot rates are, so we find that for a large number of oursee a method of legislating equivalence of pay jobs they are on higher pay rates than people in thewithout immense bureaucracy and that is my user company and we can justify that because notconcern. Generally we find—and please understand only do we provide a more skilled person underthat I am not talking about workers but about pay certain circumstances for a highly specialised taskrates here—that wage rates are a commodity on the but we also have to demand more in the pay rate formarket and they are driven by supply and demand, that job because we need to run our own company.supply of the skill, demand for the work to be done, We train and develop them, we give them careeras you very well know. Very often it is a lot easier for paths, we give in many cases back-to-back jobus to specify a market rate for a job, be it technical, employment for years to temporary people from onespecialist or a special kind of admin or financial organisation to another. Do not forget that in theservice every day because we deal with thousands UK this industry creates more than a million jobs aand thousands of jobs and we know what the pay year. Do not forget that most of the employers thatrates are for themarket. We often have a muchmore we have polled in the UK say, “If we could notaccurate shot at what the right pay rate is than some have temporaries we would not hire them ascompanies that have their own internal pay scales. permanents”. If we take the flexibility away I thinkAs you know, company strategy on remuneration is the bureaucracy embodied in some of the aspects ofdriven not just by market rate supply and demand user pay is so complicated that the companies wouldbut also by the possibilities of investing in pay or just say, “Forget it. I am just not going to do it”.remuneration by that company, its state, its That is the reaction that we are seeing. I like theevolution, its strategy and what it intends to do with notion of equivalence. I cannot see any measureits capital. There are so many considerations when whichwould allow it other than to say that in the endyou are in a company. I would find it very diYcult to themarket decides and that gives you approximatelybe able to specify a methodology to determine user the right pay rate for an individual.pay. For instance, I could place the same technicalskill in a large corporation in the City of London

Q395 Mr Clapham: That is interesting. From whatthat would be at rate X. The same job in a small toyou are saying you see the agency as the comparatormedium size enterprise somewhere also in the Citybut as to whether the comparison is to bemight have a 25% diVerential. Who do we compare?implemented it is left up to the employer?Do we compare people against the market rates or

do we compare people with the user rate inside a Mr Arkless: Actually it is going to be left up to thelegislation in the end and the employer will try andcompany and then, when we get inside a company, I

find it very tough, given the structure of how you implement whatever the legislation is. I know frompolling our large customers that the employer’s viewarrive at internal pay rates, to determine what the

user pay would be. I will give you some examples. is, “We want flexibility with the right pay rate, withthe right skills of the person for the appropriateThe issue of a pay rate should revolve around a




amount of time we need to increase our productivity involved? Are we going to see long discussions anddialogues taking place about what are the features ofor get this specialist job done.Donot allow people toequivalence?take that away from us”. If you were to do a detailedMr Arkless: Absolutely. That scares me to death. Isurvey of pay rates between temporaries andhave seen papers prepared already by some toppermanents you would find a whole range of peopleBrussels legal firms on behalf of employers within diVerent companies with the same skills doing theregard to the fact that they are stating that there is asame job at a vast variety of pay rates. Then there isvery sound case already to say that parts of theuser pay. We have user pay in one company, as IAWD are discriminatory and illegal. There is asaid, with comparators in inner London, and thenwhole raft of legal interventions potentially out thereyou move to Reading and then to Newcastle andfor the future of this directive, I believe.then to the south west of England. What is the right

rate for the user pay?Generally one of the other veryproductive roles we play is that we know the Q398 Richard Burden: You put a fair deal ofemployment market on a local basis and can advise emphasis on the complications of comparisons atemployers about supply and demand and about the the user end of things and establishing equivalency,pay rate. We do that on a daily basis. Our service and I understand what you are saying there, but youreps are trained to do that with their customers. One are also saying that the agency should be regarded asof the interesting things is that our customers that the employer. Howdo you establish any equivalencyare in a long term relationship with us say to us, if the agency is the employer within the agency? I will“You decide the pay rate. I am not even going to give you an example. You have two people on yourcompare it with anything internally. This is special books that have identical qualifications, identicalwork. This is an increase in productivity that I talents, but you place one of them in a City firm thatneed”. It is short term in some cases and they are has got a high pay rate and the other one in a Citymore than willing to pay a higher pay rate. In many firm that has got a slightly lower pay rate. Therefore,cases we must apply more than the logical pay rate within your employment relationship you have afor the job because of our overhead and employers disparity. What is your obligation to thoseaccept that. employees to ensure that they have, with a small “e”

and a small “o”, equal opportunity?Mr Arkless: It is an outstanding point and we haveQ396 Mr Clapham: A little earlier you were talking an obligation to do the following and this is what we

about the features that you see as being included in do every day inside our company. If you think aboutthe job. Would you see, for example, in that it this is the most basic commercial common sense incomparator template the inclusion of the the world. We basically are a company thatoccupational pension? generates its revenue from pay rates and a mark-upMr Arkless: I think it is everyone’s right to have a on top of the pay rate, or a multiplier, as it is called.pension. I think it is one of the reasons that agency Clearly, the higher value jobs that we can placecompanies need to be employers. I think it is very people into the better it is for our business. What weresponsible to provide a pension. Do not forget that will attempt to do is to take workers through a rangethroughout Europe if you polled every agency of progression and the range of progression (andworker (which has been done) almost 40% of them they usually go in parallel and hand-in-hand) iswant to do agency work because it suits their increased skills, increased learning, greatflexibility, because they do not want to work full curriculum, giving them more capability; thereforetime, because they are older people that want to we can place them in higher paid jobs. There is nocome back to work, because they are disadvantaged sense in us having a massive discrepancy betweenpeople who, through specialist schemes, we put to two workers who can do the same in diVerent

companies. Typically what we will try to do (andwork, and they just do not want traditionalvery actively) is migrate workers throughemployment. That is 40% of the eight million peoplesuccessively higher paid job rates and then fill thethat work in this industry full time every year. Therejobs that they have left with workers who are comingis a huge amount of people out there who wantup the skills and performance scale. For us that is aflexibility. However, I think that as an employer wenormal part of our business. Is it possible for us tomust fulfil our employer obligation and givepractise equivalency inside the temporary servicethem access to pensions, insurance, training,agency? I would say it is about as practical as doingdevelopment, cut-price gymmembership, all sorts ofit inside a large corporation. It is complicated, therestuV. The other one on equivalency that is a realare regional diVerences and you will find thatproblem is that many of our temporaries have betteremployers are remarkably adept and skilful andbenefits than many of the user companies that wecreative in achieving whatever objective they wantput them into, so if there is a mandated equivalencyand I am sure that they can change job descriptions,on benefits packages I am going to be asking somepay scales, pay rates, to suit the requirements of theof our employees to reduce their package and I docompany. That is what is happening. Companiesnot think they would like that.always re-engineer their remuneration systems tosuit their commercial reality and that is not going to

Q397Mr Clapham:Given, from what you said, that stop. To pick upon the agency and say, “You are notit is a very complex area, do you foresee it being a practising equivalency”, I would say yes, we are, in

as much as every other company in the worldground in which we are likely to see many lawyers




practices equivalency and it is not in our interest in Department of Work and Pensions, and try andrecruit people there? Would you be interested, evenany way, or the industry’s, to hold people in lower

paid jobs when they have the skills to get higher pay although it was within certain rigidities that youwould not encounter in the private sector?rates because that is the business we are in.Mr Arkless: First of all, one of the most productiveroutes with regard to public sector productivity inQ399 Chairman: Is much of your client basefuture is the potential of public/private partnershipsaccounted for by the public sector: by localwhich are developing in many of the largestauthorities, the Health Service and the Civil Service,countries in the world, if you look at some of theand if it is, do they exercise that degree of flexibility?models of sourcing employment flexibility throughMr Arkless: That is a very interesting area. Of thegovernment and private sector partnerships inmillion jobs that have been created by thisplaces like the US. Also, interestingly, we areGovernment in the public sector, we have just heardengaging in programmes with the Chinesein the last couple of days that quite a lot areGovernment on helping them within their publicdisappearing and we would like to oVer our help insector. I think it is an area of terrific productivityoutplacements (and we are one of the largestimprovement within the United Kingdom. Theoutplacement companies in the world) for the rightanswer is yes, at the minute they go to governmentmanagement because we know the right person toagencies and on certain occasions, I think for thecontact. I would be delighted to get in touch withslightly more specialised jobs, they go to outsidethem. TheUKGovernment is interesting in terms ofagencies. There is a continuum of recruitment here.its public policy with regard to flexibility. I see a lotIt is not just temporary services; it is also themore of the flexibility in UK public services going totemporary contract/permanent service. Let us notcompanies that are willing to fully undertake theforget that in this industry one of the most terrificoutsourcing of the work, companies like Capita,benefits of having employers like us is that mostwho take whole swathes of public work outside ofpeople that take up temporary employment within athe public sector and provide people, buildings,year move into permanent employment, which is aprovision of services, on an output basis. Typicallyterrific asset for any economy to have. I see the fullwe would try to supply companies like that.range of that within the public sector in the UK butit is by no means practised with uniformity. It is byQ400 Chairman: But you do not supply theno means seen as a natural area for an organisationDepartment of Work and Pensions or the Childas a commercial organisation to look forSupport Agency who may have shortages?productivity within flexibility. I think it is a greatMr Arkless: Not in great numbers.area to focus on.

Q401 Chairman: Is that because you do not seekthe work? Q403 Judy Mallaber: To be absolutely clear on this,Mr Arkless:We would seek the work if it was there. to make sure I am following you right, in terms ofThe point I was trying to make was that it seems to equal pay, for someone who is placed in an end user,me that the public procurement strategy tends to you are saying they should not necessarily be giventake pieces of work and move them out of equal pay with the person doing the same job in thatgovernment circles rather than have what I call employer, and similarly you are saying that yourinternal flexibility to the degree that some mechanisms within the agency for one of your staV

corporations have. Yes, I think it is a very additive to have equal pay with someone else employed forpotential practice and yes, there is some of it on a exactly the same job by your agency but in a diVerentsmall scale but not to any degree. Also, let us just end employer will not be there. Are you saying thatreflect that inmany parts of Europewe are precluded equal pay should not operate for practical reasons orfrom the public sector in lots of areas. on principle because it is not flexible? It seems to be

going totally against any concept of equal pay forwhich I have campaigned for decades, so I find thisQ402 Chairman:What I was trying to get at is thatslightly upsetting.you have made the point that one of the ways inMr Arkless: I am sorry to upset you, but, looking atwhich you address the challenge of equivalence andthe practicalities of equal pay, it depends uponquality is that you try and place people. You kind ofpersonal capability, company performance,compromise between the demand of the market andindividual performance, positioning in lifetimethe individual skills. That seemed to be what youexperience on an area of main expertise or technicalwere saying. One of the issues that might arise is thatexpertise. I am not disputing, nor even stating, thewithin public sector employment there are clearlyfact that fair pay is not the right thing. Fair pay isidentifiable pay scales, there are qualifications, andabsolutely the right thing and the market decidesthere might be, it could be said, a degree ofwhat fair pay is. To say that because we pay personinflexibility, of inbuilt rigidities in the interests ofA in this company this rate for 13 years someonetransparency, ideas of fairness and the like. Let usentering the company should immediately have thesay that a government department, which is not insame pay I think is nonsense. That is just mythe business of outsourcing and going down thepersonal opinion, and no employer that I haveCapita route, has shortages of people to undertaketalked to accepts that principle at all. Today I thinkcertain tasks. They cannot do it internally. Wouldthe issue with regard to balancing pay withthey come to people like you or would they just go

to the government employment exchanges, the productivity, output and growth is probably one of




the most critical issues in any company today. The global economies is that we are not competitive froma general pay rate and flexibility point of view. If youissue of pay should be driven within a range, and

maybe that is where we are looking for look at all of the foreign investment there has beenin the United Kingdom over the last 10 years, muchequivalencies, so that there should be ranges,

potential open to individuals to do certain kinds of of it has been because we have got a skilledworkforce. Some of it is for proximity economicsjobs with certain career patterns and with certain

kinds of competences. How do you decide within a because for American companies value for money iswanted in the European market, in the UK, butrange of remuneration, which is usually measured

against outside market values, where the person some of it has been made on the assumption thatthose companies, as they do in other countries, canshould be positioned?get similar flexibility in their workforce, as they doelsewhere, and once they run their employment costQ404 Judy Mallaber: That is fine. I will move on. Itenvelope calculations, flexibility, a capability to layis a principle objection.people on for a specific job and then lay them oV,Mr Arkless: I understand your principle.have them go somewhere else and then come backlater, is critical to those global corporations. I am

Q405 JudyMallaber:Have you got any indication as concerned that if we solidify the employmentto how employers would respond to the directive? structures within Europe we are going to diminishAre they likely to recruit fewer agency staV because foreign direct investment. That is one issue at theit is going to be more expensive? What is your top level.assessment?Mr Arkless: With regard to the general reaction in Q406 JudyMallaber: I am a bit unclear.Would yoursome companies, the larger ones, it is much more of estimate be that the Agency Work Directive withinan economic calculation. They are looking at the those factors you are describing would lead to theabsolute economy of provision and labour and recruitment of fewer agency staV?flexibility and saying, “If bureaucracy is going to Mr Arkless: Fewer agency staV and this would notcost us that, if the pay rate is going to cost us that, if be translated into permanent employment.your overhead is going to cost us that, we probablyare not going to do it”.Here is why that is important.

Q407 Judy Mallaber: How would they then copeWe deal with maybe the top thousand corporationswith fluctuating workloads if they were less inclinedin the world and we work with them on movingto use agency staV?pieces of work and employees from one place toMr Arkless:We would then have the same situationanother. As you know, one of the more seriousthroughout Europe regarding some of the morechallenges for Europe is to sustain foreign directsocially protected, longer job tenure countries ininvestment from outside Europe, the magic triangleEurope. Companies would grow more slowly. Theyof government spending, exporting, foreign directwould not expand. They would move thingsinvestment, creation of jobs with productivity.elsewhere, outside of the EU. Foreign companiesThere is nothing complex about developing awould not invest in the EU in the way that they haveproductive economy, at least I do not think there is.done in the last 10 years.Foreign direct investment is critical.Whenwe talk to

those companies, the global thousand, they todaymake decisions on three principles, and we have Q408 Judy Mallaber: But how would the individual

employer respond to not being able to use agencysurveyed this. Although this sounds a little bitglobally strategic, it is critical for the UK economy. staV? How would they recruit their people?

Mr Arkless: I think they would be creative and lookThe decisions they make are very similar across allthose corporations. When they look to invest in a for some alternatives which would potentially lead

to greater exploitation of individual workers. Theregeography or a country they will look for threeprinciples: number one, a stable government and are all sorts of smart things that they can do and I

have tried to make a list of, if I were a creativegovernment policy; number two, consistentinvestment in infrastructure that enables business to employer, what I might do if I did not like the

Agency Workers Directive. It is stuV like wholework more easily; and number three, great humanresources and talent. That is not rocket science. That work sub-contracting, fixed term service contracts,

individual contractor status, terminal contracts,is what I would look for if I were starting a company.We asked them to break down the aspect of, “What regularly changing job titles every twomonths. They

would be very creative, I think, at the expense ofdo you mean by great human resources and talent?Do you mean appropriate, adequate, from schools, employees and I think what you are taking away

from the individual if you remove our potential to beuniversities, technical colleges, the right skills at theright time in the right place?”, and the answer is, a large scale employer is the way that we are

custodians and guardians, I think, of the status and“Yes, of course”. “What else do you look at?”. Theyalso look at a mixture of things between government the rights of employees. What we see here is a

disintegration of the irregular workforce, as somepolicy andwork, which is, does the government havepolicies in place to promote flexibility of the people call it, people who do not want permanent

employment with one company down to theworkforce? It is very good, variable utilisation at acompetitive pay rate, so they eVectively look at that. individual level which, as we said earlier, is

characterised by some high level technical expertsOne thing I am concerned about deeply with regardto Europe and our poor performance against other that just arbitrage their way round the workforce for




the highest pay rates they can get and as long as they just to do with the skills they have got and theexperience they have got, but it is to do withare good they can do it, but a lot of those people do

not make any provision for retirement benefits, behaviour, it is to do with the way the companyworks and sometimes it just does not work.insurance, the whole thing. I just get very concerned

about diminishing our ability to be a responsible Therefore, I think for all of those reasons, extraskills, fitting the job, employers finding out that theemployer, and I think other employers, if the AWD

is too restrictive, would just get into creative hyper- temporary contract has turned to a permanent one,I think all of those are reasons why there are somanydrive to the detriment of employees.translations into permanent employment.

Q409 Mr Clapham: Based on what you have said,Q411 Mr Clapham: Nevertheless, skills arewould you characterise your approach then as theimportant and training is important in relation tounions refer to, as ‘flexicurity’, that is, flexibilityproductivity.with security?Mr Arkless: I would agree.MrArkless:Absolutely. In fact, we have worked for

many years with the International Labour OYce inpartnership to drive the concept of flexibility with Q412 Mr Clapham: Given that fact, would youresponsibility into as many countries as possible in support the mandatory right to training for agencythis world. This is of no relevance to today but the workers?work that we are doing in India, the work that we are Mr Arkless: Yes.doing in China, is fundamentally helping reform notjust employment structures but the whole social Q413MrClapham:Presumably because you see thatsecurity systems into slowly a much more as adding to the prosperity of the economy andresponsible employee orientated system. That is adding a feature of dynamism?absolutely part of our core values in Manpower. Mr Arkless: I start from a grubby commercial pointThat is what we do. of view which says that the better I train people, the

higher-value jobs I get them into frankly. It is nottotally altruistic, but as a principle, if you look atQ410 Mr Clapham: We need to get you working in

the mining sector of China where there is an North America, what is happening in NorthAmerica is that the average skills of the workforceenormous number of accidents each year. Could I

take you to the point you made a little earlier about are moving up increment by increment. Everyone istalking about all of the jobs that are being oVshored,temporary workers who are in jobs for about a year

actually translating into a full-time job and relate outsourced and re-engineered, but the fact is thatmore jobs are being created in North America thanthat to training. Where people do that, is it because

there is training available for themwhen they go into have been outsourced, many, many more.Outsourcing and oVshoring in North America hasthe company and, as a result of that training, they

are able to move from temporary to full-time created jobs inNorthAmerica. The average pay ratethere is moving up and the pay rate does not moveemployment?

MrArkless: I think there are two things. Remember, up just from inflation in North America, but itmoves up because people are fulfilling higher-skilledI said that my recommendation for qualification was

12 months. I think as you go through a year, many jobs and if we can engineer that by any mechanism,better training, better development, we must do it.organisations will decide that what they thought was

a temporary assignment or a project does actually The single biggest issue for training and education inevery developed economy in the world today is lacksometimes translate into a permanent job, so then

theymake the decision and that is nothing to dowith of synchronisation. Why are there so many unfilledjobs in Europe?Why didGermany have fourmilliontraining because usually for those project-related

jobs, they want a fully trained person already unemployed, but 300,000 unfilled IT jobs last year?It is madness and it is the same in just about everyprovided for the flexible employment and contract.

Certainly if I take a company like ours, we have got country. We have an inability to fit the vocationalskills output with the right number of people hours1,100 skills and vocational training schemes that

every one of our assigned temporaries has full access in the correct vocational areas to fit into themarket’sneeds for jobs. I think the issue is not just providingto and most of them these days are Internet based

and they canwork at homewhile they are working in the training and the development at the right timeand the right place, but it is synchronising ittheir job or their assignment to improve their skills. I

think a lot of employers like the notion of what we accurately with market needs at the right time and Ithink we really need to focus on that. One thing weused to call when we were young lads the ‘trial

period’ in a company and that is where you used to do simply because we provide so much training; Ithink in terms of people hours for training, we aresign on for a company and you used to have a full

trial period after which if you were the right person, the biggest trainer in the UK, strangely enough,because we have everyone training most of the timeyou would be translated into a permanent job. I

think many employers see one of the roles of and one of the issues is that people actually perceivea lot of benefits apparently through training. We seeagencies as being able to provide people for almost

a trial period and not just whether they have the a benefit out of better pay rates, but individuals seea better career path, better potential returns and theyskills, but whether they have the right culture and

behaviour for the company because, do not forget, feel better about themselves. I think one area whichwould be great to focus on in European labourvery often thematch of the job with the person is not




legislation is the provision of skills and vocational ship their employees from one to the other or is itthat they use in-house agencies as a way oftraining because we have not got that right inregulating their workforce?Europe, so I fully and absolutely support that.Mr Arkless: They use both of them and I think theyare very opportunistic. I think a necessary control of

Q414 Mr Berry: You said that agency workers are the transition from part-time contractor andtypically employed for longer than six weeks, but temporary to permanent staV is a critical hinge-less than a year and you made the comment that it is point, or should be, of this legislation. I think itright that after 12 months, employers have an really is critical.obligation to decide whether or not a post should bepermanent or not. How, therefore, do you react to Q417Richard Burden: I just want to be clear onwhatallegations that there are some employers who keep you are saying about the relevance of the year. Is theworkers on long-term, temporary contracts to implication of what you are saying that once areduce their costs? temporary placement goes beyond a year, it wouldMr Arkless: I do not think they are allegations; I be reasonable to deem that the employmentthink they are absolute facts. I think that employers relationship at that point switches to the userwho do not behave correctly absolutely do that and employer and it would be reasonable for legislationI think we have all read of quite a few cases in the to deem that?City, for instance, in some of the higher-level, Mr Arkless: Yes, absolutely.financial services jobs and information technology

Q418 Chairman: One thing we just touched on wasjobs. I am fully in support of introducing measuresthe issue of ‘flexicurity’ in that. Now, the countrywhere many employers make the hard decision towhich seems to embody this within the Europeansay, “This job really now is permanent. I find I reallyUnion in its labour market practices is Denmark, orhave the obligation to take this person oV theso we are told and we are going there later on. Doesagency’s employment books and on to my booksyour organisation have any experience of theDanishbecause this person deserves the long-termsituation? Do you operate in Denmark? I am justinvestment and return”.asking because is it one of these areas whereflexibility and security are not inimical to the

Q415 Mr Berry:How do the big corporations in the activities of the organisation?City then get away with it? What is the cause of Mr Arkless: We have a fully-fledged and featuredmarket failure which has not enabled the market to Manpower organisation in Denmark. Denmark iswork in this case? interesting because they do have this pretty eVectiveMr Arkless: Clearly people get away with things for mix of security and flexibility which still seems totwo reasons: one, lack of regulation; and, two, lack work. I think if you go and talk to Danishof policing, I think. If there are regulations that employers, you will find out that they believe that

there are ways the market could be more productiveprevent certain practices, they will probably happenand they could havemore productivity in themarketon the basis that some employees, for various short-because they do characterise certain parts of theterm or medium-term financial needs or strategicsecurity bit as being overbearing. Also let’s notneeds, will be, I think, exploited and I thinkforget that it is a bit dangerous to compare smallregulation of those cases is absolutely essential.economies with big economies, small groups ofSecondly, and this is where I have some diYculty inworkers, and frankly Denmark is small for workers,the whole of the contracting and general employerwith large economies. I think they can operate andemployment law, is how do you police that stuV? Itfunction diVerently.is very, very bureaucratic and very diYcult, but in

principle we have got to find measures to control it.Q419 Chairman: Thank you very much. That isvery helpful.

Q416 Mr Berry: Is one of the causes of the problem Mr Arkless: Can I leave this paper for you? I willthat some of the larger corporations deal with a very send it electronically as well.

Chairman: Yes, thank you.small number of specialist agencies and basically



Witnesses:Mr Tony Dubbins,Deputy General Secretary,Mr Tony Burke,Assistant General Secretary, andMr Mike GriYths, National OYcer, Amicus, GPM Sector (formerly GPMU); and Professor Keith Ewing,Professor of Public Law, Kings College, University of London, examined.

Q420Chairman:Goodmorning, gentlemen, and can Mr Dubbins: Indeed. Since the merger on 1November, we are now the only union operating inI welcome you here. I think I should probably start

oV by declaring an interest in the sense that I have our sector. The sectors vary very considerably. In thepaper sector I would guess that the unionhad a longstanding connection with the GPMU in

the past, or, at least when sponsorship by unions was penetration is well over 90%.Most of the companieswe deal with in the paper sector are very major,the appropriate expression, I was sponsored by the

GPMU, although I have to say I am not quite sure multinational companies. In the converting andpackaging sector, it is somewhat lower than that andwhat the appropriate word is now, but since I amnot

standing at the next election, any support that the our estimate would be around 85 to 90%. When youcome into the mainstream printing sector, which isLabour Party might have had from them will not be

in the form it was in the past, although that is the sector which is dominated by small- andmedium-sized companies, my guess is that ouranother matter, but I think I should just say that.

Can I welcome you here this morning and make the penetration there is around the level of 70%, andmoving into the newspaper sector, which was thepoint, Mr Dubbins, before I ask you to introduce

your colleagues, that we would like to look at, on the subject of the widespread derecognition campaignduring the 1980s, we have now restored ourone hand, the flexible labour market and we have a

number of questions relating to that, and then we recognition in the entire production area ofnewspapers, except for the provincial arm of thewould like to move into the somewhat uncharted

seas of union-busting which in some respects is the Daily Mail Group, so the production side ofnewspapers is now again pretty highly organised.flip side of the flexible labour market insofar as it

aVords privileges and benefits to employers which We are assisted, it is fair to say, in industrial relationsterms from the point of view of joint regulation bymay or may not be deemed to be to the detriment of

workers, and that is one of the issues we wish to the fact that we do hold national agreementswith thepaper employers, with the converting employers andexplore with you. Perhaps before we get any further,

Mr Dubbins, you could introduce your colleagues. also with the printing employers. There are nonational agreements in the newspaper sector. TheMr Dubbins: Thank you, Martin, and, like yourself,

I certainly will not be standing at the next election printing employers are around 50% of the printingemployers in the UK, perhaps a bit higher, and ineither, so it is a similar situation actually. On my left

is Tony Burke, our Assistant General Secretary, and membership of the BPIF, the largest employer’sfederation in terms of the number of employees, Ion his left is Mike GriYths, one of our national

oYcers, and on my right is Professor Keith Ewing would guess they actually employ over 80%, myguess would be, of the employees in the industry.who has been advising the union over a number of

years on labour law and labour legislation and The BPIF again is dominated by small- andmedium-sized companies. The national agreement, Iparticularly with relevance to small business.think it is fair to say and I am sure both sides of theindustry would openly admit, has stood us in veryQ421 Chairman: Perhaps you could just put intogood stead throughout some very diYcult times andcontext where you stand in relation to the unionvery diYcult periods, a heck of a lot of technologicalAmicus of which you are now a section because I didchange and a heck of a lot of structural change in themake reference to the old organisation and Iindustry as well. The national agreement is really aunderstand that since October there has been atwo-tier agreement. It provides a baseline for thechange.industry as a minimum wages and conditionsMr Dubbins: We merged with Amicus along witharrangement which is renegotiated annually, but theUNIFI, the bank workers’ union, on 1 Novemberactual wages and conditions in the plants are2004 and we are now the GPM sector of Amicus. Asroughly around one-third higher than that providedfar as our collective bargaining industrial side isfor in the national agreement. There is a second tierconcerned, it is an autonomous sector withinof bargaining at local level which adds on to theAmicus and of course we are very much a part ofnational minimum standards which are set. TheAmicus as far as administration, finance, politicalagreement provides for very widespread flexibility,relations and everything else is concerned.productivity arrangements, hours and shiftarrangements. It is now the subject of a considerable

Q422Chairman: If we could justmove on then to the renegotiation. We are in the process with theindustrial role of the union; as I understand it, you assistance of Professor Frank Burchill ofoperate within a number of areas, printing, paper renegotiating the national agreement to takeand graphics, an industry in its broad sense because account of some of the further changes which areit is dominated by small- and medium-sized happening in the industry. That has been going oncompanies. What is your penetration of the sector? for several months and we anticipate it will reachWhat percentage do you have and what percentage conclusion hopefully successfully early next year.of wages and conditions do you organise for them inthe sense that obviously you will have areas where

Q423 Mr Clapham: So we have got quite a diverseyou do not have 100%membership, but on a reducedindustry. Given that there is a lot of competitionmembership you have organising rights, so maybethere and employers of course can ease the situationyou could give us an idea of the membership and

general penetration. of competition by non-compliance with



18 January 2005 Amicus, GPM Sector

employment regulations, are you able to monitor Mr Dubbins: It has got an extremely bad reputationand I have to be frank and say that some of it isemployers’ performance with regards to compliance

to employment regulations right across the industry warranted. We have a high incidence of overtimeworking and part of that is due to customeror are you only able tomonitor the compliance in the

unionised sector of the industry? requirements and a rapid change in customerrequirements. Everybody, particularly when itMr Dubbins: In the unionised sector of the industry

we certainly can monitor compliance. In the non- comes to stealing amarch on their competitors in thepublication field, is looking for shorter lead timesunion sector of the industry it is much more diYcult

and it is really anecdotal evidence. That evidence and diVerent publication times, but I do not thinkthat is the main problem. The real problem is in thecomes to us when we are organising and recruiting

people to take into membership and the small andmedium companies where, it would be fairto say, the wage levels would tend to create ancircumstances that we find which are very often

standards which are below the national agreement incentive to our members to work overtime and tomake up their money by overtime working. That isstandard and very often of course it is other

employers drawing to our attention the fact that not true in the medium and larger companies.Frankly, the overtime culture in the medium andthey are suVering from the competition from

someone who is not applying a level playing field, so larger companies is down to an inability or anunwillingness on the part of management to actuallythere is an interest from other employers in assisting

us or certainly in guiding us towards organisation manage working hours properly and to manageproduction properly. To try to give you an exampleand recruitment because it tends to undermine the

standards which have been set. It is fair to say also of this, in the working time opt-out we havemanaged to negotiate a number of nationalof the BPIF that there are a number of BPIF

members who are members of the organisation, but agreements, unfortunately not with the BPIFbecause of the dominance of small and mediumon the basis that they do not apply the national

agreement so they receive the commercial services companies, and the BPIF area has probably thehighest level of overtime working. When we havefrom the BPIF, but negotiate agreements either

separately with us or some of them are not unionised gone to individual plants to negotiate working timeagreements, we have very often found a 48-hour, aat all and of course we pick up a significant amount

of information from theEmployers’ Federation, and 55-hour and in one case a 60-hour workingweek at averymajor publication company.We had diYcultiesthe conclusion we arrived at quite frankly is that

there are very few non-union employers where with our own members because they had got used tothe culture ofworking 60 hours aweek.Wemanagedproper monitoring, proper regulation and proper

working conditions apply. It is usually when we get to persuade both our members and the company tointroduce new working arrangements and new shiftinto organisation and recruitment that we find

generally that the standards are lower than have systems which cut the working hours dramatically,first of all, to 48 and since that was negotiated abeen set in the national agreements in the printing

industries. couple of years ago we are well down below 48. Theproblem with the industry in the larger plants, in myjudgment, is really an unwillingness on the part ofQ424 Mr Clapham: And, as you were saying, thecompanies to bring in new shift workinginformation from the non-unionised sector isarrangements and to control production in a moreobviously anecdotal, but are you able to influenceeVective way than they do at the present point inthe non-union sector, do you feel, by what you aretime. I believe that the Working Time Directivedoing in the union sector and, given that employersactually is a damn good incentive to push them intoneed to be competitive, that they do look to what ismore eYcient ways of working and, consequently, inhappening in the union sector?the plants where we know it has gone in, it hasMrDubbins:Yes, it is limited, what we can do.Whattended to improve quality as well.we attempt to do every year on the conclusion of the

national agreement—which is of course virtuallyautomatically applied to BPIF member companies, Q426 Sir Robert Smith: In the larger plants wherecertainly those that work under the terms of the there is a management issue in your eyes, has thatagreement—is that that is circulated to all of our meant that they have brought in extra workforce orbranches and to our members, but we also circulate they are just using the same workforce morethe basic terms of the new agreement to all of those eYciently?plants who are not in membership of the BPIF itself. Mr Dubbins:Mostly it is using the same workforceSome of them are unionised andwe have recognition more eYciently. It has on occasion, depending onand in some of them we only have individual the shift coverage, meant some additional people,members, so the terms and conditions are pretty but, to give you a for instance, if you rearrange shiftbroadly known across the industry and I think it working to cover for six days and have four 12-hourwould be true to say that the vast majority of the shifts and three days of 12 hours, you can actuallyindustry does apply those terms, but there are some get six-day production cover and take account ofsignificant gaps. changed publication times. If somebody is working

two shifts or a three-shift system, you have not gotthat extra day, you have not got that extra cover andQ425 Sir Robert Smith: Just moving on to theit is the same with seven days, it is the same withworking hours culture in the printing industry,

would you say it was long working hours? standard shift arrangements and it is the same with




particular shifts arranged for weekend working Q429Mr Berry:Where there is a serious problem oflong hours, is it partly because of reluctance bywhich we would encourage employers to do too,

avoid Saturday and Sunday working as that is a employers to provide the necessary investment toimprove productivity? Are they saying, “Look wedisaster from the productivity point of view. It is also

disastrous from the health and safety point of view. could operate with shorter hours, but part of theproblem is we have to invest and that costs money”,Long hours tend to reduce productivity.and so on; is that a constraint? Is the overriding wishto be able to appear to publishers and purchasers toQ427 Sir Robert Smith: In the smaller companiesbe flexible 24 hours a day?then, the problem is that the basic remuneration isMr Dubbins: I do not think, in our experience,not really enough and, therefore, the incentive is toinvestment is a major constraint. I think the generaltry and get extra hours of work?investment levels in UK print pretty well compareMr Dubbins: Yes, I think certainly at this levelwithmost of Europe. I think it is under-utilisation ofamongst all of us, it is fair to say, there would beequipment. We have certainly had an excess ofmore understanding and more sympathy withcapacity in the industry over the past few years,members in the smaller companies because the wagewhich has made things a bit more diYcult. It reallylevels and the condition levels are generally loweris a lack of ability to be able tomanage the use of thatthan in the medium and large companies.equipment. It is a very high tech industry, as I said abit earlier. The cost of investment, and the lifespan

Q428 Mr Berry: I must declare an interest. I am a of investment are issues. The cost is getting higher bymember of Amicus and I am standing at the next the year significantly (because of the technologyelection. Could we stick to the long hours culture or which is increasingly being introduced) and thethe long hours issue. From what you are saying, lifespan is getting shorter. You are being squeezedTony, the larger companies have been persuaded to from both ends. I would not say it is a majormove to more acceptable hours and it was simply by complaint. I am not saying it does not exist—it does,improving productivity and it was about getting I am sure—but I would not say that investment is attheir act together. That raises the question of why the top of the list of problems.are they not doing it in the first place? You may wellbe better managed than they are and maybe that

Q430 Mr Berry: Finally, where you and youris the reason, but it is about productivitymembers have negotiated more reasonable hoursimprovements, is it not, essentially substituting thewhat has happened to the pay of your members?longer hours? Why do they not do it without theMr Dubbins: Obviously it is part and parcel of thetrade union coming along to apply pressure?arrangements we do. We have an arrangement, forMrDubbins:Well, it is a very diYcult one to answer.instance, if there is a treble shift arrangement thereThere are varying responses to it when you talk tois a standard national premium of 33´%. If it is a six-employers about it. Very often you will find thatday working four shift arrangement the standardsome of themanagements are verymuch coming outpremium is usually 40%. We have diYculty and Iof family companies and have not necessarily got thewould not want to mislead you about this. If you goreal management skills that are required to manageto a group of GPMU members and try to get themwhat now is a very high-tech industry.We also knowto do six-day working, boy, you have got somethat in the kind of competitive situation we are in,problems. They resist it. The ironic thing is wethe natural response of the employer to a customer,always manage at the end of the day to persuadeparticularly if it is a large customer, is to say, “Openthem to give it a try, once they have had a trial of six-all hours. We will meet whatever productionday working you cannot get them oV of it. Thedemands you have got” in order to maintain thatopportunities it throws up: they can see thevolume and to maintain that contract and they areimprovements in eYciency, productivity, and theafraid to say, “Well, we are bringing in new workingwork/life balance changes and changes quitearrangements which you must now fit in with. Wedramatically. They really do have a lot morewill try to respond to what you want, but you can’tavailable time to spend with their families. It is akeep changing it every week”, and the nature of ourproposition which is usually never responded toindustry is that a lot of publishers do tend to changepositively at the time when employers try toevery week. I would not suggest that it is okay in theintroduce it, but within a few months of beinglarger companies as I do not believe it is. There areintroduced you cannot get them oV this kind of shift.still a lot of larger companies where there are high

levels of overtime working, poor levels ofproductivity and in my judgment, work Q431 Richard Burden: Could we look at things from

the other end briefly where employees themselvesarrangements which could be considerablyimproved. We have a process on a joint basis with may come forward and ask for greater flexibility in

working, whether it be work/life balance orthe Employers’ Federation to try to improveproductivity, to try to improve working whatever. Are those opportunities increasing, or are

they decreasing and getting shunted intoarrangements and we are more than happy tocontinue to do that.Where there is low productivity, arrangements with the employer?

Mr GriYths: You are right, there is now—with thewhere there is bad management, we need to draw itto the attention of the employers and to our own publicity and some of the changes in legislation—a

desire by workers in the industry to look atmembers and to try and get that changed where wecan. alternative working patterns. We have not had an




awful lot of experience of that, in fairness. We have with agency and temporary workers at rates andvery set arrangements for a lot of workers. It is also conditions which are well below the industrytrue to say, by and large, that has not been standards and the industry norms. That was prettyresponded to favourably by employers, for the same unusual two or three years ago but now it issorts of reasons we are talking about—the need for increasing greatly. The numbers involved arediVerent shift arrangements to spread the working tremendous and we have some of the largestweek in order to make publication dates or just companies in the industry who clearly have policiesgeneral contract delivery times. There is not much to move towards a core workforce, the vast majoritydesire to see individual requests accommodated. We of them being skilled workers and to outsource tohave had instances where we have had to raise it with agencies the unskilled areas. That has created a lot ofthe use of legislation particularly for women; but it insecurity and a lot of vulnerability. I think the otheris very, very diYcult to persuade them for the need area where we see some further regulations beingfor individual requests. helpful in small companies is the removal of the 21

employee threshold for statutory underpinning ofrecognition.We have had some diYculties with that.Q432 Richard Burden:When you do negotiate, say,I would not want to suggest that most of oura change in shift pattern would it be a standard partrecruitment resource is going to small companies. Itof your objectives in those negotiations to build intodoes not, because we can see if we get to the end ofthat some recognition of exceptions being made tothe road in a small company you can spend a hell ofcope with family circumstances, say?a lot of time and resources recruiting and organisingMr GriYths: The sorts of shift patterns Tony hasonly to find you cannot obtain recognition.described are generally greeted with pleasure onceGenerally, the burdens that business carries, in mypeople try them. Of course, it is a huge change forown judgment, are pretty wildly exaggerated. Keith,people initially, particularly for those members whoyou actually have been involved directly, and ithave family responsibilities, caring responsibilities,might be better for you to supplement this becausemainly women. There is often a total inability toyou are involved in a survey at the moment.suddenly move from day working or double dayProfessor Ewing: We have been doing someshifts stretching from perhaps six in the morning tointerviews of small businesses in printing, textilesnine or 10 at night to 12-hour days and nights. Theand light engineering, and we have been speaking tonight working element is often a problem. In thoseemployers about some of the issues which you haveparticular instances we alwaysmake an arrangementraised today—one of which is the burden ofwhereby individuals would be asked by the companyregulation—and asking expressly, “Do you feel, in abut if anyone has particular reasons why theysense, that there is too much red tape of over-cannot, they should be accommodated. In thoseregulation” of the sector in question. I have got someinstances obviously accommodations are made; butof the transcripts with me so I can read to you somerequests, as in the earlier question, to change as aof the responses we have been getting. With oneresult of a change in family circumstances are notemployer in the Midlands to whom I spoke thegenerally accepted by the employer.interview went something like this: “So you’re notbothered by red tape, like a lot of employersQ433 Judy Mallaber: Obviously you will be seekingcomplain about? Respondent: No. Interviewer: No?protection for your members but, given the areasRespondent: No. I ring up one of my contacts andyou represent where there are such a substantialsay, ‘What are you doing about this’. Interviewer:number of small firms, do you have any sympathy atYou don’t think that there’s too much regulationall with the argument that employment regulationthen? Respondent: It depends on how you look at it.can be overly burdensome?I mean, I can’t aVord to have anyone here looking atMr Dubbins: Not really, I would have to say. Ourred tape all the while. I certainly can’t do it myself, soexperience is the reverse—it is the lack of jointwe streamline it”. Then I have another from a microregulation which I think leads to diYculties andcompany where some people would think the shoeproblems in the industry, certainly as far as wagespinches tightest. The same question to the companyand conditions are concerned. There are three keyin question: “Do you feel there’s too much red tapecrucial areas where I think we need more regulation,as an employer in terms of what you have to do?if I can answer the question that way: one is the endRespondent: What, just generally? Interviewer: Yes.of the opt-out. I see that not only from the heath andRespondent: Yes, I think there is. She [his wife]safety point of view, which is obviously a majorhandles all that side of things. Just general red tape,factor, but quite frankly if we are ever going to reallytax, VAT, that’s what you’re talking about, isn’t it?address the productivity question in the UK andInterviewer: What about employment regulation,bring ourselves up around the European average inyou don’t feel there’s too much protection for theterms of productivity, the pressure onworking hourspeople you employ, or too many rules? Respondent:is a major contributory factor. I am quite sure ofNo, nothing that gets in the way of us running ourthat, so I think it is useful in two ways. The secondbusiness. Interviewer: So you don’t feel that theis agency and temporary workers. We are more andprotection for your staV frustrates your ability tomore concerned (and this has been around for arun the business in the way you want? Respondent:while) but in the last couple of years we have seenNo, no, no, I wouldn’t”. Then we go oV and discussmore and more large companies, some of them insomething else. That would be a view expressed bymajor groups of companies, who are allowing their

unskilled workforce to leave and replacing them a number of employers, in the sense that the




regulation which they have to deal with is something say that in some cases the information does take timeto filter through. I do not think you can generalisethey can deal with and is not a burden they feel too

heavily. With another employer I spoke to I said to about the issue. Some people are pretty well clued-up on what is going on and are well-informed andhim, “If the general regulations in employment

conditions were to be relaxed how would they well resourced as it were; but in other cases it doestake time to get through.change the way in which you run your business?” He

said that it would not, in the sense that he could notthink of ways in which things would be done any Q435 Sir Robert Smith: What stage is this researchdiVerently. There are a group of employers who feel at in terms of it being published?quite relaxed about the specific issue; but there are a Professor Ewing: That is a very good question, asnumber of employers who do complain about red they say. This is a very helpful occasion because ittape, but when pressed specifically about which compelled me to go and read very carefully some ofissues trouble them, when the questioning is the transcripts and to be able to bring them today.persistent, they are unable to identify any specific We are probably about two-thirds of the wayissue which is a real and consistent concern. There through. We have some interviews we still need toare other employers who say, “Yes, red tape is an do, particularly in one of the sectors.issue, or regulation is an issue”, but when you raisethe issue of red tape, the issue they are concerned

Q436 Judy Mallaber: Is it possible for us to haveabout is how to dispose of chemicals and it is wasteaccess to that information?management which tends to be the problem. This isProfessor Ewing: Yes, when it is completed. I willthe kind of evidence which is coming forward fromhave an advance copy of the information. It is verythis study. That is not to say there are somediYcult to recruit small employers, or indeed anyemployers who do feel some things in particular areemployers. It is not an easy process. We do have toa bit unfair. There was one employer who wasgive various undertakings in terms of anonymity andtroubled by paternity rights. It was something he didso on. I think the best thing from our point of viewnot have to deal with in the past. People of hisis that we get this information into a workable formgeneration in that situation were never entitled toand would be looking to produce an interim reportthis, and this particular employer was clearlyquite soon. When that is available I would be veryanxious about that. Again, a number of otherhappy that it should be passed to the Chairman foremployers (not those I have referred to) weredistribution to the Committee. I would not like to beperfectly relaxed about paternity and accepted thispinned down to a date, but as soon as possible.was a good thing and were perfectly happy to

support those employees who felt the need to takeQ437Chairman:Thatwould be helpful. I have to sayleave. So far as printing is concerned, the responseto you, Professor Ewing, the evidence you arewe have been getting is that over-regulation is notalluding to (if I can put it that way) seems to be insomething that employers, on the whole, arecontradistinction to evidence we have already hadcomplaining about.from bodies like the FSB, the CBI or the BritishChamber of Commerce, whom I think it is

Q434 Judy Mallaber:Do you have any information reasonable to say anticipate the apocalypsefrom that research you have done, first of all, on the relatively soon. I notice your questions were fairlydegree to which employers just do not know about gentle and non-specific in character. Do you think ifthe things they are meant to be doing, or how you had pushed some of the employers on issues likeknowledgeable they are; and, secondly, if something maternity, as distinct from paternity, that the issuedoes then suddenly hit them which they have not is being extended with opportunities for additionalrealised (such as paternity rights, which you have leave? The impression we got was there are certainmentioned) how easy it is for them to access employers where this was really rather diYcult.information without it taking them an inordinate Professor Ewing: One employer did express concernamount of time and diYculty? about maternity and having to leave the job open forProfessor Ewing: What is interesting is the very 12months. The point of an open question is to invitecomplex networks by which information is shared, response, is it not, to pour out your concerns? It isor by which information is obtained by employers. not really to invent responses, or create responses forIt would be the case, for example, that many of the the interviewee. It is to give an opportunity for theemployers we have spoken to are members of the interviewee to identify the problems which are ofBPIF, even very small employers. They would be concern to him or her, rather than put words intogetting the information there and would be very people’s mouths. This is what we have done as wehappy with that. It is also the case that some of these have provided this opportunity. In the questioning Iemployers employ a considerable number of people think we have been quite persistent. We have notwho, it should be said, retain their membership of a simply raised it and moved on but we have queriedunion. You have some employers still members of it. “Are you sure?” This is part of a generalAmicus, as it now is, and they are getting discussion over a wide range of other employmentinformation from the union and getting support issues as well. We have not just been looking at thefrom the union in terms of some of the issues that burden of red tape; we have been looking at the rolearise in the workplace. For other employers, they which the trade union may play in dealing withwill subscribe to various advice services which are problemswhichmay exist in theworkplace.We have

been looking at why small businesses feel the need toavailable commercially. I think it would be true to




comply with the National Pay Agreement, for On the one hand, you have the employers’ lobbywhich will take one view, and you have the tradeexample. We have been looking at a wide range of

issues, of which this is one. It would not be fair to union, TUC and others who will take another view,in the sense that they will be coming to this withlead people into directions of the kind you might

otherwise imply. diVerently informed positions.Chairman: We certainly get the impression thatquestionnaires are issued on the basis of, “Tell us five Q440 Miss Kirkbride: I was interested in your lastthings you hate about employment regulation”, and response because, listening to what you told thethen give them seven options! Committee a minute ago, just because an employer

does not rant and rave about one specific piece ofregulation does not seem to me to mean he is notQ438 Judy Mallaber: Just following on from theupset about the aggregate burden of it? Very oftenChairman’s question, how far might those responsespeople think it is unreasonable to criticise someonereflect the general make-up of particular industriesthey know and like for wanting to take maternityyou are working in with, for example, maternityleave but, nevertheless, it can be very aggravating asrights where women are employed a lot and whetheran aggregate. I would take that from some of yourit does or does not create in practice more or lessresponses. I was interested to see how youdiYculty within a particular industry? If you areinterpreted it. My question is whether or not therelooking at the question of maternity rights,were any individual regulations that you think couldobviously the diYculty that will create for a firmbe dismantled or got rid of?depends on whether they have women employed inMr GriYths: I think that question was in partparticular jobs which are diYcult to replace. Havecovered by an earlier response where we see some ofyou tried to identify the make-up within thethe regulations that should be removed. I thinkTonyindustry?gave detail there, in particular the opt-out from theProfessor Ewing: No, I have to say in fairness thatWorking Time Directive.the issue of maternity rights, particularly, has not

really arisen, except in two cases: one was the chapQ441 Miss Kirkbride: To remove the opt-out?who was quite hostile to all forms of regulationMr GriYths: To remove the opt-out, yes.anyway and this was one issue he identified; and in

the other situation where it arose there was quite adegree of sympathy for the position of the employee Q442Miss Kirkbride: It would not have the eVect ofand her husband—both of whom are employed in removing the regulation?the same company. You cannot generalise about Mr GriYths: There is a certain amount of time andemployer attitudes. One thing about this study is the resources involved with employer-led issues to seefact that we are actually speaking to employers— about that. He has to actually get each individual toemployers who actually have to deal with the sign away their rights. In our experience that meanssituation as it is. Hearing from themwhat they really spending some time explaining why it is better forfeel is actually quite interesting. them to be able to work unlimited hours and not be

constrained by the Working Time Directive. In anumber of instances, particularly when theQ439 Mr Berry: It seems to me it is pretty obviousregulations first came into this country, we hadwhy organisations like the FSB do not likeinstances of employers saying, “Look, you will notregulations. They know the more regulations therebe able to do overtime any more unless you sign thisare, the more likely their members are to get on theopt-out”. We have also got experiences of contractsphone and ask for advice. The rational response is toof employments being oVered to people when theybe anti-regulation for that reason alone. Professorjoin a company with a requirement or an option toEwing, presumably your research cannot be the firstsign away their rights under the Working Timeresearch in this area about how firms react toDirective.regulation. Apart from your study, what is your

interpretation of the evidence? Is it, as I thought youQ443 Miss Kirkbride: The Working Time Directivesaid earlier, that the argument “regulation is ais a deregulatory measure?problem” is greatly exaggerated when you actuallyMr GriYths: You can make your own judgmentask employers about how they operate? Would thatthere. What I am suggesting is that it is a regulationbe the consensus, or are you out on a limb here?on business.Professor Ewing: It is hard to say. It is like with all

scientific questions in the sense that there is probablyno consensus. There is a range of positions in the Q444 Miss Kirkbride: No, it is your opinion we

want.sense that there would be people who would take aview that regulation is a problem; and there would Mr GriYths: In my opinion it is a regulation on

business which should be removed for a number ofbe people who would take a view on the other sidethat lack of regulation is a problem, because reasons. As you will be aware obviously the

Working Time Directive gives an ability to averageregulation creates better productivity, improvescompetitiveness and so on. The best answer I could the 48 hours over a period—the default period being

17 weeks but up to a year. In every single instance,give would be that there is no consensus position onthis. There is a range of responses, and this range of and I have negotiated a number, when we have had

discussions with employees their first reaction is,responses is reflected in the diVerent evidence youreceive from diVerent witnesses to this Committee. “We want the 12 months. We want maximum




benefit”. In all cases I have said, “If you need that, evidence earlier that you have been comparativelyyou can have it, but I would like you to actually successful in securing recognition with employersexamine and consider whether the 17-week period who have derecognised your members for(which is obviously more limiting) is capable of organisational purposes. It has to be said we havebeing worked”. In all bar two cases they have not had a lot of evidence from employers’accepted the 17-week period. Where they did not organisations that the opportunities for securingwant it, they have had a bit longer and had the six recognition have been a burden to them. On themonths rather than the 12 months. I am suggesting other hand, in your experience, and some of yourthat the rush to sign away those rights to require evidence would tend to suggest this, have you foundpeople to give an acceptance of the opt-out is that there are ways in which so many employers canunnecessary. side-step the thrust of the legislation, if not the actual

letter of it? I wonder if you can let us hear somethingabout this at this stage?Q445 Miss Kirkbride: Therefore, there is always aMr Dubbins: Chairman, I think it would be best if Icase for more regulation and that would be it?ask Tony to fill you in on the detail of the problemsMr GriYths: That is one way it is happening. Could

I perhaps broaden my answer, if I may, because it we have found with individual attempts at obtaininglinks in with a number of the other questions, but recognition. Generally, one of the things we havespecifically on that: I have not done surveys, as been pressing very strongly for is to extend the legalProfessor Ewing is suggesting, but I have spent a right to recognition to include companies withlifetime in the private sector both as an employee under-21 employees. In an industry such as ours,and now as an oYcial. We work with a great many with so many small and medium companies, it doescompanies that are more enlightened, certainly that exclude and discriminate quite strongly againstare very comfortable with trade union membership people in small companies if they cannot have theand are happy with the relationship they have with same basic right to recognition and representation.us. Almost without exception, I have never known We found that mitigates disproportionately againstcompanies that immediately embrace what we are woman, black and ethnic minorities because, again,describing here as ‘regulations’. The example I the composition of small companies is skewedwould like to cite—and this applies in the main to generally in the fact that more people from thoselarger companies—is talking about information and backgrounds are employed in those companies,consultation which is just coming in, if you talk generally there is a discriminatory element built intoabout the EWC regulations and generally the it. We have been pressing very strongly for thearrangements for partnerships, the reaction extension of the right to recognition to lower theamongst most enlightened companies at first is, “We threshold of 21. If I could say so, no-one is under anydon’t need this. This is going to be an extra cost to doubt, certainly we are not and have not beenus. This is going to be an extra burden to us”. Yet in

suggesting as a parallel to that, that in those smallall of those cases, once they get into it, and once theycompanies there should be the same kind ofstart engaging and once they start informing andrecognition procedure which we have to go throughempowering their workforce, they see benefits; theyin larger companies. We believe in a very simplifiedsee benefits to the bottom line in terms ofform, we should apply a criterion saying there has toproductivity. My view, which is a view based on mybe proof that more than 50% of the employees are inexperience and you can take it or not, is that there isunion membership and if that needs ACAS toalways reaction from employers against any outsideconfirm that, that is fine, but without all of the ballotinterference of whatever type—taxes or theparaphernalia and this so-called bureaucracy that isindividual regulations we have been talking about—associated with it. That should be very, very easy tobut that does not necessarily mean in the long-rundo in small companies. Tony has been the hands-onthey are bad for the business. We work in the privateperson as far as the diYculties in the wholesector so the bottom line for us is that unless therecognition field are concerned.company makes a profit our members are notMr Burke: As we indicated in our evidence earlier,employed.we have had some success in the printing industryand, as Tony said, in the newspaper industry, inQ446 Chairman: Just for the record, EWC is thewinning recognition, not only in companies whereEuropean Works Council. There is always a dangerwe were derecognised but in companies where therewith our witnesses that they lapse into jargon! Onehad never been a union. In some respects that isof the aspects of the flexible labour market as it wasbecause there was a considerable interest amongdeveloped byMrs Thatcher and her colleagues in theemployees to join a union and they approached us.1980s, and I think you referred to it earlier on, wasIn many respects we have been successful. We havethe issue of the capacity that was aVorded tohad voluntary arrangements with various employersemployers by one means or another to derecognisewho have looked at the legislation and felt it wasunions. Without wishing to get into the merits of thebetter to work with the union. Generally, we utiliseargument one way or the other at this point, becausethe services of ACAS to provide assistance andthis is an all-Party, non-Party, investigation in someguidance in the main to help the company through.ways, there was in 1997 a signal given by theCertainly over the past two to three years, what weGovernment that there would be a change of step onhave been experiencing from certain companies hasthis. You can argue that the steps have not been big

enough, or whatever. You have indicated in your been what we describe as heavy duty American-style




anti-union tactics, union and union avoidance. We talk to them about testing the workforce on unionrecognition. They had T-shirts and all the usualhave a number of good examples and if you would

like to hear them I can give them to you. American style paraphernalia about why theworkforce should not vote for a union. This includedthe door of the managing director’s or the plant

Q447 Chairman: I think we have them in the written director’s oYce always being open and people couldevidence. solve problems which they had by setting up a staV

Mr Burke: As Tony said earlier on, in general terms association which, to all intents and purposes, wasin the newspaper industry, the biggest culprit is the worked around the basis that people would beDaily Mail Group, Associated Newspapers, where selected for it who were not going to give them anywe have tried to achieve recognition at a number of diYculties. Again, the dismissal of our uniontheir plants in Stoke, Gloucester, Exeter, Swansea representatives was involved. We had unionand Bristol. The workforce has wanted to join the representativeswho had been at the company for notunion and they have made approaches to us, they a long period of time because of the high turnover,have issues at work which have been very important but were actively encouraging their work colleaguesto them and they raised them with us and we have to join the GPMU and they were faced then withgiven them advice. We had begun to build up a dismissal on charges which did not hold up quitemembership based around those colleagues who frankly. It is interesting to note that in the Dailywant to join a union and want to be represented by Mail and Amazon cases, we took it to tribunal anda union. The first major confrontation we had with won, all of the companies settled outside thethe Daily Mail Group, in the first instance, was at tribunal. At the end of the day it shows you some ofStoke Sentinel where we had over 50% in one of the the ideas the employers had been using, if they haddepartments. We were forced to go down the CAC come before the tribunal, would have been totallyroute—the Central Arbitration Council route— exposed for what they were.which is the legal route to achieve recognition, asthey would not go down the voluntary route. Of

Q448 Chairman:On the other hand, even if you hadcourse what the company did in advance was to takewon formally in the tribunal, there would be noa number of steps, which included the dismissal ofentitlement to reinstate them?our union representative, our key representative inMr Burke: That is right, absolutely.that particular department who was supporting the

union’s campaign to recruit. I have to say, whatQ449 Chairman: In a sense it is really a kind ofhappened to the previous GPMU has happened tomoral/financial victory?the NUJ and I am sure they would give you veryMr Burke: Yes, Chairman, it is. If it is a largesimilar evidence. At Stoke Sentinel, we were facedcompany the total maximum that can be outlaid is awith the dismissal of our union representative. Thevery, very cheap price to pay andmore than they areballot was ordered by the Central Arbitrationprepared to pay.Committee. Individuals were brought in before

supervisors and managers, they were pressurisedinto saying which way they were going to vote, they Q450 Richard Burden: In the evidence you putwere pressurised into dropping out of the then forward one of areas where you say certainGPMU and literature was circulated which not only employers do manage to get around obligations andput the company’s arguments forward but made recognition procedures and so on is by playingsome quite disgraceful comments about our union around with what is defined as the appropriateand what we were about. On each and every bargaining unit for employees. From the writtenoccasion in the Mail Group, where we have been evidence you have put in I understand the objectiveinvolved either in working towards a ballot or is there. How would you like to see legislationworking towards gaining recognition, we faced the change so you can have a diVerent definition forsort of tactics which I have described: dismissal of bargaining units?union representatives; pressure to drop out of the Mr Burke: One of the diYculties is that it is theunion and pressure to indicate to supervisors and union’s duty to put forward the bargaining unit.managers which way people were going to vote in Usually we work around the basis that peopleadvance of the meeting and in advance of the ballot. renewing membership and those people who fit inAlso, we have got other experiences, which we have with the structure of the company. In a number ofdescribed, and some of them tend to come to the instances what we have found is that the companysurface because of the names of the businesses. As will challenge the bargaining unit by adding inyou knowAmazon.co.uk atMiltonKeynes is a large supervisory staV, temporary and agency workers,book distributor on the Internet. We recruited the boss’s wife and anybody they can put in to makearound 50% of the permanent workforce at the it much more diYcult for us. What we would like toMiltonKeynes facility, we were doing quite well.We see is a very straightforward situation where we cantried to meet the management and suggested they approach the company, using ACAS if necessary, toshould sit down with us. They invited our full-time define the bargaining unit a lot tighter and not beoYcials to the site to get into discussions with them dragged through the CAC where we can get into aand then the company brought in their own very complex argument as to who should be in andAmerican advisers to run a campaign against who should not be in. We would prefer a muchGPMU. They ran their own ballot in advance of us smoother transition where we can provide the

information, the employer provides the informationeven getting to the basis where we could sit down and




and at the end of the day, ACAS can decide very is not finished yet, but their Glasgow plant. It was aremarkable eVort because the two guys I met—youquickly, “They should be in the bargaining unit” and

both sides can agree to it rather than go before the may not believe it—were telling me about the lastunion oYcial they had run into was a guy calledCentral Arbitration Committee and have to have, as

we have had, sometimes two, possibly three Briginshaw and that was in the 1930s, so I was thenext union oYcial they met. With all the concernshearings, just on that while there is an argument at

the CAC. that were on both sides, we concluded an agreementand it has gone very, very well. I think if you askDCThomsons now: “Has the experience of dealing with

Q451 Judy Mallaber: If all the recommendations the union been a bit better than you would havewhich you put forward here were implemented, you anticipated?”, they would probably say: “Yes, ofwould still have the problem of getting recognition course it has its ups and downs and always does, butand representation rights, the employer not being generally it works well”. I am one of those peopleinterested in acting in good faith. How meaningful who believes that once the parameters are set, peopledoes that make getting representation, if you are more frightened of possible implications butmanage to get it through because you have got these reassured by the reality of their experience.new provisions but it was within a company thatwould naturally have used union techniques? What

Q452 Chairman: One of the arguments which hasdo you think would be the next stage after that onceadvanced in favour of the “flexible labour market”you have recognition and representation rightsis that it aVords employers opportunities to come informally?to established businesses easily. I realise a lot of yourMr Burke:What we are proposing would assist andmembers are employed by what might be calledmake the situation fairer. Also, I think it would help“indigenous companies” and, on a number ofmake sure there was this level playing field with anoccasions this morning, Mr Burke has referred toemployer. It would be very nice to have a systemAmerican style tactics or American organisationswhere we turned up and the employer granted uniondoing this. With the exception of Amazon—one canrecognition because we asked for it. The reality isunderstand why they would want to come to Britainemployers are always going to put forward theirto distribute books because of the English languagecounter proposals and their view about howmarket—are there instances of inward investors intorecognition would work and the sort of agreementthe UK—in paper, packaging or printing across thethat could be reached. What we are saying is,spectrum of your membership—deciding to leavecertainly it would assist us in the long run in beingbecause of the pressure to unionise? Are there peopleable to achieve recognition because at the momentwho are involved in the union, if I can put it thatwhat we have got is the legislation and whilst it hasway, and are theyUK employers or inward investorsbeen successful in some respects where companieswho resent this tradition? Can you generalise it orare determined to keep a union out, irrespective ofgive me numbers?the law, they will undertake all of the sorts of stepsMr Burke: They are mostly UK employers. Therewhich I described earlier to try and break open, asweare occasions when we have got some overseascall it, our union organising campaign. Thesecompanies coming in or they have a diVerent base.proposals would help but at the end of the day if anSometimes they are a bit reticent but we haveemployer is absolutely determined, as we have seen,reached agreements on recognition with them. Atto bring in American style tactics, which we are nowthe moment it tends to be those companies, such asincreasingly seeing in some companies, then it isthe ones I described, who are determined to try andvery, very diYcult for us but it would curb some ofkeep us out by using these tactics.the things the employers are doing and, certainly,

in the long-term it could assist us in gainingQ453 Chairman: These employers who derecognise,recognition.notwithstanding the Associated Press issue, theMr Dubbins:We have approached it from the pointother ones, where would they come into the frame?of view that the main priority must be to protect theWould these other ones have been firms thatindividual’s right to have a trade union andderecognise when they have the chance under whatrecognise that the trade union must be able tomight be called Thatcher-led employmentbargain on the individual’s behalf. The activities oflegislation?the employers, which Tony has been describing,Mr Dubbins: The only other major company of anyinfringes the spirit and intention of the legislation.real substance is News International. The plants atFrom our own experience, I am quite convinced,Wapping have never been reorganised and, frankly,also, that once an employer has come to terms withwe would not attempt to at the present point in time.the fact that with all the reservations they may have,News International is going to relocate outside ofthe vast majority of their employees want a union tothe M25 anyway and, I think that would be therepresent them, they will do that in good faith andappropriate time to look at News International as athey will bargain in good faith. One of the mostwhole. I think it is fair to say that we have not gotremarkable things we foundwaswithDCThomsonstoomuch experience of foreign companies coming inof Dundee, who did not derecognise the GPMU inwith a view of de-recognition.the 1980s, they derecognised us after the General

Strike in 1926 and as a result of this introduction ofthe legislation, we managed to reorganise DC Q454 Chairman: I was thinking more about the

paper industry where you have large investment?Thomsons, not completely at the Dundee plant, that




Mr Burke: No. The paper industry is an entirely Mr Burke: There are a number of Americanbusinesses and legal companies who are lookingdiVerent field.around and providing this sort of advice toMr GriYths: In my experience—the view iscompanies. One of whom is called the Burke Group,obviously mixed—there are fewer companies whichunfortunately, but they appear to be a major playerderecognised the union and are now resisting ourin this arrangement in the USA.entry back in. It is companies where, as a result of a

change in the industrial climate,members are saying:Q456 Chairman: We are not always responsible for“Yes, we want to join the union” and we are tryingour relatives!to organise companies where the union has not been Mr Burke:Not at all. In terms of our regulations, in

established before. Traditionally they are non-union our written evidence we make eight specificcompanies. They may be a new company setting up recommendations about changes to the proceduresor an expansion of a group which has brought in and that would be lifting the burdens on companies,people from the locality and there has not been as we see it. Notwithstanding the response given byrecognition because there has not been a company the Deputy General Secretary, once we establishthere before. It is the attitude of companies. In some recognition it usually flows and the fear is more incases—I cite groups—we have groups where we the perception than in reality. The direct answer tohave really good relationships, where we havemany, the question: “If you had a company that wasmany plants in union membership and where a new determined to keep you out, what happens then?”,plant was set up, and there would be the initial we make the point of recommendation that once

recognition is granted they should be seen to beresistance until we go in and speak to people andnegotiating or joining the collective bargainingthen we have to go through the procedures. It is notmeasures in good faith, which is a phrase used inso much de-recognition, as very often it is in the newother legislation. I do not believe it shouldcompanies where we are gaining membership wherebe permissible for a company then to seekthere are diYculties.derecognition after the requisite period of timeMr Ewing:When the legislation was first introducedunless they have demonstrated that they havethere were organisations in this country which tookengaged in good faith. If the union was able to provean initiative to invite American consultants overthat they have not, then I think the procedures forhere with a view to getting advice about how toderecognition should apply.manage trade union relations under this legislation.

I think in your introductory remarks to this line of Q457 Chairman: To what extent are you satisfied orquestioning you said something about not meeting relieved with the proposals in the currentemployers who have been able to identify any issues employment legislation going through the House?relating to union-busting. If there is a line of inquiry Mr Ewing: On recognition?which you might hope to pursue it might be worthgoing beyond the employer to the people who are Q458 Chairman: Yes.giving advice and speak to them getting some sense Mr Ewing: I can express some concerns. It is now

enacted as Employment Relations Act 2004, which Iof what they do, why they do it and, generally, to getam sure everybody is intimately familiar with. Theresome measure of this conduct. I am sure theare provisions which have been introduced dealinginformation could be readily available about thewith unfair practices which are designed to deal withtype of organisations which were engaged in thisboth employer and trade union misconduct duringactivity over the last two for three years.the recognition campaign. The problem, as far as weare concerned, is that the legislation dealing withunfair practices applies only during a ballot period,

Q455 Chairman: Are we not saying that when the whereas a lot of the misconduct may take place at aLabour Government introduced the right to be a much earlier stage while the union is trying to

establish itself, organise, recruit and build up sometrade union member and, as it were, firmed up thekind of structure. It is at the time when the union isfacilitation of union recognition being achieved, thisbeginning to flower that it is most vulnerable and itwas a kind of trigger mechanism for eitheris at that time that it needs better protection than isentrepreneurs in America to say: “We can frustrateprovided currently. In a sense, our view is that itthat” or, alternatively, for employers in the UK towould be helpful if legislation were to be broughtsay: “We do not want this, how do we frustrate it”?back to an earlier stage in the campaign.Mr Ewing: There was an article in The ObserverChairman: On that point we will finish. Thank younewspaper around the time the legislation was very much for your evidence this morning. If thereintroduced. It drew attention to the fact that there is anything we need to follow up on, any names of

was a conference being held in Londonwhich people organisations, we would be grateful and it would behad been invited to from the States. It was about helpful if you could provide that within a reasonablehow you manage to stay union free in a legal timescale. You may appreciate that we are under aenvironment where there is support and where a little bit of pressure to get our report out before aunion is wanted. The best line of inquiry would be to General Election. In that sense, we have a deadlinespeak to the people who are engaged in that kind of of probably towards the middle of next month, itactivity rather than directly to the employers may be a short time but do what you can. Thank

you.themselves.



Tuesday 18 January 2005

Members present:

Mr Roger Berry

Richard Burden Judy MallaberMr Lindsay Hoyle Sir Robert Smith

In the absence of the Chairman, Mr Berry was called to the Chair

Witnesses: Mr Nick Isles, Associate Director and Ms Alexandra Jones, Senior Researcher, The WorkFoundation, examined.

Q459 Mr Berry: Welcome. Would you like to employee which is not necessarily the right thing. Indebates around labour market flexibility, that tendsintroduce yourselves for the record please?

Mr Isles: I am Nick Isles, Associate Director at the to focus more on the hire and fire side of things andthat tends to be more about the employer, flexibilityWork Foundation.

Ms Jones: Alexandra Jones, Senior Researcher for for employers. That is a key question which is notalways addressed as well.the Work Foundation.

Q460Mr Berry:Could I kick oV by asking what you Q462 Mr Berry: Does that not also raise the issueabout the extent to which government interventionunderstand by “flexible working”? The word

“flexibility” in relation to the labour market has is enhancing flexibility as opposed to impeding it incertain circumstances? Very often, in popularbeen thrown around like confetti for quite a few

years now. Could you just summarise how you view discussion, in some of the newspapers at least, youhave flexibility on the one hand, intervention on thethat concept? What is it really all about, what are

the issues? other and this intervention is preventing flexibility.Now the examples you have given include examplesMr Isles: The first thing to say is that it is actually

more complex than people often assume. where that is not the case.Ms Jones: Absolutely. There is a myth thatintervention impedes flexibility and actually whatweQ461 Mr Berry: Yes, I was suggesting that.are arguing, in terms of flexibility, is that it is allMr Isles: I think it was the Treasury, when they wereabout employers competing on the same grounds,trying to describe flexibility for the euro test, whichbecause you do need employers to compete in thecame up with five broad areas of flexibility whichsame way—that is what regulation is about—but, ainteract in the labour market. They are briefly: wagedegree of flexibility within that. So, for example,flexibility—and there are various types of wageemployment flexibility and the legislation which hasflexibility as well to make things even moreoVered the right to request flexible working time, hascomplicated—geographic flexibility, labour marketbeen seen by some people as an impediment to themmobility, employment flexibility, functional or taskdoing their business in the way they have alwaysflexibility and nominal flexibility. Where we seedone; others would argue that actually the Workingconfusion is that around employment flexibility—Time Directive suggests that people may be able towhich is basically about how individuals improvereorganise the way they work to become morethe quality of their working life and become moreproductive in the hours that they do.productive—there is one debate which is happeningMr Isles: If you look at OECD data which looked atover here on one track and then there is the debatethe level of employee protection legislation, there didaround nominal flexibility, the ability to hire andnot seem to be any diVerence at what level that wasfire, happening over here on another track. There isset and the behaviour and performance of the labourconfusion between those two areas of flexibility. Themarket as a whole. There is not a straightforwardthird area Iwould highlight is around task flexibility,causation between high levels of nominalwhich of course is critical when we start talkingflexibility—the ability to hire and fire—and a veryabout the sorts of flexibilities and capabilities wewell performing or high performance on your labourneed for a knowledge economy and knowledgemarket in terms of employment rates andsociety. There are all sorts of question marks aboutengagement elsewhere. If you look at thethe UK labour market in terms of its adaptiveScandinavian examples, they have higher levels offlexibility and its task flexibility.regulation and less flexibility than we have, yet theirMs Jones: One of the key areas where there isemployment rate is above ours.confusion as well is about whom the flexibility is for.

It can be for employers and then perhaps thenominal flexibility comes in more strongly; I do not Q463 Mr Berry: Do you think that the main

obstacles to some of the flexibilities are thethink many employees would necessarily say thatthey welcome the freedom to hire and fire. I think employers? You refer to employers and government.

In terms of flexible working, do you see that themainthat whom the flexibility is for is a key thing andcertainly in working time debates, employment players here are the attitudes of employers, or the

attitudes of government?flexibility debates, there tends to be a focus on the



18 January 2005 The Work Foundation

Ms Jones: I think it has to be a combination. Ms Jones: It is not necessarily an area whereLegislation sets a minimum standard for many legislation is the answer; often legislation is seen asemployers. Again, with the right to request, many the answer. I think the point that we have madeemployers have brought their policies up to that around employers needing to be engaged in this doesmark because of the legislation, whereas others were mean that there needs to be a real emphasis onwell ahead and have remained well ahead. The making the case for flexibility. When you look atgovernment certainly sets a minimum standard, but employment flexibility, working time flexibility,employer attitudes, employer culture, employers’ employers who are engaged in it are the ones whoway of working is vital to achieve some of the actually buy why they should get engaged andflexibilities. Sometimes it is posed as a dichotomy, an certainly our research suggests that where it workseither/or, and that just simply is not the case within most eVectively, it looks at the customers and theorganisations. If you have, for example, a culture in markets, it looks at the organisation and the way itan organisation that says “We have a lovely flexible works and at the individuals; it really does take thatworking policy”, to use an example of an investment stakeholder approach you mentioned. Thosebank we spoke to, they had wonderful paternity organisations are engaged and a role for governmentpolicies, absolutely fantastic, complied with the would be partly in making that more strategic caseletter of the law and they said they were going to use and also talking about some of the practicalities. Thethem to weed out the losers. Now, certainly DTI has promoted best practice, but some of thatgovernment has a role to play in getting policies best practice tends to be somewhat vaguer thanthere, setting that minimum standard, but perhaps is useful for organisations. It tends to focusemployers need to be engaged and need to see the on the fact that it is great without saying what isbenefits of being engaged. It does need to be a kind diYcult, talking more perhaps around workof joint eVort. organisation and job design, which we would argueMr Isles: Our research into performance issues—we are key. There are roles, we would welcome theran a major project in which we described work and extension of the right to request to carers forenterprise, that is what we called it—looked at those example, which is already suggested, but there is abits of an organisation’s performance which were lot more to be done just getting that conversationnot just about input, the number of staV or the going.qualification of those staV and the amount of Mr Isles: Going back to what I was saying aboutcapital.What we found over those high performance employment flexibility, that is very much about theorganisations—we developed an index, we surveyed level of skills and adaptability of the workforce as aover a thousand private sector companies across the whole. Our research shows that the UK has madeUK—was that there was a 42% performance hike in great strides actually in increasing levels ofour high performing group. They all, without attainment within the workforce as a whole. It isexception, put a lot of eVort intowhat youmight call now standing at around 63% of the whole workinga social partnership approach, into deciding how population at level two or above, and the EU target,best to deal with work organisation and job design. as suggested by theKok report, as part of the processLegislation per se, regulation, was not seen as a of reviewing the Lisbon strategy, was to get that upparticular problem by those organisations. It was a to about 85%, which is where the best performingbit of a hygiene factor almost. It was something they European economies are at the moment. I think thathad to account for and deal with and they did. Even is a critical element when we are talking aboutin smaller organisations, other research we have flexibility and thenwhat thatmeans for performancedone has shown, surprisingly I think, that they enjoy productivity; that would be where we would focusquite marked degrees of flexibility in the way that eVort and resource by government, getting thosejobs are designed and the work is organised. That is inputs right, the demand side, bringing employerswhat is critical in terms of what you might call into contact with supply side to improve the levels ofemployment flexibility and task flexibility, which are skills. The rest of it has to be down to employers tothe key elements of flexibility to improve get work organisation and job design right. Whereperformance overall within the economy and, as a can government play a role? Clearly in exhortation,second order, is the sort of flexibilities that we in aspiration setting, in encouraging best practicedescribe as hire and fire. I would say they are less

along the piece, but we have to move from where weimportant than those other two types of flexibility inhave been, at this oft-cited low skills equilibriumthe economy as a whole.leading to low productivity outcomes, to a muchmore high value adding economy. Michael Porter’s

Q464 Mr Berry: Just to bring that all together, in report to the DTI, last year or the year before, madeterms of theUK economy,which are the areas where that very point, that we have reached the end of theyou think more flexibility would be desirable and road for being able to compete on cost alone.which are the areas where you think we have got Basically, with the way that demand has beentoo much? structured on a global scale, the emergence of ChinaMr Isles: I am not sure I can answer that to be and India and other countries as a place to go to dohonest. your cheapmanufacturing and then even your cheap

services, we have to be focused on those inputs andcreating those flexibilities around what happensQ465 Mr Berry: It does depend on what you meanwithin the organisation. That is where governmentby flexibility. We have been through that already.

Your policy recommendations I suppose. has a very big leading role. I do think one of the




things that we got wrong in the past, in this area, was organisations do not measure the impact offlexibility. In fact very few do and when you look atlooking toomuch at the supply side to provide all the

answers. It is about bringing employers, the demand the results of many surveys in organisations, theretends to be a focus on employment productivity,side, to step up to the plate, in a way, and accept that

they have an active role. Looking across at which is time, and there tend to be surveys which saymorale went up or people seemed happier. WhereEuropean examples of where this has worked well,

apprenticeship schemes that really have the there have been some measurements, BT is a verygood example of an organisation that has beeninvolvement of employers, where they are putting

their money where their mouth is, seem to have a actively trying to measure what the impact of someof its flexible working arrangements are and thatbetter return rate for increasing levels of vocational

skills and really achieving performance means homeworking, that means rearranging tasks,giving people more control over their time andimprovements.organising their tasks, they found, for example,homeworkers are 31% more productive than oYceQ466 Mr Hoyle: What do you think the UKbased counterparts, people still in the oYce. SomeGovernment’s approach is to flexibility at work andother work has been done in other organisationsdo you think it is doing enough to promote morearound retention of women after maternity leave,flexibility?which suggests that having some flexibility in theMr Isles: You could do more around getting theway that work is organised has an impact onmessage that creating more flexibilities around workproductivity. The other interesting statistic, I willorganisation, giving people what we have describednot go into too many, is something we did in ourin The Work Foundation as more time sovereignty,workplace trend survey which said that flexibleis actually a good thing for their performance andworking, however you define that, was in the toptheir outcomes, and, critically, spending money onthree things which business thought would have aninvestment in their human capital. All these are goodimpact on their productivity over the next year. Thatmessages and there is a little bit of fence-sittingis a survey of 1,000 organisations in all sorts ofaround how far to go on these sorts of questions.sectors. So it is seen to have a link. The gap seems toThe business lobby is very vociferous about talkingbe in research that actively pins down exactly whatof the damage that red tape can do to UKthat is, with all the caveats that come with researchperformance, but in our view the red tape argumentsaying what diVerences certain ways of doingis a slight red herring. It is much more about thebusiness have anyway.inputs and being smart around how you adapt to

regulation.Q470MrHoyle: So youwould actually say probablythe best market leader is BT?Q467 Mr Hoyle: Just following on from that, in the

case of the EU regulations, do you feel that the Ms Jones: At measuring? Absolutely. They do seemto be doing some good things. There does seem to beGovernment is a gold-plater?

Mr Isles: It is probably a well-founded charge. We more work on looking at what impact flexibleworking has. There are many case studies out there,do things very thoroughly. I think one of the benefits

of our system and our excellent civil service is that anecdotes around the way that functional taskflexibility has impacted on the way businesses havethey are very thorough when they put it in. We have

a very good record of transposition of EU directives run, so they have been able to save money becausepeople have needed to do fewer hours. That goesinto law compared with other European countries I

shall not name. back to some of the conversations around the lowroad to productivity, UK businesses operating on alow skill model and just making people work longerQ468 Mr Berry: If not gold, certainly silver.hours when they need to produce more. There isMr Isles: Certainly silver. One of the outcomes ofsome case-study evidences, there is evidence around,this mid-term review of the Lisbon strategy, whichbut it seems to be a bit scattered and it could beseems to be on the verge of being thoroughlypulled togethermore eVectively, certainly fromwhatendorsed by governments across Europe, is thatwe have reviewed.there will be more naming and shaming through the

openmethod of co-ordination of countries which donot transpose as they should do, so that we do create Q471 JudyMallaber:Youmentioned homeworkers.a level playing field and that allows UK businesses, Do you have any information on how many hourswho feel that maybe we have been doing this homeworkers tend to do? Also, I think there yougold-plating and therefore disadvantaging them were mentioning it in the favourable light of peoplecompared with some of their competitors in Europe. with good jobs who are doing homeworking and IIt will deal with that particular issue. wondered how much information you had on those

which are fairly well exploited at home and anyinformation or thoughts that you had on theirQ469 Mr Hoyle: Can I just take you on a little

further? Do you have any figures on productivity employment status. Have you done any research inthose areas and how that links into the flexibilityand flexible working?

Ms Jones: There are figures around on productivity argument?Ms Jones: We have done some research onand flexible working. Establishing correlations,

cause and consequences is very diYcult in all of this homeworkers. It has tended to be looking at thosewith better jobs, because that it where the focus ofand one of the challenges around this is that many




the debates have tended to be. Certainly in response could argue the same around the homeworkingdebates.What you see around that are articles aboutto your question on hours, there is a mixed bag of

evidence, that homeworkers, because they have people deciding to downsize and work at home in alovely place in the country often. Now, that is aaccess via mobiles, via laptops, seem to be doing

more work, which may explain some of the caricature, but a little more accurate than perhapscertainly we would like to see around these debates.productivity boost; but they also seemmore satisfied

with their jobs. If they feel more in control and they When you see that, it influences your view of whatthese debates are about, of who is involved, sofeel happier, then it is an argument perhaps for

homeworking. There are issues around, even with around security, you are absolutely right, there arewider economic issues but also debates aroundthose good jobs, whether people really do feel in

control, whether they feel actually they constantly security are a kind of myth which can be sustainedwithout necessarily evidence to back it up.need to be checking e-mails, phoning the oYce,

constantly proving that they are working. Certainly Mr Isles:We have done some research into so-calledwe found, talking to companies, that it does need to generation Y workers; these are people who werebe done carefully. You need to be the right kind of born after 1981. They absolutely have the idea thatthe person to be working at home, to be able to cope there are no more jobs for life and this is creatingwith it. You need to have good communications set some problems for employers, because they have noup, you need to feel part of the team, so there are all loyalty to the employer. We came up with this termsorts of policies which need to wrap round it, also gold dusting for groups of young workers who werehealth and safety needs to be a consideration and literally acquiring brands on their CV. Then, as soonthat is a legal requirement. There are many more as they felt they had done enough, they moved on. Itissues around homeworking than are commonly is almost that the rhetoric has gone too far. If youdiscussed, even in those so-called good jobs. I think think about it logically, there is a sort of illogic aboutaround the people who are working at home and companies saying “We can’t oVer you a job for life,who are exploited, I have not seen much research but we want to go on and on”. Especially with largerdone on that but it is an issue when you consider that organisations, why would you do that? I think wepeople working at home, even in employment, may have maybe gone too far the other way and feltfeel that they do not have the equipment, that they security is clearly a problem, an issue in the UKare working too long hours, that they are not being labour market; I do not know enough about theadequately rewarded, that they are not part of the French labour market and other labour markets toteam, they are not getting the training. Taking all of know whether that is the case. These externalitiesthat and putting it into the context of perhaps not which aVect an individual, proving that business ishaving clear employment rights and other issues, very much rooted within society and everything thatthat is a real issue but it is not something that we we do around that, are very important to thosehave done a great deal of work on. feelings of felt perception. Feeling secure and in

control are the two key things for improvingperformance and productivity. TheMichaelMarnotQ472 Sir Robert Smith: You mentioned earlier,research into Whitehall clearly shows that thosenominal flexibility and the sort of view that hire andpeople who have no control over their job, stuck infire might be a way some people feel would drive thethe middle doing routine tasks, actually have veryeconomy down the American model. One of ourpoor health outcomes; it aVects their health in a verywitnesses this morning was talking about how,real way. So giving people some control and someinterestingly, someone working in the US stylesecurity is actually a smart thing for an employercompared with someone working in the Frenchto do.style, where it is much more diYcult to hire and fire,

actually it is the US person who probably feels moresecure in their job than the French person at the Q474 Sir Robert Smith: On the issue you raised ofmoment. I just wondered whether there was any the shortcomings exposed by long hours andactual research which you are aware of in that field overtime as a poor response to the need forof comparingwhat is the nominal situation andwhat productivity, can regulation on working timeis the perception of the person actually working in prompt the reorganisation of work and increase inthat situation. productivity, or is it more to do with trying to getMs Jones: In the UK, there is research. People’s industry to recognise its problem and confront it?feelings of insecurity around their job are not Ms Jones: Regulation can have a role. It certainlymatched by the figures on job tenure. Job tenure does not seem to have had a great deal of a role withover the last 10 years has gone up, which is entirely the working time directive. Some organisations havecontrary to popular perceptions around insecurity. reorganised the way they work, whether it is aThere is a perception gap around how people feel security firm reorganising from about 90 hours aabout their jobs and security and actual job tenure. week down to about 70, which is a start, or whether,

with some organisations, I believe a brewerycompany were among those, it is looking at theQ473 Sir Robert Smith: It may be the widerhours their employees were working and thinkingeconomic issues than the state of the company whichabout making sure they could work diVerently andaVect security.work fewer hours. It has prompted someMs Jones: Yes; absolutely, but also the debatesorganisations to look again at how they arearound it. People talk so much about the fact that

people are losing their jobs and it feels insecure. You organising their work, how they are designing their




jobs and how people are working; but not that many Europe has in economy around what it has done onenvironmental regulation, I do not think anyonepeople, because of the opt-out. There is not much

enforcement around the Working Time Directive, would have an argument about that. We wouldidentify five areas. What does regulation do?nor is it really widely understood among employees,

certainly as far as we understand it, so I think that Promote and underpin competitive productmarkets, create a level playing field, it is there tocould have a role. If you are going to organise work

within 48 hours then you would clearly need to start protect consumers and public, it is there to protectthe environment, to protect employees and otherthinking around work organisation and job design.

It clearly raises a challenge for industries such as stakeholders and, also, it is the balance betweenbusiness doing business as it wants and being part ofconstruction where you win contracts based on this

idea that youwork very quickly and it is usually over the society in which it operates, which is a way ofidentifying where the public interest is. So smart48 hours in one week, perhaps not over the 17-week

period, but if it is an industry-wide assumption that regulation is actually a good thing, it can drive upstandards, but on its own it is not suYcient to get thethat is how you will work, you do need to get

industry talking about what agreements will be put productivity and performance improvements thatwe want to see in the UK.in place to make sure that everyone is operating and

competing on the same level. A study of anaccountancy firm around these issues was very Q476 JudyMallaber:Youwere talking about peopleinteresting because it talked to clients and working very long hours and you mentioned highaccountants and found that accountants felt the earners and the people who are obsessed by work.need to work incredibly long hours in order to Apart from high earners and the self-employed, inprovide a customer service for their clients. Clients which areas or sector is the long-hours culturefelt the need to stay quite late because they thought concentrated?they needed to make best use of the accountants and Mr Isles: On the whole, it is professional, associatemake sure they were there to answer any queries. It professional people and people doing those sorts ofwas a fascinating reinforcing cycle. It does make a jobs. It is men with family responsibilities as well.point around having a wider debate, having a debate Interestingly, until recently at least, it was alsowithin the industry about what good looks like, women working full-time who were seeing thewhether this is in terms of construction or in terms biggest net increase in their average hours. In the PSIof professionalism in accountancy. LSE data, it had gone up from 40 to 43 hours a weekMr Isles:The researchwe did last July into work and for full-time working. I think it was mothershappiness, the link between people’s jobs and how actually, but we can send a note on that justsatisfied they were, showed that on the whole, long clarifying it. That was certainly up to last year whenhours follow pay. Themore highly paid you became, the average hours did fall back a bit. No-one is quitethe longer hours you tended to work. However, sure why that might have been the case: athere are two caveats to that. One, we identified combination of debate around work/life balance,about 400,000 people, extrapolating up economy- probably theWorking TimeDirective and the eVectswide, who were working 60 hours a week for less of full employment, a mixture of those three I wouldthan £11,000 a year and that clearly is a wrong. We have said.also identified about two million people, againextrapolating up from our survey, whom we Q477 Judy Mallaber: Were those long hoursdescribed as “workophiles” and these people do not concentrated in particular sectors or industries?make a distinction between work and life. Work is Ms Jones: There is some concentration, certainly intheir life, they really enjoy it. Now it might have a surveys we have done, around agriculture sectors,knock-on eVect for the people with whom they are where that varies seasonally, construction. Thereliving, are friends of and all the rest of it, and we all were fewer long hours within the public sector,know these people, we probably work with them although an awful lot of people were putting ineveryday. What does legislation do around that? It unpaid overtime within the public sector andis there to curb excesses, where there is clear certainly the public sector feels more strongly inexploitation, and set a tone around eYciency and surveys we have done about hours of work.eVectiveness, which is going back to the points we Financial services also seem to appear as a sectormade earlier, but there are groups of people whowill where there are particularly long hours, but wecontinue to work excessively long hours and we should be happy to send a note on some of theshould probably not worry about them too much as research we have done.long as they are happy doing so and healthy.

Q478 Judy Mallaber: I would also tend to associateQ475 Sir Robert Smith: Do you think there is a long hours with poor basic rates, people desperate todanger that actually, if you just rely on regulation get overtime. I would assume that is presumablyand it becomes too over burdensome, you are borne out by the evidence.actually going to drive away the investment that Ms Jones: Two groups of people tend to be workingwould bring about the reorganisation that could long hours. One is for money and the other isproduce the better working environment? because it is unpaid and those who tend to workMr Isles: We just have to be clear about what because they need the money are often on poor basicregulation is for. Regulation has a very important rates of pay, often are the people who need it to get

necessities let alone basic luxuries for their families.role to play. If we look at the comparative advantage




Certainly that seems to be a big group of people who should be much more able to take time out during acareer or work diVerently and be able to return soare working long hours. Then there is the group who

are doing unpaid overtime and they are usually the that you can progress as far as you are able and stillhave access to opportunities. People are starting tomore voluble group because they are doing these

hours and it is to do with workload and work feel that things should change.organisation. There is a substantial groupwhich wasidentified in the TUC survey for example, of people

Q481 Judy Mallaber: Are there any sectors where itwho do work long hours because they need thehas actually proved possible to do that, to make thatmoney.kind of change in working patterns, either to go parttime or to job share or whatever and not lose your

Q479 Judy Mallaber: May I go to the other end, career profession, be able to move back?. Are therepeople who maybe are not doing as many hours as any positive examples of that?they would like to? When, in another select Ms Jones: The public sector is actually fairly good atcommittee I served on previously, we did a report on this; for example, job shares within the senior civilpart-time workers, I recall there being evidence that service. There are not that many, but there are somein fact a fairly substantial number of those who and it seems to have worked eVectively. Anotherworked part-time did not want to work full-time example, in the private sector, is a job share storehours, but would like to have been able to do more manager role in Boots which has worked quitehours. Do you have any evidence of that and is that eVectively. The problem tends to be that thesomething which there is any evidence that examples are few and far between and many of theemployers will respond to, if asked to rearrange challenges people cite on job sharing are aroundwork patterns in that way? finding a partner; on part-time working, aroundMr Isles: Certainly we do have some evidence that finding a role where the workload will suit or thewe can send you from the survey I mentioned earlier workload can be reorganised to suit. Anotherlast year about part-time workers who want to work example, unfortunately also from an investmentlonger hours. In that group we identified a group of bank, was where somebody was told they were tooindividuals who would like to work more if they senior to take paternity leave; so seniority issues.could. There is a large number of people who said Certainly we found barriers, but the public sector isthey would like to work fewer hours and of course in many ways leading the way on this and there arethe UK does have a larger number of part-time some good examples there. Understanding whatworkers than other European economies on the some of the barriers are goes back to these things wewhole. I think that the Dutch have a higher have been going on about: work organisation andproportion than we do. job design. These are key skills whichmanagers needMs Jones: Forty per cent compared with 25% andwhichmanymanagers just do not have. In awayroughly. that goes to the core of this debate around flexibility,

whether it is functional, whether it is employment, ifyou are looking at the productivity side, and weQ480 Judy Mallaber: How much evidence do youwould argue those are the key ones. Understandinghave on what response there is from employers ifhow to reorganise work, how to workforce plan,they ask to change their working hours in either ofhow to job design are key and that may be one of thethose directions?key barriers to people who are working in aMs Jones:We do not have a great deal of evidenceparticular way, either full time or part time, shiftingspecifically on what happens if you try to increaseinto a diVerent way of working.your hours. When we ask people why they areMr Isles: Some of the retailers, I am thinking ofworking the hours they are—and we did a surveyASDA in particular, have been quite good inrecently on this issue—there tends to be an emphasisoVering a range of flexible benefit, or flexible ways ofon “My employers would not want me to workworking to suit diVerent life stages. I do not knowdiVerently” or “My workload will not allow me towhether there is any data on people shifting aroundwork diVerently” for those working longer hours.between them. It is muchmore to the idea being thatThere seem to be many people who feel that theyif you have someone coming in at a particular lifecannot ask their employer essentially to changestage, they can have an employment contract thatthose hours. Certainly with the right to requestsuits that life stage, say term-time working or, forflexible working, if you do move to a diVerent wayolder workers, being able to takemore time oV in theof working, it is a permanent change in terms andwinter, that sort of thing. I have not seen data onconditions and that may make it more diYcult formovement within an organisation like that.somebody, once they have changed the way they areMs Jones: What is encouraging is that we run theworking, to move back to a diVerent way ofemployers’ work/life balance website and we have aworking. Certainly the evidence around careers,steering group of employers and they have expressedwhen women may move to part-time working whena real interest in understanding how they can startthey have young children—and it does still tend toproviding ways for people to work diVerently, takebe mainly women—the diYculty of actually gettingtime out, work part time, then move back into theback into, call it a career track, call it access tocareer track, or into working full time for thetraining and to pay rises and promotion, seems to beorganisation. They are realising that with an ageingquite considerable. Once you move oV that full-timeworkforce, with more and more women in thetrack it is quite diYcult to rejoin it. We did a survey

and found that two-thirds of people feel that you workforce—one in five workers will be mothers by




2010 for example and most of the workforce growth NHS. That is an example perhaps of where agencywork can distort the market for employment in thatis going to be women—they are starting to realise

that you cannot write somebody oV because they particular area and actually drive up costs. Nursesshould be able to get higher wages within the NHSperhaps do not work in a way that people have

always worked. They are losing some of the people arguably rather than resorting to agency work. Notin terms of a sector, but just in terms of some of thethey need and certainly in retail, oVering flexible

ways of working is key to them. They have found recent developments in agency work or peopleworking for themselves, one of the interestingthat people like B&Q, who oVer good flexibility to

older workers and all sorts of diVerent ones are things, in terms of growth in self-employment, seemsto be that many people may have been given earlyfinding there is a link between that and profit which

always gets people’s attention. retirement or may have been made redundantslightly early and are not wanting to give up. Somepeople are suggesting that some of the growth in self-Q482 Judy Mallaber: B&Q are very pleased toemployment is around people who have decidedpublicise that as well and say how well they arethey want to work for themselves, you could definedoing. Talking about work organisation leads onthem as temporary or agency workers—temporaryquite neatly to looking at agency work. Weworkers anyway—doing short-term contracts, goinginterviewed Manpower this morning and had anand deciding to help out with some things andinteresting set of views about the values of agencyworking for themselves rather than getting back intoworking. Would you regard the high use of agencythe labour market. Now that might be because theywork in the UK as a sign of a flexible labour marketcannot get into the labour market, but for some, itor of poor work organisation and an inability toseems to work rather well. In terms of your questioninvest in the workforce and to organise their work inon sectors, we could certainly see whether we coulda way that does not need agency working?find some more information for you.Mr Isles: I am not sure that I would agree with the

last point you made, that it is necessarily the labourmarket notworking eVectively. I think it is an output Q484MrBerry:One of our witnessesmade the point

that in his view labour market flexibility in the UKof our particular labour market cultures, because alot of people choose to work in temporary work and was superior to that in Germany and the evidence

was that we have much lower unemployment thanagency work. The surveys of satisfaction show quitehigh rates of job satisfaction for those people who there is in Germany. May I ask the hoary old

question? It is true that the UK’s employmentare doing temporary and agency work wherecompared, certainly with full-time workers and even performance has been far better than most of

Europe, certainly Germany in recent years. Is it allwith part-time workers, who usually have higherlevels of job satisfaction being recorded. It may well about labour market flexibility? Is it all about the

macro-economic approach? Is it both of the abovebe part of the fact that we have a slightly easier, orthe second most flexible, labour market in terms of or, fourthly, none of those at all?

Mr Isles: I think a lot of the stories about the way wenominal flexibility of developed economies, that oneof the side problems of that is that we have a thriving have managed macro-economic demand and those

types of institutions, the independent Monetarytemporary and agency work sector. It is notnecessarily a bad thing. Where it can become a bad Policy Committee and the Bank of England and the

setting there compared with what has happened inthing is where employers are using it as substitute forposts which should probably be full-time or Europe. Certainly the German labour market does

suVer from some rigidities which need a forensicpermanent posts, where it is ineYcient, eitherbecause you need to build up skills and experience approach to loosening them up and a good dose of

applied active labour market policies in particularand knowledge and develop staV properly and whatyou are really doing is having a series of temporary ways would probably help. If you look at want-work

rates across Europe and compare France, Germanyengagements which do not really add a huge amountof value. That is where one could arguably say and UK, and there are some very good numbers

from the TUC, they are pretty similar. Ourflexibility has a down side. I think I will leave it atthat. unemployed moved onto incapacity benefit on the

whole. According to the labour force survey therewere 2.7 million people who would like a job if theyQ483 JudyMallaber:Would you have any thoughtsthought they could get one, so I think we have to beabout whether what you have just described appliesquite careful about saying that we are doingto certain sectors but not others? Are some usingfantastically well. What we have done well is that weagency workers in a positive way and others in a wayhave created lots of jobs and that goes back to thewhich is really just hiding the way in which theypoint I was making about the way we have managedshould be organising themselves?demand in the economy as a whole. I would putMs Jones: I am sure there are examples of sectorsflexibilities lower down the order of priorities indoing both of these things. It is not something Iterms of why that story is so.would know in terms of sectors, but certainly where

you could perhaps see some disadvantages of relyingtoo much on agency workers is in places like the Q485 Mr Berry: I cannot resist what I think is a

correction. I think the 2.7 million figure relates toNHS where many people may move into agencywork because they can get higher wages as agency thosewho claim incapacity benefit, which is farmore

than those who actually receive it, which politiciansnurses, which has an impact on the budget of the




on all sides appear to make no distinction between. assumptions made are absolutely ridiculous. I thinkthey are still made by employers, but this is actuallyThe survey suggests about a million of those would

seek work. Is that correct? where regulation can have a role. The 2006 agediscrimination legislation has got many people veryMr Isles: Yes; quite right. I stand corrected.

Mr Berry: Excellent. I have never been able to do worried about their current practices and they arelooking at their graduate recruitment programmesthat before from this position.

JudyMallaber: I am very impressed that you correct right through to pensions and retirement. One of thekey challenges around that is thinking aboutthe witness’s statistics.

Mr Berry: Good; you are meant to be. diVerent ways to use diVerent people at diVerentstages of their career. For example, if somebody isaged 50 and is very able to continue working forQ486 Judy Mallaber:While on that, if you had any

information at all on any surveys which are being another 20 years and is one of themost senior peoplein the organisation, what about everybody else whodone about how employers have or have not been

able to change their work practices to assist people is trying to progress, who wants that role? Manycompanies may actually encourage people to movewith disabilities or incapacity to go back into work

on flexible working patterns, that would be helpful. on because of that perhaps, because they have notreally thought about diVerent ways of using people’sI think we are all looking for ways of doing that. I do

not know if you have done any studies on it at all. skills. Again, that goes back to functional flexibility,task flexibility, thinking about diVerent ways ofMs Jones:Wehave done an evaluation of theMarks

and Spencer programme which is not quite the same using people. For example, they could lead projects,they could be mentors, there are all sorts of ways.as that. It was a programme which provided work

experience for a whole range of groups of people Certainly I would say that the employers we talkedto are amixed bag in terms of when people recogniseincluding homeless people and people with

disabilities, so we have done some work on some of it is an issue in terms of a changing labour market,when they realise it is an issue because they are losingthe key barriers to getting people with disabilities

working, some of the enablers. We could certainly good people and whether they really want to tackleit, because it is quite a big issue.send that across. We are also talking to another big

retailer about some of the ways in which they might Mr Isles: I think this is where the market is going tocome into play. If you look at demographic trends,be able to make use of their ability to employ people

with disabilities and actually reach out to some of andwe are comparatively better oV than some of ourEuropean country partners in this regard, employersthose who would like work but who may be on

incapacity benefit at the moment. I should be happy are going to have to rethink their approach to earlyretirement and discarding people at 50–55. Whereto do that.are they going to get their workers from? They aregoing to have to look at so-called atypical groups ofQ487 Sir Robert Smith: One of the big challenges a

lot of the sectors we looked at say they face is a skill workers to get their workforce.Ms Jones: One of the things to mention as well, isshortage or recruitment crisis. What, from your

experience, is the view though of them recognising that it is usually assumed that it is men over 55 whoare the group who are going to suVer particularlythat at the other end of the scale they have people

who they make retire who perhaps still have plenty from being made redundant or being forced toretire, when actually many women over 55 areto oVer the company? What is the view nowadays of

a retirement age? Is it a fictional age, or should unemployed. It tends not to be a group that isfocused on quite as much because more women maypeople be judged on their merits whatever their age?

Ms Jones: We would argue that people should be stay at home because of caring responsibilities.Certainly the statistics I have seen suggest that it isjudged on their merit and their ability to do the job

and age is not necessarily an indication. For a big issue and given the poverty of many women inretirement, because they have taken time out to careexample, I have to resort to an anecdote here, but a

debate on Newsnight argued that older people were for dependants, that is an issue which we thinkshould rise up the agenda much more as well.unable to use ICT, so would be unable to lead

organisations. It is a gross generalisation, when you Mr Berry: Okay; thank you very much indeed. Thathas been very helpful and extremely interesting, sosee that one of the key growths in internet usage is

so-called silver surfers. I think some of the thank you again.



Witnesses: Mr Gerry SutcliVe, a Member of the House, Under-Secretary of State for EmploymentRelations, Consumers and Postal Services,Ms Janice Munday,Director of Employment Relations andMsBeatrice Parrish, Senior Economic Advisor, Employment Relations, Department of Trade and Industry,examined.

Q488 Mr Berry: Minister, good afternoon and responsibilities within the same job and through theability and willingness of employers to adjustwelcome. We are ahead of schedule by three

minutes, so we will not detain you unnecessarily. employment or invest in training. All of these thingsare looked at in Wim Kok’s report and are keyShall we get on with it? Flexible labour markets,

what does that mean? components of adaptability.Mr SutcliVe: For the Government it means tocontinue the excellent position that we are in at the Q491 Mr Berry: Out of interest, when did themoment where we have more people in work now terminology change from flexibility to adaptability?than ever before, the lowest level of unemployment Mr SutcliVe: It is something I am trying to initiate.andwe want tomaintain the soundmacro-economicposition that we are in. I would perhaps prefer to use

Q492MrBerry:That is fine.We like to be first in thisthe word “adaptability” rather than “flexibility”Committee.because flexibility sometimes creates the wrongMr SutcliVe: If the Committee will help me withimpression: that it is about people working harder,that, I am sure that we can.working more vigorously, when it could be about

working more productively through betterinvestment decisions, through working smarter. We Q493 Mr Berry: Your submission talks aboutthink that adaptability has been a key component of flexibility.the UK labour market, which puts us in a very Mr SutcliVe: I have been thinking about this a lotstrong position when you measure that against our actually over this last period. Flexibility has diVerentEuropean colleagues. Yes, it is important that we connotations. If you say flexibility, inmy former rolesigned up for the European social model but if you as a trade union oYcer, to my members in alook at the Lisbon targets, the Lisbon agenda and workplace situation, they would see flexibility asthe WimKok task force report, you will see that the meaning they had to work harder. It is more aboutUK is ahead of the game in terms of trying to reach adaptability in terms of the changes that we arethose agreed targets. trying to achieve because of the changing nature of

work patterns and the workplace. I very muchwelcome the opportunity to come before theQ489 Mr Berry: Some of us were saying some veryCommittee this afternoon and look forward tonice things about the UK’s performance in yourthe future. This is about making sure that peopleabsence earlier, just to put that on the record.raise their games, employers and employers’Mr SutcliVe: I am very pleased.representatives, employees and employees’representatives, in terms of the challenges that we

Q490 Mr Berry: In terms of flexibility or are facing in globalisation, in a more competitiveadaptability, obviously this covers a number of environment. It is about changing some of theaspects, a number of issues. Which are the areas of attitudes and viewpoints as to how we need toflexibility or adaptability which the government are continue to be in the strong position that we are inkeenest to promote? Be specific. with employment.Mr SutcliVe: The driving force around productivityis that the Government set out its strategy in terms

Q494 Mr Berry: How important is more regulationof investment, innovation, skills, enterprise andin achieving those desirable objectives?competition being key drivers towards increasedMr SutcliVe: Regulation has to be a balance. Thereproductivity. We want the adaptability around that.was a necessary restoring of a balance from 1997 toIt is interesting in the UK, that you can look at thewhat happened previously. I think the introductionchanging work patterns in terms of flexibility, theof the Information and Consultation Directive is achange in how people see work and rememberinggood example of this and we have ended up with athat in my view legislation is only to set minimumframework agreement between the CBI and thestandards so that work practices evolve and develop,TUC which sets out the structure for agreement andso you have the flexible working arrangements inI think that has been tremendously important. Soterms of parents being able to apply for appropriateregulations are minimum standards which are set,time oV for caring responsibilities and the flexibilityminimum legal requirements and where we can getthat you could go down in that particular way. Weagreement from social dialogue, that is how wesee these as key components and we also see thatshould try and move forward.there is a change in the structure of industry and

there is a change in the way that the UK does work.Adaptability and change are key elements to what Q495 Sir Robert Smith: Just building on that,

because obviously a lot of the regulation comes fromwe want to try and achieve. I will hand over to mytechnical experts on my left and my right in terms of a European-wide framework, how do you respond

to the concern that the UK model has been moremore definition.MsMunday: If you look at adaptability, it can arise successful because it is diVerent and that asmore and

more regulations become on a European-widein many ways. One is how quickly wages adapt toshock, one is the willingness or ability of people to framework, we are likely to suVer because they will

go with the majority on mainland Europe.move into new jobs or sectors or to adapt to new



18 January 2005 Department of Trade and Industry

Mr SutcliVe: We have put a very strong case in raise the game, because things are changing. Weneed to find how people do things better, how we getEurope. We were happy to sign up for the Social

Chapter for the reasons that I outlined earlier in people to return to work who have been inactive inthe labour market. Good examples exist in Europeterms of the holiday arrangements, the working

hour arrangements.We have been very secure in our and elsewhere. We are constantly seekingimprovement, but we do that from a very strongbelief that to achieve the Lisbon targets, to do what

WimKok is asking of us in the report, is to argue the position in the employment terms that we have andthe adaptability and the understanding of thecase for adaptability and we want to see a high

involvement in the labour market, rather than the challenges that exist. There may be public positionsthat employers’ organisations and employees’view of the previous government, which was to have

a higher level of unemployment. We are arguing organisations have, but there is a general acceptancethat the UK is in a strong position.with our European colleagues, other Member

States, and I have been talking to most of theemployment ministers in the Member States on

Q498MrHoyle:Can we go on to theWorking Timeissues like the Agency Worker Directive and theDirective and flexible working? I know this isWorking Time Directive. On the bigger picturesomething very dear to your heart, Minister. Orabout why adaptability in the market is important,should we now say adaptable working? I think wewe are gaining allies in terms of regulation notwill stick with flexible working for themoment. I justalways being the appropriate way forward, but thatwonder, in the case of trying to maintain the opt-outit can be dealt with through other issues, throughfrom the Working Time Directive, why thecompetition or better competitive involvement.Government wishes to do that. Do you not believeThere are other ways of dealing with things and Ithere is suYcient flexibility built into the averagethink theUK view is now coming to the fore in termsperiod now to allow it?of that approach. I know that MPs will be aware ofMr SutcliVe: The Working Time Directive hasthe current debate in Europe about moving awaybecome a bit of a cause celebre in a sense and there isfrom regulation to greater competitive values.a greater attachment to its importance than perhapsthere needs to be. We all agree about the need to

Q496 Sir Robert Smith: How has the enlargement make sure that people are not forced into workingaltered the dynamic in which you have had to over-long hours and that people should be protectedoperate in terms of that debate? from exploitation. The Working Time Directive isMr SutcliVe: Clearly, with the addition of the new actually a health and safety directive and if you lookMember States, I do not think it is surprising at the UK’s health and safety record compared withbecause we are making the case, they favour our any other European Member State, we are in theapproach because of our record of employment and upper regions of those comparisons. We areour record of activity in terms of employment concerned about our long-hours culture, weactivity and how we are trying to create the balance introduced a project to look at the issues aroundbetween making sure that there are minimum long hours and we are for tackling any abuses whichstandards in place to make sure that people are not exist and indeed to call together the CBI and TUCexploited, which is a key element as far as we are to discuss any abuses that they say exist. It is not thatconcerned—we may return to this perhaps on some we want to see an exploitation of workers, but weof the other issues that the Committee might want to think it is an issue of choice, in terms of individualtalk about—and that we are achieving a good choice, that people should be allowed, if they sobalance. So the newer Member States are looking wish, without any burden being placed upon them,around at what goes on within Europe and seeing to have the right to determine their working hours.that theUKmodel is perhaps one to support.We are We do not think that this is an appropriate vehiclealso seeing change in the longer-standing members to be used in the way that the Commission are usingof the European Union. We are going through it. At the last meeting of the Employment Councildiscussions on a reform package in Germany, we are the Commission quite openly said this was aboutseeing changes to employment legislation in France, protected collective agreements. Now there is achanges to the insolvency laws, etcetera. I believe discussion to be had about collective agreements,that people are seeing us as an appropriate model to but we do not think that that should be on the backfollow. It throws up thewider issue as well, that there of the Working Time Directive. We are quite happyis no one-size-fits-all approach to the whole of with the reference period, the whole of the positionEurope and what suits diVerent Member States is that exists in the Working Time Directive, but weimportant. That is why we have defended our think that the individual opt-out should be retained.decision on the Working Time Directive and the We are not saying that should be forced on otherissue of the opt-out. Member States, we are saying that is what works

well in the UK and therefore should be retained intheUK.Wewere happy to discuss alterations to thatQ497 Sir Robert Smith: Looking round the otherdirective with the Commission and with the Dutchcountries in Europe and outside it, do you see anypresidency, but at an early stage in the discussionsrole models where we could learn anything in termsthe Commission did not want to deviate from theirof labour market policies?agreed position within the Commission and I thinkMr SutcliVe: There are always opportunities to findthat that gave us an inability to resolve some of thebetter ways of doing things and that is why I talk

about globalisation and the need for everybody to issues that we might want to resolve about changing




some of the reference periods. The UK view point is are having and why information consultation isthat the individual opt-out should be maintained important, in the new agenda, in new relationship, Iand that we should guard against people being would argue that we have to look at the big pictureexploited. and look at things in the round, not just cherry pickMs Munday: One of the things the Commission has certain aspects of why a particular piece ofproposed is that the reference period could legislation is better in one place than it is elsewhere.automatically be extended to 52 weeks. Aboutnine% of full-time employees in the UK, that is 1.7

Q502 Mr Hoyle: That does worry me. We have hadmillion, would still be aVected because they tell usevidence before us before, and I respect your viewsthey usually work more than 48 hours over a year.Minister, but Vauxhall and Ford have pulled out ofOne of the things we are doing is trying to dig furtherthe UK because it has been easier to close here andinto the statistics and the evidence to find out exactlycheaper to close here than in Germany. We havewho these people are, but certainly surveys areseen more productive factories being closed becauseshowing that there are people for whom this would

not solve their problems. it is easier. What do you say to that?Mr SutcliVe: I do not think it is easier. I think it isquicker and that might have been part of it.Q499MrHoyle: In continuingwith the opt-out, who

do you think it benefits themost, the employer or theemployee?

Q503 Mr Hoyle: It is easier not quicker.Mr SutcliVe: I think both.Mr SutcliVe: If you look at the timeframe that isused in terms of the redundancy payments Act thatQ500 Mr Hoyle: Equally or . . . ?we have and some of the insolvency legislation thatMr SutcliVe: Providing the protection is there andwe have, there is an argument that it could beone of the recommendations that has been underquicker in the UK. There is a comparison tablediscussion with the Dutch presidency was improvedwhich shows theUK ismid way in the range in termsrecord-keeping for people using the opt-out so youof European comparisons. Those decisions arecould evaluate in what sectors it was being used andcommercial decisions based on a whole range ofif there were abuses, you could deal with them, issuesfactors; I do not think those decisions are based justaround the opt-out being sent along with the oVer ofupon employment legislation or employment law. Ita job which we thought were unfair and which wethrows up a big problem for us in terms ofwould not support. I think, used in the right way, inproductivity issues, the globalisation that we havethe context of the changed agenda that we are trying

to promote on flexible working arrangements—and and the stiV competition we now face from emergingthat is why we introduced flexible working economies like China and India. This is why it isarrangements into legislation and they will be important that we have a new approach to industrialreviewed in 2006—it could equally balance the relations and we move away from an adversarialemployer and the employee within the right type of discussion to a more informed approach.framework. The charge from the trade unions is that That is why information and consultation are vital.in certain sectors there are abuses. What we have We were opposed to those employers who sackedargued is that if they tell us where those abuses are, people by text message, who do not give employeeswe will put conditions in place to stop that. The opt- information about the development of a company,out has worked well, it has benefited the UK; clearly where a company is going, what the trainingso because of the employment record we have. requirements are going to be. We all know now that

the days of going into a job at 16 and staying in thatQ501 Mr Hoyle: That is why I asked whom you same job until you are 65 are no longer going to bethink it benefits. It seems strange that the employers the case, that individuals themselves, throughsay they wish is to keep the opt-out yet the trade lifelong learning and development, are going to haveunions say they wish you to follow the other two, three or four careers. There needs to be a newMember States. arrangement, a new deal if you like, between theMrSutcliVe:One of the things that we have towatch employer and the employee about the future ofout for here and why I talk about the changed organisations and that is why the Government,position that we are in is that we often hear in the through its economic policies, has developed thingsUK, and it is right and proper that trade unions have like regional development agencies to make sure weaspirations for their membership, that is their role,

support local businesses in particular regions.and what you tend to see sometimes, that they willcherry pick some of the best, in their terms,European legislation, but they will not tell you the Q504 Mr Berry: On the specific point that Lindsaywhole picture. So they will say that it is easier to get raised about the ease and/or cost of dismissingrid of somebody in the UK than it is elsewhere in employees, if your department has any evidence onEurope. Well, that is not the case. It is the case in this issue that we have not already seen, we shouldterms that it is quicker, but it is not easier and it is be very grateful to receive it. Clearly, you may havenot more cost-eVective.1 In the discussions that we some perceptions but what is the evidence out there?

We should like to see what evidence you have on1 Note by witness: It is cheaper, but not easier and quicker tothat, because it would be very helpful to themake UK workers redundant compared with workers in

other EU countries as a whole. Committee.




Mr SutcliVe: We shall certainly do that. What we Mr SutcliVe: There is an acknowledgement, becauseof the labourmarket position that we have, that theycan provide you with is not only what happens in the

UK but how that compares with what happens have to oVer enhanced conditions to people theywant to retain and people they want to get back intoelsewhere and some of the new legislation which has

been considered elsewhere in most Member States. the labour market. I think more needs to be done.That is why I said right at the outset, that it is aboutMr Berry: Yes, the comparison issue is important.raising the game on all sides in terms of theThank you.representatives of employers and the representativesMr Hoyle: Thank you for that. It would help if youof trade unions, to make sure that people fullycould give us that evidence, especially the Vauxhall/understand the benefits to business of getting peopleFord one, because that would really throw previousback into the labour market.evidence in the bin.Ms Parrish: We have surveyed recently and thatshowed quite a wide support of their work/life

Q505 Mr Berry: A particular reference to Vauxhall/ balance type measures and policies within theirFord is the request now from the Committee, if that workplaces. They see the benefits of those sorts ofis possible. practices as a happier workforce, more retention ofMr SutcliVe: Given the Committee’s wide remit, I high quality of staV and so forth. We also did athink it would be better if we just explain what the survey three years previously and that sort ofposition is in theUKand how it compares with other appreciation does seem to be improved. Thosecountries. people who did introduce or do have flexibleMr Berry: We should be grateful. These are working arrangements have not really found thatempirical matters actually and we should like to see there is a huge cost involved. The majority did notthe evidence your department has. find there was a cost: some found there was a small

cost and quite a small minority found that there weresubstantial costs. The evidence of understanding inQ506 Mr Hoyle: How to respond to The Workbusiness is there probably from that survey.Foundation’s concern that work-life balance

policies are being inserted into an unreformed workenvironment? Q508 Mr Hoyle: Maybe not yet, but it is gettingMrSutcliVe:Wedo not necessarily agree that it is set there. Would it be fair to say that?out quite like that. What we are trying to do, and I MrSutcliVe:Our campaign that is out there, is doingsaid earlier that employment legislation was a very well. As Beatrice said, the morale changesminimum standard, is to look at the number of within the workplace lead to better productivity, lesspeople in work now, the number of people who have absenteeism. They are all benefits that can be madebeen inactive that we are trying to get back into to the bottom line by oVering flexible working. Wework, women returners, people who have been long- do acknowledge that there are some sectors whereterm sick or perhaps educational issues. We are there are greater diYculties than others, but it istrying to get people back into work by getting something that we want to pursue and do it from aemployers to oVer a diVerent work pattern. Many position of strength because of the labour marketemployers see the business case for oVering flexible position we have in the UK.working because of the nature of the labour marketand their need to keep people and retain people. I

Q509 Sir Robert Smith: On adaptable working, is itinitially presented awards at the Parents at Worknot time for employers to judge people on theirevent which showed, in a whole range of

organisations, how flexible working can be abilities and not to say because they reach a certainage that they should no longer be working for themadvantageous to business and can be advantageous

to individuals. and bring in modern human resources managementand judge people on their merits and not their age?MsMunday: The research we did after the first year

of the duty on employers to give serious Mr SutcliVe: It is and clearly this is a very diYcultissue that government is currently grappling with inconsideration to requests for flexible working has

shown that nine out of 10 requests have been either terms of the advancements in medical science.People are living longer and are able to continueaccepted in full or in part, which is a significant

increase on what was there before the legislation working longer if they so wish.We do not want to bein a position to force people to work longer who didcame along. We think we can say, in respect of the

Work Foundation’s work, that this is a moving not want to work longer. We are looking at theeVects on labour market conditions of people beingtarget and more and more employers, as parents of

young children are encouraged tomake requests, are allowed to work longer if they so wish. I do agreewith you. I think people should be judged on meritfinding and exploring the benefits of flexible

working. right across the range, regardless of a whole rangeof issues.

Q507MrHoyle:Are you satisfied that businesses areactually embracing flexible working? Do they really Q510 Sir Robert Smith: Just as a lot of industry

comes to us saying there is a great skills shortage,understand there are benefits there, if they wereactually truly to take it on board? Or do you think well they have a lot of skilled people at the other end

of the age range, who may want to carry on becausethere is a real reluctance by business?




they are fit, healthy and still motivated. It seems very MrSutcliVe:The key thing about nationalminimumwage is clearly the Low Pay Commission. I think itstrange to say there is an age at which, regardless ofwas the right and appropriate step to have ayour ability, you reach retirement.commission made up of all sectors of industry or allMr SutcliVe: There is, but there are complex issuesstakeholders that were involved.around that and I am sure that members are well

aware of those issues in terms of pensionentitlement, the issues around industrial tribunals. Q514 Mr Berry:We are still left in the UK with oneWe have to look at a whole set of things to of the widest distributions of income in theaccommodate people working longer. There are European Union. To what extent do you think themany reasons for the skills shortage as well. The minimum wage legislation has a role in addressingdrivers of productivity are about investment in skills that income inequality or are there other policiesand development and I think this Government has a that the Government are pursuing to address it?proud record in terms of trying to get people back Mr SutcliVe: Clearly the tax credit situation ininto work. There are issues around measures of addition to the minimum wage has improved theproductivity then, in terms of being able to be more position for lots of people.productive with fewer people in work, but if you getpeople intowork it is about raising their standards as

Q515 Mr Berry: What about people on very highwell. That is why lifelong learning, the issues aroundincomes?union learning reps and developing people’sMrSutcliVe: If you look at the figures, and I am surepotential in the workplace is important as well, soBeatrice has the figures to hand, in terms of incomesyou raise the standard and get people to raise theirand the growth in incomes.own standards for the reasons we gave about theMsParrish:There was a big increase in dispersion ofneed to change working patterns because of what isearnings through the 1990s, but this has stabilisedgoing to happen.and in fact very recently we have seen the earnings ofthe bottom 10% growing slightly faster than the top

Q511 Mr Berry: Could we turn to the National 10%. Was that your question?MinimumWage? Can you give us your estimates ofthe number of people who have benefited from the

Q516 Mr Berry: It related to my question, yes. Themost recent rise in the National Minimum Wage?issue in a sense is that we do have a very highMs Parrish: We estimate that around 1.1 millioninequality of income in the UK. Most evidenceworkers should benefit from the increase insuggests that it has been consistently growing overOctober 2004.the last 10 or 15 years or so. My question really wasthat the national minimumwage and tax credits andso on at the moment address one end of the labourQ512 Mr Berry: It seems to be the case that themarket, so what about the other end of the labourGovernment has consistently over-estimated themarket too?number who benefited from previous increases.Mr SutcliVe: Within the department, the SecretaryIndependent research makes this allegation on aof State on a number of occasions, as the Chancellorregular basis.Do you agreewith that? If so, does thathas, has urged restraint and caution and there arenot mean there is scope to raise the minimum wageissues that the department looks at in its discussionseven further?with the CBI, with a whole range of organisationsMs Parrish: There is a combination of two thingsabout rewarding success not rewarding failure. Justwhich are happening. First of all, in the paston the national minimum wage and the tax credits,statistics have been revised downwards, so when we the example I would give is a person with one child

are making our estimates and looking to see how who works full time at the national minimum wagemany workers might benefit, oYcial statistics have and presently receives around £6.70 an hour afterbeen revised down. Probably what is more taking tax credits into account. It is thoseimportant is that we make our estimates and then relationships that the Committee needs to look at incompanies are raising their wages in anticipation of terms of raising the pay for people on low incomes.the national minimum wage. So our final estimatesof how many people have benefited end up being

Q517 Judy Mallaber: The Minimum Wage Act isslightly lower because there is what some peoplemeant to cover homeworkers and give protectionhave described as a sort of snow plough eVect. Youagainst victimisation, but as part of our evidence, theare getting employers not wanting to be seen asTUC gave us a submission pointing to a particularminimum wage employers, so the rate is announcedcase which went to the Employment Appealand quite quickly people are bringing their increasesTribunal, which showed just how easy it is, becausein, because it coincides with their pay rise rounds,of the status of atypical workers and the legalwell before the October increase. Our estimatesdefinitions, for employers to evade that specificallyprobably err on the side of being conservative.by inserting a clause in the contract to show thatthere was no mutual obligation. As I was on the

Q513 Mr Berry: That is entirely consistent with the Minimum Wage Bill Committee when this wasview presented by one of the trade unions, so that going through, I find this rather disturbing. It would

be helpful to know what the current position is onshould cheer you up.




the review around atypical workers and what the in place. With the introduction of migrant workers,with a great resilience on issues around the lower endpossibilities are of getting a single clear definition ofof the labour market, we have got to be even morethe term “working”.aware of exploitation that can take place and put inMr SutcliVe: On the employment statute review,place enforcement mechanisms to make sure thatclearly we have consulted, are still consulting, stillpeople are not exploited.We have done that in termstrying to make decisions relating to that review andof advice to Polish workers, to Lithuanian workers,we are hoping to do that in the coming year. Therein terms of areas in the country where they areare some very diYcult issues to deal with in that.coming to work.You will be aware of the changes that we made in

terms of calculations of homeworkers pay, weworked with the National Group on Homeworking Q518 JudyMallaber:Apart from enforcement and aand continue to do that. There is a lot of evidence number of very positive projects to reach out toaround that we are trying to improve the situation, homeworkers, are there not arguments for changinglooking at enforcement issues as well. the legal definitions so there is a clearer singleMs Munday: One of the problems we found with definition of the term “worker” which could also behomeworkers is that there is quite a lot of ignorance phrased in such a way that it would override specific,about the rights that they do have and therefore it is clear changes made by employers specifically topossible for them to write those rights away in evade that legal definition? That is clearly what hascontracts. One of the things we are looking at is how happened in the particular case quoted, which showswe more eVectively get information to that group just how easy it is for employers to do that.who are, by their nature, very, very hard to reach. Mr SutcliVe: That is why we are taking time on theOne of the things we have done is that we have review. There have been over 400 written responses.funded the National Group on Homeworking to Ms Munday: We are expecting a response in theemploy a worker to try to get out into this group and foreseeable future.make sure they are aware of the rights that they Mr SutcliVe: We are hoping to be able to makehave. announcements this year in terms of that, and thatMr SutcliVe: We estimate that there are about may accommodate some of the issues.270,000 homeworkers in theUKand there is a whole Ms Munday: To give you another example, therange of issues, not to mention the status and the distinction between self-employed status and otherenforcement issues around the national minimum forms of status is a very key issue for thewage, in terms of getting to those workers with construction industry. Things which might seemadvice and support, which are issues we are simple in one sector becomemore complicated whendiscussing with the trade unions as well. It is you look at another sector, which is why we are stilltraditionally an area where there is not a great deal looking at all the responses.of trade unionmembership.We are actively trying to Mr SutcliVe: The regional development agencies arefind the routes in.We are also looking at other things looking at the issue of homeworking as well and,that can be done. There are the supply chain issues again, people can be more specific then inin relation to organisations and how ethical trade, geographical terms, where homeworkers are andcorporate social responsibility and issues like that some of the issues that aVect this.can be addressed in terms of employment practicesthroughout the supply chain. We are looking at awhole range of areas where we can try and be of Q519 Richard Burden: I am going to ask you aboutassistance. Again, I think this Government has a compliance issues, but could I just stay on theproud record in trying to tackle what is a very homeworking issue for a moment and ask youdiYcult area for a whole range of reasons, where whether you are clear that within your ownsome homeworkers themselves do not come forward departments, issues of homeworking relating tobecause they are frightened of their individual employment are actually suYciently joined-up withpositions in relation to that homework, which in the work you have been doing on homeworking asmany cases can be a crucial part of their income. far as consumer protection is concerned? About fourThis is not an easy area to look at and we are years ago, I brought in a Private Member’s Billworking with the groups Janice hasmentioned to try unsuccessfully, which was actually about the otherand improve the situation. It is incremental. We are end, the consumer end of it. One of the problems oncontinually looking at ways in which we can be of that is issues about working or homeworking and itbenefit to people. Lots of homeworkers are in a relates to the self-employment issue. At that time, itposition where it works for them in the was in a sense, being dealt with by the consumer endcircumstances that they have and they have a of things and employment was kept separate. Itreasonable relationship with the people who provide seems tome that if the right kind of attention is goinghomework. What we are always looking at is this to be given to the homeworking issue, those two endselement of exploitation, to make sure that we stop need to be brought together a bit. Is any work beingexploitation, and, through the enforcement of the done on that?national minimum wage, where we have recovered Mr SutcliVe: It is not just our department and thelarge amounts of money over the years that the Act gangmasters issues threw this up in terms of thehas been in place, it will be workwhichwill continue. Defra Select Committee report and the diVerentIt is an important issue aVecting the UK labour government departments which had a role to play or

a part of a role to play in the whole of the issue. Wemarket. We already have the gangmaster legislation




are looking across government. I chair a sub- with a whole sector of small businesses, industry andtrade unions about how to get information down tocommittee of the Cabinet Committee looking at

employment issues and many of these issues around small businesses in a practical way that does notinhibit the way that they operate and the way thatenforcement, what is happening at the lower end of

the labour market, are being looked at in a joined- they work.up way.We do not miss a trick in terms of the abilityto look at the enforcement aspect. I agree with you Q523 Richard Burden: People round the table herethat we have to make sure that there is a joined-up probably would not make the argument that certainapproach to these issues and the complexity of the other parties would, but it has been put to us on aissues around the status position in terms of where number of occasions and put to you that for smallpeople are. businesses, say on theWorking TimeDirective, even

if there were no objection to the principle of that, orindeed the objectives of it, issues of paperwork andQ520 Richard Burden:One example is the operationthat kind of thing could actually be made an awfulof things like Stop Now orders, which are seen fromlot simpler than they are. I just wonder whatthe consumer end of things.Has anywork been donemechanisms exist to try tomeet those practical issuestomonitor or to look at how eVective they have beenwithout going down the road of saying get rid ofin regulating the employment relationship betweenregulation.the homeworker and the trader.Mr SutcliVe: One of the ways has been through theMr SutcliVe:Not as much as could be done and thathuman resource pilots which we have tried tois probably a useful area for us to return to and lookdevelop to see what works best in what sector.at. Quite rightly in fact the Stop orders and the

Enterprise Act legislation have benefited theconsumers. Q524 Richard Burden: How do they report back?

Mr SutcliVe: What has happened is that 11 pilotstook place up and down the country in particularQ521 Richard Burden: May I move on to issues ofsectors to see what was the best way of givingcompliance. What kind of ongoing assessments doinformation not only to small businesses but to theyou make of compliance costs, particularly thinkingvoluntary sector and to look at ways to make sureof the situation of small businesses?that the important issue of employment legislationMr SutcliVe: I have a wonderful figure forgot down to where it needed to be. Those pilots havethe Committee here. The ongoing annualtaken place. We are now looking at the results ofimplementation costs are under three pence perthose pilots and deciding which way to move inemployee job per week. I am sure that will be a figureterms of their development right across the piece.that will be contested and discussed by a number of

organisations.Q525 Richard Burden: Are there any timescales forwhen we might get any kind of information?Q522 Richard Burden: Three pence per week toMr SutcliVe: We are trying to do that as soon ascover what?possible. There was an acknowledgement from theMrSutcliVe:Three pence per employee job per weekpeople involved in the pilots that these were veryis the ongoing annual implementation cost ofsuccessful and appropriate. The thing for me is thatemployment regulation. I think there is ansmall businesses will go to a bank and get advice oninteresting dilemma here, because we hear the crytheir accounts and how they should do things, go toalmost on a daily basis, that there is too mucha lawyer for their legal requirements. Employmentlegislation, too much regulation and it is aVectinglegislation and employment policies should play anand burdening business.When you try to dissect thatequal part in all that.We need to findways of gettingand you ask which regulations they do not want tothat too. I do not think people deliberately floutsee, nobody will come forward and tell you whichemployment legislation, but it is sometimes diYcultregulations they do not want and it is a challenge. Ifor small businesses to cope with the complexity ofknow there are not many Conservative members ofthat. We need to find mechanisms, whether throughthe Committee here today, but it is a challenge thatregional development agencies, whether throughI give back to those people who say they areemployment projects, to oVer that advice andburdened by regulation and I ask them whichsupport at a practical level so people do not getregulation it is that they do not particularlywant.Onthemselves into diYculty. The worst thing that canthe wholemost people tend to agree and the nationalhappen is that people ignore the legislation and thenminimum wage is a good example, where there wasa problem occurs and they have to deal with thefailure to agree but then eventually everybody didconsequences of that, which usually costs them quiteagree it was a good thing to do. What I think thea lot of money.diYculties are is that people do not weigh the

benefits of regulation that comes forward. It comesback to the issues we were talking earlier about Q526 Richard Burden: You said that you do not

believe people deliberately flout the legislation andflexible working and the business case which can bemade for flexible working. There are problems in regulations but clearly some people would. I just

wonder whether you are aware of any particularrelation to small businesses in terms of how theyinterpret, collect and deal with the amount of areas where you suspect the regulations are being

ignored and flouted and what can be done aboutregulation that comes forward. The department,through human resource pilots, is trying to work that.




Mr SutcliVe: I believe that the majority of Q529 Judy Mallaber: If you have any evidence, itemployers, small, medium or large, do not would be helpful to have that. In slight contradictiondeliberately flout the legislation. There are rogue to the points being made earlier, where there wasemployers who do and some of those rogue discussion about whether it is easier to hire and fireemployers are at the bottom of the labour market, in this country than in other countries, how do youwhich is the point I was making earlier about the respond to the opposite accusation, which is thatneed to make sure that we have something in place government tends consistently to gold-plate EUto deal with that in terms of enforcement. I am not legislation? Do you have any evidence?particularly aware of any particular sector where Mr SutcliVe: This is the point I was making aboutpeople deliberately flout employment legislation. European directives. We do what is best for the UKMs Munday: Gangmasters are an area where there economy, based on a very strong position in terms ofhas been very clear identification of significant the UK labour market, high employment, lowbreaches of law and new legislation has been unemployment.We look at these issues as they comebrought in to deal with that. In our own areawe have along and how best to interpret them in the bestacted against allegations of the way that some interests of the UK labour market. I do not thinkemployment agencies, particularly in the film that is a case of gold-plating. What we try to do is toindustry, behave and have significant powers now to consult fully with all sectors of industry and businesstake action against those rogue employers. Where to make sure that they are appropriate and will leadareas are identified, we have put in place to a positive outcome rather than a negativemechanisms for tackling them. outcome. I do not think that we gold-plate in any

way. I think we make sure that the legislation weQ527Richard Burden:May I put one example to you introduce is appropriate to the UK labour market.from evidence we had this morning from Amicus inrelation to union recognition procedures? Theyseemed to be of the view that there is, not widespread Q530 Judy Mallaber:Do we take up instances, if webut nevertheless significant, flouting or getting do find out that other countries are operating in around union recognition rules in ways such as way where they are not implementing legislationvexatious picking of bargaining groups and in some rigorously and where we might be seen to be at acases union-busting techniques learned in the US. Is disadvantage because we are in fact implementingthe department looking at anything in those areas? things in the way we think is appropriate?MrSutcliVe:We introduced, in theEmployment Bill Mr SutcliVe: There are clearly issues aroundwhich has just gone through, protection in those interpretation, about who is included and who is notcircumstances relating to the ballots on recognition, included in certain directives, which we have takenthe position leading up to the ballot taking place, the up and have explained our position to thetimeframe there. We have introduced legislation Commission. Challenges are made the other way;similar to the Representation of the People’s Act, there are things which benefit us, which otherwhere people can be found guilty of abusing the Member States complain about. On the whole, Ilegislation and can be dealt with appropriately, think that we enjoy a good relationship in terms ofbecause we were aware of that type of incident. It is employment ministers sitting down to discuss thealso very much around the Wilson and Palmer

competitive eVects which challenge all our economicjudgments which took place. The Employment Billpositions.We are in a very strong position in theUKwhich has just gone through the House addressesto make sure that we ensure that the laws andthose issues.directives we implement are appropriate anddevelop the UK labour market.Q528 JudyMallaber:Do youmonitor compliance inMr Berry: Minister, may I thank you and yourcompetitor countries as well? Is there any evidencecolleagues very much for being with us thisto suggest that the UK is more rigorous in itsafternoon? It is a pleasure, as always, to see you. Weenforcement than other Member States?may have one or two other questions we can put inMr SutcliVe: We can provide the Committee withwriting and indeed if there is any further evidenceevidence of where we think we stand in comparisonyou feel is relevant to the questions which have beenwith other Member States. Because of the diVerentraised this afternoon, do get in touch. Thank younatures of labour markets in each Member State,

sometimes the comparisons are not easy to make. again.

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Written evidence

APPENDIX 1

Memorandum by Amicus

Index

Paragraphs

Introduction 1–4

Flexibility 5–9

Flexible Working 10–11

Investment 12–13

Employment Regulation 14–17

A Skilled Workforce 18–21

Summary

In this submission, Amicus has concentrated upon the need to define what is meant by flexibility in thelabour market, its impact upon investment in the UK economy and the issues which need to be addressedto ensure that UK workers are not disadvantaged by the failure to provide appropriate employmentregulation. Amicus has also addressed the qualitative issues which employment regulation impacts upon interms of job category and earnings. Although the Committee has identified labour market flexibility as itskey issue to be considered, Amicus has also taken the opportunity to raise the overall need to tackle thestrategic training needs to cope with skill gaps and shortages.

The submission argues:

— Any debate about flexibility must address the positive aspects of employee protection as well asthe restrictive approach of employer freedom to hire and fire at will.

— Employers argue consistently for the limiting of employee rights on the false premise that this hasa negative impact on productivity.

— The failure of government to recognise social planning as an integral part of the industrialeconomy has led to a European two-tier workforce with the UK viewed as an easy option forclosure and redundancy.

— Functional flexibility introduced with full employee participation can lead to improvedproductivity and greater competitiveness.

— Evidence illustrates that the UK flexible labour market has failed to bring the real gains inproductivity and competitiveness promised.

— It is also apparent that the progression towards full employment has masked the shifts in thelabour market reflected in the decline in manufacturing jobs

— Government should adopt a more positive approach to employment regulation where thisenhances the working environment or conditions of UKworkers and, in particular, should ensurethat all workers are protected under UK legislation.

— Negative impact of labour market flexibility based on numeric factors rather than functional, willundermine government strategy to create a high-skilled, added value workforce in the UK.

Introduction

1. The Amicus Trade Union welcomes the opportunity to contribute to this inquiry into UKEmployment Regulation. As the UK’s largest general trade union covering both public and private sectoremployment, Amicus is well placed to understand the impact of legislative changes on both employers andemployees.

2. In this submission to the Trade and Industry Committee, Amicus will address the issue of the flexiblelabour market and the investment implications that this has for the UK economy. We shall also drawattention to comparative figures for other major European Union countries.

3. Amicus is concerned about the need to establish a level playing field for UKworkers in their treatmentboth at the workplace and at times of employer restructuring and potential job loss.

4. We shall look at the impact of regulation on the quality of jobs and earnings within the UK and referto the strategic needs for tackling skill gaps and shortages.



Flexibility

5. In recognising that the concept of flexibility can provide opportunities for improved productivity andmore eVective working, it is important to define what is meant by flexibility. Too often flexibility is apseudonym for the freedom to hire and fire at will, to avoid regulations introduced to protect workers suchas the working time directive and to restrict the ability of trade unions to organise in the workplace.

6. Current flexibility is controlled by the employer rather than employee. Employee rights whenintroduced are welcome but frequently do not go far enough to allow individuals to take advantage of thoserights for economic reasons. Employers cry wolf at each new right, eg family friendly developments, whilstfailing to produce any evidence of impact on productivity or eVectiveness or competitiveness.

7. The failure of government to address social planning as an integral part of the industrial economy hasmeant that the employer’s flexibility is greatly enhanced to the cost of the employee. Redundancy protectionin the UK is minimal and frequently means that lip service is paid to the regulations on consultation. As anincreasing proportion of the workforcemove into employment in smaller establishments, even the proposednew regulations on Information and Consultation will do little to protect the position of millions of UKworkers as it does not apply to them immediately, or in cases of less than 50 employees, ever.

8. The penalties against employers who abuse the existing employment rights of workers areminimal anddo not act as a deterrent. For many workers the extension of the flexible labour market means greater jobinsecurity and unacceptable workplace practices.

9. Amicus is not opposed to the concept of functional flexibility in the workplace where this is introducedthrough consultation and the full participation of the workforce. We have been instrumental in workingwith employers to achieve team working and multi skilling which has both enhanced the individuals’ skilllevels and resulted in improved productivity and greater competitiveness. However, too often the conceptof flexibility from an employers’ perspective is about numeric flexibility which is about greater use oftemporary and agency labour and knee-jerk reactions to dips in demand for products.

Flexible Working

10. Flexible working for employees provides an opening up of the employment market to many whowould otherwise not be able to work and Amicus welcomes recent improvements in legislation in this area.This widening of the labour pool has the potential to help address the skill needs of a number of industries.Progressive employers have embraced these provisions and in some cases enhanced them in an eVort toposition themselves as employers of choice. This would clearly not be done if they felt that this woulddamage their competitive position.

11. Equally, we are concerned that without adequate employment regulation, workers who choose towork part-time or are employed by agencies, will be disadvantaged and leave themselves open to unfairemployment practices.

Investment

12. Much has been made of the benefits that a flexible labour market brings in terms of attractinginvestment into the UK (include comparisons with Germany and France over last 10 years).

13. Although the numbers employed in the UK now are higher than ever the quality of the jobs availableand the levels of earnings do little to support the government’s stated aim of achieving a high-skilled, addedvalue workforce. There is little evidence to support the contention that the flexibility in the UK labourmarket has brought long term investment into the country or that indigenous employers are prepared toincrease investment other than those in areas where there is a guaranteed, quick return.

14. Our own research has shown that despite statistics showing progress towards full employment thishas hidden the serious decline in manufacturing jobs over the past 15 years. The shifts in the labour marketin the UK towards the service sectors has brought with it a diminishing supply of key skills which impactsupon the attractiveness of the UK to inward investors.

Employment Regulation

15. Conversely there is no real evidence to suggest that employment regulation where it has beenintroduced has a detrimental eVect on investment and jobs. This is due, in part, to the extent to whichpositive rights for workers are integrated into UK employment legislation by the Government.

16. Amicus notes that many of the positive developments in employee rights in the UK have originatedfrom European legislation and directives. Amicus would like to see a more positive approach from the UKGovernment when such directives are proposed and consulted upon. We welcome the earlier opportunityfor consultation which the DTI now provides to interested parties, but are concerned that the outcomes todate have represented a dilution of the intent of such directives. This is apparent in the Working TimeRegulations where the UK has continued to argue for the retention of the opt out clause, and theInformation and Consultation Regulations where many employers will be excluded from the requirements.



17. There is no evidence from those countries where existing consultation rights meet the new regulationrequirements or where there is no opt out from the working time regulations that investment has beenundermined or productivity has suVered.

18. It is important that positive changes that will create the right sort of working environment toencourage the acceptance of change, so necessary to today’s economic climate, are introduced withenthusiasm by industry’s partners if the UK economy is to meet the aspirations of government in terms ofproductivity and competitiveness.

A Skilled Workforce

19. There is a general recognition that for the UK to compete in the global economy in manufacturingand commercial services, it needs to create a balanced workforce with the capability to adapt to changethrough training and re-skilling. Such an approach needs the right sort of workplace and employmentenvironment.

20. If on the basis of the false premise that the UK is over-regulated, government restricts the ability oftrade unions to organise or play a full role in business strategy through consultation, it is unlikely to createthe environment where change is seen as an opportunity rather than a threat.

21. Amicus argues that the record of theUK employers demonstrates that there is a need for the provisionof mandatory training levies where industries fail to demonstrate that they are investing in the futurethrough a strategic training plan.

22. It is against this scenario that Amicus argues that there is no question that the UK workforce can orshould seek to compete with low wage economies on the basis of low wages and less regulation. Such anapproach would be disastrous and seriously damage the UK economy in the medium and long term. Aprogramme of sustained investment, innovation and high-skill, added value workplaces is the sustainableapproach for UK employment and the proposal for a level playing field by expanding regulations on a parwith the rest of Europe, provides no real obstacle to such a strategy, or to flexibility.

June 2004

APPENDIX 2

Memorandum by the British Chambers of Commerce

TheBritish Chambers of Commerce represents, through a quality assured national network ofAccreditedChambers of Commerce, more than 135,000 UK businesses in all sectors of the economy, and of all sizes.Accredited Chambers seek to represent the interests and support the competitiveness and growth of allbusinesses in their communities and regions.

Executive Summary

The BCC’s response to the Committee includes employment regulatory costs, working time regulations,national minimum wage, work life balance, temporary agency workers, discrimination and the availabilityof a skilled workforce. The key points are:

— The BCC Burdens Barometer found that the total cost of Regulation since 1998 to be £30 billionof which £12.68 billion is from employment regulations. The total cost of employment regulationsin the last year has increased by 21%. Our research has shown that for all 165 Regulatory ImpactAssessments (RIAs) published in 2002–03 the costs of regulations were rising whilst the benefitswere declining. This trend results from the fact thatMinisters continue to sign RIAs certifying thatthe “benefits justify the costs” when, in the majority of cases, no evidence is presented that this isthe case. This practice is in direct contravention of the Cabinet OYce guidelines on the preparationof RIAs.

— The Working Time Regulations are the largest cost to business at £11.1 billion since beingintroduced in 1999. The opt-out from the maximum 48 hour working week is valued by employersand employees. Losing the opt-out would add further regulatory costs to business and would alsoundermine the flexibility of the labour market. The BCC strongly support retaining the opt-out.

— The BCC supports in principle the minimum wage, which was introduced through the NationalMinimumWage (NMW) Regulations 1999. However, the NMW presents two potential dangers.Firstly, if the NMW continues to rise at the rate it has over the last five years, (this year by justunder 8%) it could lead to businesses having to cut costs. The BCC therefore recommends that theNMW be capped in line with inflation. Secondly, the new NMW for 16–17 year olds could harmthe flow of skilled workers into the economy. The BCC therefore recommends that the exclusionsfrom workbased learning should remain but also that the rate of £3 should also be capped toprevent adding further incentives for young people to leave education or training.



— The light-touch approach to flexible working has been a success over the last year. Flexibleworking benefits businesses by encouraging higher levels of productivity and increasing staV

retention. The success of the light touch approach negates the need for further regulations. TheGovernment must honour the commitment it made not to review the Regulations until 2006.

— TheUK has more temporary workers than any other EU state, over 700,000. Therefore full parityof benefits and conditions between temporary and permanent workers would raise the cost ofhiring temporary staV, making them a much less attractive prospect for employers, and leading tofewer employment opportunities. The BCC therefore recommends that the current proposal for a6 week exclusion period within the Temporary Agency Workers Directive should be extended toa 6 month period.

— It is essential that a common sense approach be taken with the Age Discrimination legislation andthat the end point of the employer/employee relationship defined. Therefore, a mandatory stateretirement age must be included in the proposals. Further, the costs to SMEs must be more closelyanalysed as the current RIA does not provide accurate estimates.

— The UK currently suVers from an acute skills shortage which is a barrier to raising productivityand competitiveness. The problem is that not enough people pursue vocational routes of learningand too many young people are encouraged to pursue academic routes when it is not in theirinterests or the interests of the economy to do so. The Government must fully incorporatevocational routes throughout the national curriculum.

Introduction

1. The British Chambers of Commerce (BCC) welcomes the opportunity to respond to the Trade andIndustry Committee’s investigation into UK employment regulations and the contribution labour marketflexibility makes to the economy. The BCC’s response is divided into the following sections:

— Total costs of employment regulations.

— Working Time Directive: Impact on labour market flexibility.

— National Minimum Wage and introduction of new 16–17 year old Minimum Wage.

— Work Life Balance.

— Temporary Agency Workers.

— Age Discrimination.

— Availability of a skilled workforce.

— Recommendations to the Government.

Cost of Employment Regulations

2. The burden of regulation continues to be of great concern toUKbusinesses as it represents a significantfactor in the erosion of our competitive advantage. The BCC Burdens Barometer1 lists the total cost ofregulations introduced on business since 1998 through calculating the Regulatory Impact Assessments(RIAs) produced by Government departments. The latest Burdens Barometer (2004) found the total costof regulations introduced from1998 until July 2004 to be £30 billion. This figure excludes the cost to businessof the National MinimumWage Regulations 1999 and subsequent amendments to the rate estimated in theRIAs to have cost £13.5 billion.

3. Analysis of our Burdens Barometer reveals that out of the total £30 billion in extra regulation, £12.68billion is resultant from employment regulations. The most costly employment regulation has been theWorking Time Regulations 1999 costing £11 billion since its implementation. The most recent additionalcost has been the Flexible Working (Procedural Requirements) Regulations in April 2003 which have cost£404 million. Other significant employment regulatory costs have included the Employment Act 2002costing £565 million, Employment Relations Bill 2000 costing £215 million, Part TimeWorkers (Preventionof Less Favorable Treatment) Regulations 2000 costing £112 million, Maternity and Paternity Leave(Amendment) Regulations costing £64 million, and the Transnational Information and Consultation ofEmployees Regulations 1999 (European Work Councils) costing £72 million.

4. The cost of employment regulation is continuing to increase. In 2002–03 the total cost of employmentregulation introduced since 1998 was £10.5 billion. However, in the last year the total cost of employmentregulations has risen by 21% to £12.68 billion. The largest proportion of this increases comes from theEmployment Act 2002 and Flexible Working Regulations which have added £969 million.

5. The key to eVectively lightening the regulatory load on business is to address the heart of the problem.In our report “Do regulators play by the rules? An audit of the Government’s Regulatory ImpactAssessment System”2 we found little evidence that RIAs have caused legislation to be aborted. Our research

1 BCC Burden Barometer 2004.2 British Chambers of Commerce, February 2003.



has shown that for all 165 RIAs published in 2002–03 the cost of regulations were rising whilst the benefitswere declining. This trend directly contravenes the Cabinet OYce’s own guidelines which state that the“benefits must justify the costs.”

6. In our study last year of the period since RIAs were formally introduced, we found only 11 cases whereRIAs have caused legislation to be aborted. However, this may be because the Regulatory Impact Unit web-site only lists FinalRIAs and there is have noway of tracking initial and partial RIAs that were subsequentlywithdrawn. The option of not regulating appears to have been considered in only 11% of the analysed RIAsand less than half of the RIAs (44%) quantify all the options considered. The rest provide cost/benefitanalysis for the preferred option only (31%) or no quantification at all (24%). This makes the decision toadopt, amend or reject a regulation biased and greatly reduces the usefulness of the system.

Working Time Directive: Impact on Labour Market Flexibility

7. The European Commission is presently reviewing the Working Time Directive and more specificallythe UK opt-out from the maximum 48 hour working week. The BCC has consulted our entire membershipon this issue and we strongly support the UK retaining the use of the opt-out from the 48 hours maximumworking week. Business needs a flexible economic environment to maximise productivity and profitability.A central ingredient to this environment is a flexible labour market. Restrictions on working hours wouldserve to erode the flexibility of the labour market.

8. The BCC believes that the availability of an opt-out from the 48 hour maximum working week isextremely beneficial to employers and employees. A large proportion of the BCC’s membership consists ofsmall and medium size businesses. Losing the opt-out will place restrictions on labour market flexibility andwill lead to operational diYculties, particularly for small businesses. A recent BCC Survey found that 90%of employers currently make use of the opt-out.3 The BCC believes that if an employee chooses of his ownfree will to work longer hours and is appropriately rewarded for doing so, that the employee should be freeto do so.

9. The opt-out allows businesses to deal with fluctuations in customer demand. The value of suchflexibility is illustrated by a BCCmember in response to our survey.4 A security provider with 32 employeessaid that:

“We have scheduled engineering work during normal hours, but can not dictate the volume ofemergencies that we receive requiring emergency attendance and repairs. Therefore our engineershave to remain flexible in the hours they work, through their own choice.We do not have the resourcesor cash to cope without employees signing the opt-out.”

10. Employees value the opt-out because a forced reduction in working hours would result in lowerearnings and lower living standards. The freedom to choose how long they work is important. For example,one BCC member who runs a design company with 15 employees said:

“StaV who work more than 48 hours do so because they want to for whatever reason, and financial isthe main one. Removing the opt-out would mean staV would work the contractual hours with us andwork several other jobs elsewhere.”

Another member who runs a food warehousing company with 40 employees says,

“many employees rely heavily on overtime as normal pay to live how they want. They would see thetaking away of this choice as detrimental.”

11. An example from our survey illustrates the importance of flexibility to deal with seasonal peaks. Anemployer of a manufacturing business with 2,300 catalogued products said that “May until September arehistorically busy months for our manufacturing business. We do not know with great definition the mix oforders to come for that period. Our employees look forward to it as a short term defined period of hardworkto earn extra money.”

National Minimum Wage (NMW)

12. The BCC are not against the minimum wage which was introduced under the National MinimumWage Regulations 1999. Employers should fairly remunerate their employees. However, the successiveyearly increases of the minimum wage above the rate of inflation and national average earnings are notsustainable and could start to have an impact on employment levels. This regulation has cost £13.5 billion.Further, the forthcoming introduction of a 16–17 years old minimum wage will add further costs and havea detrimental impact on the flexibility of the labour market.

3 BCC Online Survey, 2004.4 BCC Online Survey, 2004.



13. When the NMW was introduced in 1999, it was set at a reasonable rate. However, since 1999 theNMW for over 21 years old has increased from £3.60 an hour to £4.50 and is set to increase in October to£4.85. The rate for 18–21 year olds has also increased from £3 to £3.80 in October, is also set to rise againto £4.10 in October.

14. This year alone the NMW for over 21 year olds has increased by 7.7% and the rate for 18–21 yearolds has increased this year by 7.9%. Inflation is currently 1.4% and the annual average earnings increaserate is 3.4%. Therefore the increases this year in the NMW rates are over five times the rate of inflation andover twice the rate of the increase in average earnings. These large percentage increases this year togetherwith a 25% increase in the rates over the previous four years have resulted in a reasonable rate becomingincreasingly unmanageable for business. The continual increases are not sustainable and the Governmentmust cap the rate of the increase.

15. The rate of £3 for the new 16–17 year old NMW is set at a reasonable rate. However, the increasesover the last five years in the other twoNMWrates suggests that this rate will be over £4 in the coming years.Further, the BCC is concerned about the potential impact of the new 16–17 year old NMW on the flow ofskilled workers into the labour market. In a ranking of the number of 17 year olds remaining in educationor training, the OECDhave ranked theUK 25th out of 29 countries. The prospect of earning higher salariesat 16–17 years old will act as incentive for young people to leave education or training and enteremployment. This is not in the interest of young people or the economy as a whole. A highly skilledworkforce is the foundation of a competitive and productive economy.

16. The Government have consistently stated that their central priority for young people is to ensure thatthey acquire the skills necessary for them to progress successfully through their working life and acquire theskills which reflect employers’ needs. The 16–17 year oldNMWwould serve to undermine theGovernment’surgent drive to increase the skills of young people through the Skills Strategy and the Review of 14–19 yearolds education.

17. However, the BCC welcomes confirmation from the Government that the 16–17 year old NMWwillnot apply to employers who have young people undertaking workbased training. If this wage rate hadapplied to this group employers would have cut the number of young people on workbased learning whocurrently earn approximately £50 per week whilst on their training. Therefore although the new NMWwillact as a disincentive to young people from staying on in education or training it will not act as a disincentiveto employers who are training young people.

18. The NMW therefore present two potential dangers. Firstly, if the NMW continues to rise at the rateit has over the last five years, this could force businesses to cut costs. The result will be either cuttingoperational costs by for example, cutting the number of employees or by passing costs to consumers andthereby undermining competitiveness. The BCC recommends that the NMW for 18–21 year olds and forover 21 year olds be capped in line with inflation.

19. Secondly, the NMW for 16–17 year olds could harm the flow of skilled workers into the economy.The BCC therefore recommends that the exclusions from workbased learning should remain but also therate of £3 should also be capped to prevent adding further incentives for young people to leave educationor training.

Work Life Balance

20. The light-touch approach to flexible working has been a success over the last year. Flexible workingbenefits business by encouraging higher levels of productivity and increasing staV retention. Encouragingemployers to think creatively about how their employees can work flexibly is a better approach thanburdening them with more rules and regulations. The Flexible Working Regulations 2002 which came intoforce in April 2003 have cost £404 million. It is crucial that the right to request flexible working is kept asinformal as possible so that additional cost are not placed on employers.

21. Research conducted by the OYce for National Statistics found that, in its first year of operation,almost one million mothers and fathers have requested flexible work, with 77% of companies automaticallyagreeing new terms, and a further 9% reaching some sort of compromise.

22. The current light touch approach has been successful and therefore the BCC would not supportadding to the current Regulations. The Government must honour the commitment it made not to reviewthe Regulations until 2006.

Temporary Agency Workers

23. TheUK’s labourmarket has diVerent characteristics from other EUmember states, consequently theDirective’s provisions would have a very diVerent eVect in the UK. The UK has more temporary workersthan any other EU state, over 700,000 at any one time, or about 3% of the workforce. Full parity of benefitsand conditions between temporary and permanent workers would raise the cost of hiring temporary staV,making them amuch less attractive prospect for employers, and leading to fewer employment opportunitiesfor workers who want flexible working arrangements.



24. Equal treatment regarding pay and working conditions for temporary workers would also putsubstantial additional administrative burdens on user enterprises (particularly SMEs). Additionally, smallfirms with no dedicated human resource expertise would be concerned that if they get it wrong on equaltreatment for temporary workers they could be taken to tribunal. This would further discourage user firmsfrom recruiting temporary labour and reduce employment opportunities for temporary workers, which atpresent could possibly lead to permanent work.

25. The BCC, along with the Government and other representative bodies, have consistently argued thatthe proposedDirective could backfire against those it is intended to help by reducing temporary employmentopportunities. Currently the legislation includes a six week period before a temporary worker is entitled tothe same benefits as a full time employee. The BCC is lobbying for a six month period.

Age Discrimination

26. TheUKhas the third highest participation rate in the EUof both olderworkers and youngerworkers.The UK’s strong record is a result of the flexibility of the UK labour market. The main concern for businessin the current proposals is the plan to abolish Normal Retirement Ages (NRAs). The BCC believes it isnecessary and beneficial to set an end point to the employment relationship.

27. The BCC is concerned about the financial impact on SMEs of this Directive. The RIA stated thatthere is likely to be a significant eVect on smaller firms (those with fewer than 50 employees). The RIAreports that small firms will “bear disproportionate implementation costs, which are expected to berelatively high because of the complex nature of the subject.” The BCC is concerned with the reliability ofthe Government’s calculations and more precise figures are needed. Indeed, the RIA states with referenceto the costs and benefits that “some of the assumptions will be pure guess work” and with reference to thenumbers likely to be aVected that there “are at present no reliable statistics.” There are currently 1.14millionsmall employers. Implementation of the proposals is estimated to cost small firms between £120 million and£140 million overall. (Total implementation costs are estimated at £141–£155 million.)

28. Amongst the recurring costs, Employment Tribunal costs are estimated to be about £16–£32 million,with each individual application costing the employer £2,000. It is estimated that employers could be facedwith an extra £73 billion worth of claims and 8,000 extra cases a year from this legislation, a fifth of whichrelated to retirement issues.

Availability of a Skilled Workforce

29. The availability of skilled workers is fundamental to the strength of the economy. However, the UKhas been suVering from acute skills shortages. The BCC Productivity Survey found that 36.4% of businessescited skills shortage as a barrier to raising productivity. The UK productivity rate is 25% below the US andFrance, primarily because of the current skills shortages. OECD figures show that the UK has slipped from13th to 22nd in a table ranking the numbers leaving education with poor qualification and 25th out of 29thin a table ranking the numbers staying on in education or training. Further, a recent Learning and SkillsCouncil survey5 found that one fifth of job vacancies in the UK remain unfilled because of a lack of skilledapplicants and more than a third of firms are delaying new projects because they could not find the rightpeople.

30. In a recent BCC survey6 one respondent illustrated the impact of skills shortages by commenting“. . . we operate in a low unemployment area with few skilled workers. Therefore we must rely on those thatwork for us to be flexible. We have no other people left to employ in the area.”

31. To improve the supply of skilled labour into the workforce the BCC have various long termrecommendations:7

— The Government must shift the focus of its education policy toward vocational education.Vocational routes of learning must be present as equal to academic.

— There should not be a target for university participation. Those who can benefit from a universityeducation should go to university. However, currently there are high drop out rates and decliningnumbers entering graduate level jobs.

— The Government must ensure that young people entering the workplace have basic literacy/numeracy/IT and communication skills.

5 UK Learning and Skills Council Survey 2004.6 BCC Survey on Working Time Directive 2004.7 For more detail on BCC skills recommendations please contact Lewis Sidnick, BCC Policy Adviser.



Recommendations

32. Monitor and reduce Regulatory Burden: To help monitor and reduce the regulatory burden onbusiness from employment regulations we would recommend that the Government adopt the BCC’sdatabase of RIAs as the standard RIA reference point nationally for all government departments. TheGovernment should incentivise departments to carry out genuine consultations when compiling a RIA andsubmit the consultation process to independent scrutiny. There should be measurable targets set for eachgovernment department for the reduction of compliance costs to business through deregulation and theintroduction of government departmental budgets for every new regulation introduced. Ministers shouldonly sign RIAs where there is rigorous evidence that the benefits justify the costs.

33. Retain the Opt-Out from Working Time Regulations: The BCC strongly support the retaining of theopt-out from the 48 hour working week as this opt-out is an important ingredient to our labour marketflexibility. Employers value the opt-out because it enables them to keep costs down (both directly throughhaving to employ more people and indirectly through finding space to put them, for example); because theywish to avoid industrial disputes over the interpretation of the regulations; because many do not have theinfrastructure in place to make collective or workforce agreements in order to make the reference periodmore flexible; and because the definition of autonomous workers in the UK statutory instrument is unclear.

34. Cap the National Minimum Wage and retain the training exclusions. The NMW has increased from£3.60 to £4.85 since 1999. The BCC recommends that the NMW be capped in line with inflation. The newNMW for 16–17 year olds could harm the flow of skilled workers into the economy. The BCC thereforerecommends that the exclusions from workbased learning should remain but also the rate of £3 should becapped to prevent adding further incentives for young people to leave education or training.

35. Do not legislate to strengthen flexible working regulations. The Flexible Working Regulations 2002have been a success. Therefore there is no necessity to add to the current Regulations, which only came intoforce a year ago. Further, the Government stated that no review would occur within the first three years.

36. Extend the current six week exclusion period of the Temporary Agency Workers Directive to a sixmonth period. The UK has more temporary workers than any other EU state, with over 700,000. Thereforefull parity of benefits and conditions between temporary and permanent workers would raise the cost ofhiring temporary staV, making them a much less attractive prospect for employers, and leading to feweremployment opportunities.

37. Include a mandatory state retirement age within the Age Discrimination Legislation. It is essential thata common sense approach be taken and that the end point of the employer/employee relationship defined.Therefore, a mandatory state retirement age must be included in the proposals.

38. Place greater focus on vocational learning to address current skills shortages. The UK currently suVersfrom a critical skills shortage which is a barrier against raising productivity and competitiveness. Theproblem is that not enough people pursue vocational routes of learning and too many young people areencouraged to pursue academic routes when it is not in their interests or the interests of the economy. TheGovernment must fully incorporate vocational route through the national curriculum.

June 2004

APPENDIX 3

Memorandum by the Chartered Institute of Personnel and Development

The Chartered Institute of Personnel and Development (CIPD) has over 120,000 members and is theleading professional institute for those involved in the management and development of people.

This memorandum sets out the CIPD’s view on how best to promote labour market flexibility in the UK.Section 1 defines what flexibilitymeans for the economy. Section 2 looks at flexibility from an organisationalor workplace perspective. Section 3 considers the role of employment regulation, while sections 4 and 5discuss the impact of regulation on employment and productivity respectively. In concluding, section 6makes some recommendations regarding employment regulation.

1. Labour Market Flexibility: the Economic Perspective

1.1 According to the Treasury, “A flexible and eYcient labour market has the ability to adjust to changingeconomic conditions in a way that maintains high employment, low inflation and unemployment, and continuedgrowth in real incomes.” (HM Treasury, Flexibility in the UK Economy, March 2004)

1.2 This is a rather general definition. In more specific terms, a flexible labour market will:

— enable the economy to maintain a high degree of employment stability over the economic cycle;

— help sustain a low rate of structural joblessness (“full employment”); and

— raise the trend rate of productivity growth.



1.3 The flexibility that gives rise to these outcomes has a number of well-known dimensions:

— real wage flexibility (the ease with which earnings adjust to fluctuations in aggregate demand forlabour);

— relative wage flexibility (the ease with which the earnings of diVerent types of labour adjust tostructural shifts in the economy);

— numerical flexibility (the ease with which employers can adjust labour inputs—people or hoursworked—in response to changes in demand);

— functional flexibility (the ease with which labour can be redeployed to new tasks, or are able toadapt to change, in response to changes in demand and improvements in technology);

— occupational flexibility (or occupational mobility, the ease with which workers can switch fromone occupation to another in response to changes in demand); and

— spatial flexibility (or geographical mobility, the ease with which labour canmove from area to areain response to structural shifts in demand).

1.4 Labour market flexibility is sometimes considered in relation to each of these dimensions in isolationbut is best thought of in terms of the manner in which they combine and interact. This is important fortwo reasons.

1.5 First, there may be trade-oVs between diVerent dimensions of flexibility. For example, a high degreeof numerical flexibility expressed in terms of frequent hiring and firing and rapid labour turnover can, byits impact on the propensity of employers to invest in training, detract from functional flexibility. Secondly,some forms of flexibility can give rise to wider economic and social costs, which will alter the perception ofhow well the labour market adjusts to change. A society that values job stability, for example, may prefera labour market where real wages or hours of work, rather than employment levels, respond to fluctuationsin demand over the economic cycle.

1.6 This implies that to be truly deemed “flexible”, the labour market should be exhibiting strong, or atleast improving, performance on stability, full employment and productivity. The general consensusamongst economists is that the UK labour market scores well on numerical flexibility and relative wageflexibility, has been showing signs of improvement on real wage flexibility (aided by improvements inmonetary policy and the impact this has had on inflation expectations), but has performed less well onfunctional flexibility. This observation is consistent both with the economy’s relatively strong employmentperformance in the past decade and continued relatively low productivity by the standards of the UnitedStates, France and Germany. It also suggests that the common assertion that “the UK has a flexible labourmarket” should therefore be treated with caution. This in part explains why the Treasury in 2003 concludedthat the UK economy had not yet met the flexibility test for membership of the single European currency.

2. Labour Market Flexibility: the Organisational Perspective

2.1 At the level of the organisation or workplace, “flexibility” is best thought of as the ease with whichmanagers are able to respond to market pressures as they strive to meet the demands of their customers orclients. Managers will pursue their objectives in diVerent ways and with varying degrees of success. But highperforming organisations are found to be those that score highly across the following flexible dimensionsof human resource management:

— flexible management of working time to ensure that they provide customers with what they wantwhen they want it—which in today’s “24/7 society” can be any time of day or night;

— ongoing investment to provide staV with the ability to move easily between diVerent tasks, adjustto new technologies, and adapt to new working practices. This involves widespread use of teambased working, giving staV the opportunity to exercise discretion on the job, and allowing staV toeVectively voice their opinions on how to improve performance;

— reward systems that vary pay in line with individual or team performance, as well as fluctuationsin labour market conditions; and

— performance measurement and appraisal systems that motivate staV to perform well andencourage management to treat staV as valuable assets to be developed rather than simply as“labour costs” to be minimised.

2.2 As with labour market flexibility viewed from the macroeconomic perspective, some organisationswill score highly on some of these dimensions but not others, and possibly encounter trade-oVs betweendiVerent management practices. Successful organisations are those that find a balance across the variousdimensions of flexibility in a way that enables them to eVectively supply what customers and clients want.



3. Employment Regulation and Labour Market Flexibility

3.1 The preceding discussion indicates that there is a prima facie case for public policy interventionsdesigned to improve UK labour market flexibility, especially in respect of functional flexibility.

3.2 Since policy interventions are targeted at, and mediated through, organisations there are obviousimplications for management. The default response of many employers’ organisations—and the CIPD—isthat government should intervene as little as possible since organisations are better judges of how best tomanage their people than politicians or bureaucrats. On this view policy-makers should thus limit theirinterventions to persuading or exhorting organisations to raise their game, assisted by technical support,guidance or voluntary codes of practice.

3.3 Despite a general preference for voluntarism, the CIPD accepts that market failures, poor practiceor bad practice, sometimes provides a justification for more direct forms of government intervention,ranging from financial sticks and carrots to statutory employment regulation.

3.4 Indirect measures to foster flexibility include government policies for education and training that, byincreasing the supply of basic and technical skills in the workforce, can make it easier for organisations toadopt high performance work strategies. Similarly, improving the quality of management education andtraining makes it more likely that organisations will develop the leadership capacity needed to deliver highperformance.

3.5 However, recognition of the limits of voluntarism and the case for policy intervention does notprovide justification for strong employment regulation. Most organisations act in the best interests of thosethey employ. Moreover, as the Treasury acknowledges, regulation carries potential costs as well aspotential benefits:

“EVective and well focused regulation can play a vital role in correcting market failures, ensuringhealth and safety and good working practices, and in driving up standards. However, unnecessary orpoorly designed regulation can be an obstacle to flexibility restricting employment growth andcompetitiveness, particularly for smaller firms.” (HM Treasury, 2004, op cit)

4. Employment Regulation and Jobs

4.1 The potential cost of employment regulation, insofar as it hinders labour market flexibility, is said toemerge in the form of lower employment and/or slower productivity growth than would otherwise beachieved. However, care should be taken when assessing these possible eVects, particularly in relation to theargument that employment regulation amounts to a “tax on jobs”.

4.2 The regulationwith the greatest potential to harm jobs is the nationalminimumwage. But the sensibleadvice of the independent Low Pay Commission has ensured that the minimum pay rate so far set has hadno discernible negative eVect on employment levels. As a result, the bulk of employers seemmost concernedabout the combined cost of new regulations covering working time, parental leave and the rights of part-time and temporary/agency workers. Yet while these costs notionally fall on employers they in fact fall onworkers. Over time wages adjust downward to compensate for any increased employment costs caused byregulation. In other words, workers themselves pay for their improved employment rights. Consequentlythere is little or no long-run negative impact on jobs.

4.3 This point has been stressed by, among others, Prof Steven Nickell, one of the UK’s most respectedeconomists and a member of the Bank of England’s Monetary Policy Committee. As Professor Nickellconcludes in a study published by the Bank:

“The workings of the labour market ensure that employees end up paying for their new benefits(rights) in the form of lower wages, a fact which is worth bearing in mind by those who press forfurther extensions of employee rights. They might consider asking employees whether they want tosacrifice wages in order to have new rights. Typically, however, employees and others usually havethe impression that the costs of their new rights will be paid for out of profits, an impression reinforcedbecause managers also like to claim this as well.” (Nickell, S and Quintini, G “The recentperformance of the UK labour market”, August 2001.

5. Employment Regulation and Productivity

5.1 If employment regulation does not impose a “tax on jobs” why do somany employers complain? Theanswer is that regulation tends to be introduced with such speed, or in such a bureaucratic fashion, thatorganisations struggle to cope.

5.2 This has obvious implications for productivity where excessive form filling can seriously detract fromeveryday business activities. A proportion of management time is inevitably tied-up in understanding thelaw and implementing regulations. Three-quarters of HR practitioners involved in the CIPD’s 2002employment law survey complained of a lack of adequate consultation about forthcoming regulations,three-quarters of a lack of clarity in the law, and half wanted to be issued with more guidance. Largeremployers are thus increasingly hiring staV skilled in employment law, while smaller employers struggle tocope at all.



5.3 Regulation can also hinder functional flexibility by fostering a tick box or compliance culture; theneed to fulfil regulatory rules stifling organisational creativity. Half of all HR practitioners questioned forthe CIPD employment law survey referred to above thought that the law hindered the ability of theirorganisations to meet strategic objectives.

5.4 Ironically, there is also a risk that regulation will have unintended adverse consequences for those itis designed to help. One possibility is that the tick box mentality will result in organisations feeling that theyhave “done their bit” for workers simply bymeeting their legal requirement. Similarly, narrowly constructedregulations that impose one-size-fits-all requirements on organisationsmay result in some employers havingto abandon perfectly reasonable practices that suit them and their workers.

5.5 This is evident from controversy surrounding two EU directives, the Information and ConsultationDirective—due to be implemented in the UK by March 2005—and the Working Time Directive.

5.6 Regulation to require employers to inform and consult workers about plans for restructuring couldin principle help improve productivity—which is why the UKGovernment published its initial thoughts onthe EU directive in a document entitled High Performance Workplaces. (DTI, High PerformanceWorkplaces: the role of employee involvement in a modern economy’ July 2002). However, there are alsopotential costs in the form of reduced productivity that should not be overlooked.

5.7 The aim of the directive is to require organisations with 50 or more employees to inform and consultwith representative employee bodies. It is important not only that the latter prove to be genuinelyrepresentative but also that they don’t run counter to direct communication betweenmanagers andworkers,such as regular team meetings and employee attitude surveys. Organisations have been making ever greateruse of such direct forms of communication—in some cases allying this to partnership agreements with tradeunions—in order to increase employee motivation, commitment and trust. Any diminution of directcommunication caused by a regulatory requirement to consult representative employee bodies couldtherefore hinder rather than help eVorts to raise productivity and thus oVset the potential benefits of thedirective.

5.8 By the same token, while there is merit in the Working Time Directive insofar as it ensures that thatorganisations do not require people to work excessively long hours against their will, the directive shouldaim to do no more than act as a guideline to encourage voluntary changes in the behaviour of employersand workers. The current threat to remove the right of workers to voluntarily opt out from the terms of thedirective could, if carried through, harm numerical labour market flexibility in the UK.

5.9 The flexible working regulations introduced in April 2003, however, are an example of legislationdesigned to operate with a “light touch”. They were introduced after extensive consultation with a widerange of interests, including a task force with an independent chair, and this process made it possible toadopt an imaginative but practical solution to balancing the interests of employer and employee. Theregulations assume in eVect that employers will be willing to give serious consideration to an employee’srequest for flexible working, taking into account the organisation’s ability to accommodate it. Surveyevidence suggests that most employers are in practice taking a positive approach to the regulations andaccepting a high proportion of requests, either as made or in modified form. Few employers report seriouscosts or diYculties in implementing the regulations (CIPD, A Parent’s Right to Ask, 2003).

5.10 A light touch approach to regulation is based on the fundamental proposition that, in order to havepositive benefits for both employees and business, the regulation has to be implemented with this specificaim. If employers simply aim for compliance, this may protect them from legal penalty but is unlikely tobring positive benefits. So eVective regulation has to target employers’ hearts and minds. The business casefor policies on equal opportunities, for example, assumes that the employer will recruit from a wider rangeof applicants but the real benefits will only accrue if the organisation redesigns its recruitment processes,which is not of course required by legislation.

5.11 An example of legislation whose implementation would be highly damaging to labour marketflexibility is the draft EU directive on agency working. The directive would require employers to give agencyworkers the same terms and conditions as those of employees doing similar work. In many cases eg nursesemployed by nurse-banks, this would lead to agency workers receiving lower pay than at present. Moregenerally, by raising the costs of agencyworking the directivewouldmake this form ofwork less attractive toboth employers and employees. Research evidence from a number of countries shows that agencyworking isa route used by many disadvantaged groups to gain access to permanent jobs.

6. Conclusion and Recommendations

6.1 The assessment contained in this memorandum suggests that employment regulation is neitherinherently good nor bad but needs to be assessed in relation to specific labour market issues.

6.2 If employment regulation is to help rather than hinder labour market flexibility the governmentshould adopt as light a touch as possible in order to meet its regulatory objectives. Minimum standards plusleeway for organisations to suit regulations to their individual circumstances should be the order of the day.It is also vital that policy-makers do everything possible to combat the tick boxmentality so as to ensure thatany employment regulation is a platform for better treatment of people at work rather thanmerely a plateau.



6.3 With regard to future practices the CIPD recommends that any proposed item of regulation shoulddemonstrate that:

— it is both appropriate and proportionate to meeting its objectives;

— there is no reasonable non-statutory alternative to meeting its objectives;

— there is suYcient scope to allow organisations to tailor the regulation to their individualcircumstances;

— all the potential costs and benefits have been identified and, as far as possible, quantified;

— opportunities have been taken to support the use of alternative dispute resolution processes, suchas conciliation and mediation, before applications are referred to employment tribunals; and

— regulations are designed so that employers are encouraged to use them as a means of improvingperformance, and suitable guidance is made available for this purpose.

June 2004

APPENDIX 4

Memorandum by Citizens Advice

Introduction

1. This paper sets out the submission by Citizens Advice to the inquiry by the Trade and IndustryCommittee into UK Employment Regulation, as announced on 7 May 2004.

2. Citizens Advice is the co-ordinating body for the 530 Citizens Advice Bureaux (CABx) in England,Wales and Northern Ireland.8 As well as setting and monitoring standards for advice, training, equalopportunities and accessibility, Citizens Advice co-ordinates national social policy, media andparliamentary work.

3. In 2002–03, these 530 CABx dealt with 560,153 employment-related advice enquiries. Whilst asignificant number of these advice enquiries were made by employers, the vast majority were made byworkers. And we estimate that in at least 60% of these cases the worker concerned was not receiving—orwas being deliberately denied—one or more of his or her statutory workplace rights. Typically, he or shewas low skilled and low paid, and working in a small, non-unionised workplace (or was previously soengaged, prior to the dismissal that led him or her to seek advice from the CAB).

4. Early in the life of the current Government, the then Secretary of State for Trade and Industry said:“in a modern economy, we need a flexible labour market. In return, employers have a responsibility to givetheir workers the flexibility they need. Flexibility to balancework, family and other commitments”.9 CitizensAdvice has no remit to comment on the stated “need” for a flexible labour market. The focus of thissubmission is on how the Government’s strategy for making a reality of the second part of this statement—that is, of ensuring “work-life” balance for all, through the establishment of “a framework of decentworkplace standards”—is failing to benefit many of the hundreds of thousands of low paid, non-unionisedworkers in care homes, hairdressers, bars, restaurants and hotels, shops, food processing factories, cleaningcompanies, and other low-skilled or “service” jobs in which, according to many economic analysts, there islikely to be further significant growth in coming years.10

The Problem

5. As noted above, CABx deal with some 550,000 employment-related advice enquiries every year. Someof these enquiries—made by both workers and employers—relate to the company mergers and otherbusiness changes that are inevitable in a dynamic economy operating under the influences of “globalisation”and new technologies. Others reflect the fact that disagreements between workers and their employers willand do happen, just as they do in other areas of life. But an estimated 60% or more of the worker enquiriesare made by a worker who is not receiving—or is being deliberately denied—one or more of his or herstatutory workplace rights.

— Tens of thousands are not receiving their full legal entitlement to four weeks’ paid holiday per year,and/or have been forced or cajoled into “opting out” of the 48-hour limit on weekly working time.

— Many have been engaged on successive short, fixed-term contracts as a means of denying themcontinuity of employment—and thus other basic rights, such as legal protection from unfairdismissal.

8 CABx in Scotland belong to a separate organisation, Citizens Advice Scotland (CAS).9 The Rt Hon Stephen Byers, MP: speech to the Scottish TUC conference, 20 April 2000.10 See, for example: Turner, A. (2002) “Globalisation, technology and the service economy: implications for job creation”, inBurkitt, N. (ed) A life’s work: achieving full and fulfilling employment, Institute for Public Policy Research, 2002.



— Tens of thousands of pregnant women have been denied time oV for ante-natal care, or areexperiencing diYculty in obtaining their full legal entitlement to maternity leave and pay. And adepressingly large number have been unfairly dismissed simply on account of their condition.

— Many have been denied Statutory Sick Pay when forced to take time oV due to illness.

— Most have not received a written statement of their terms and conditions, and/or regular, itemisedpay slips. This simply increases the diYculty they face in ensuring that their pay, terms andconditions are in accordance with their statutory rights.

6. These workers tend to have a poor understanding of their statutory rights, and little if any awareness ofhow to assert or enforce them.Most are low skilled and low paid, and are employed in small, non-unionisedworkplaces.11 As a result, they are extremely vulnerable both to deliberate and malevolent abuse by a“rogue” or criminally exploitative employer, and to inadvertent non-compliance by a well-intentioned butoverstretched or inadequately informed employer.

7. Many small employers, especially those in low-profitability sectors of the economy, simply lack themeans and resources—dedicated human resources staV, for example—to keep fully abreast of their legalobligations to their workforce. Research commissioned by the DTI confirms that most small employers are“not confident about their knowledge of individual employment rights”, due both to the common lack of“an in-house personnel function” and to the fact that many such employers deal with employment rightson “a need-to-know basis” only.12 In short, the demands of running a small business in an increasinglycompetitive economic environment all too often lead to inadvertent non-compliance with statutoryemployment rights.

8. It is also clear that, in the words of the General Secretary of the TUC, Brendan Barber, “there are stilltoomany bad employers who exploit their workers and oVer the worst pay and conditions they can get awaywith”.13 To many of these (mostly small) employers, the basic statutory rights of their workers are simplyconstraints on “flexibility”. Suchmalevolent non-compliance maywell be the exception rather than the rule,but the number ofworkers aVected is substantial. And the power of themarket place can all too easily lead toa rapid downward spiral of wages, conditions, andworkplace safety. This is especially truewhen the workersconcerned are migrants—as the tragic deaths of 21 Chinese cockle-pickers in Morecambe Bay in February2004 so dramatically illustrated.14

9. But it is not only workers who are losing out from this situation. Good employers lose out if theircompetitiveness is undercut by the bad, and especially so if “rogue” competitors can exploit their workerswith impunity. As the former Cabinet minister, Nick Brown MP, has noted, “there is nothing more gallingfor an honest employer than finding that they are being undercut by others who are not obeying the law and,worse, finding that the law is not being enforced”.15 Focus groups of small businesses convened by MORIfor the Small Business Service have indicated that many small businesses feel particularly disadvantaged byhaving to compete with “rogue” or unscrupulous employers in the “informal economy”, where many ofthose who seek employment-related advice from a CAB are working.16

10. Similarly, the Government loses out from the non-payment (by “rogue” employers) of tax andnational insurance contributions, and from the frustration of its wider policy goal of a better work-lifebalance for all workers. And the increasingly widespread exploitation of migrant workers, associated as itso often is with the facilitation of illegal entry and employment, threatens to undermine the Government’s“managed migration” strategy of opening new routes for the legal migration of labour whilst tacking illegalmigration and illegal working.

Current Enforcement of Workplace Rights

11. CABx work hard to increase both workers’ awareness of their statutory (and contractual) workplacerights, and employers’ understanding of their legal obligations to their workforce—for example, bydistributing copies of the DTI’s authoritative booklets and leaflets on statutory employment rights.17 Andthey can assist workers who are not receiving one ormore of their statutory (or contractual) workplace rightsto approach and—where necessary—negotiate with their employer, with a view to reaching an amicablyagreed improvement in the worker’s pay, terms or conditions.

11 Less than one in three workers in the UK are members of a trade union. Source: Trade union membership: estimates from theautumn 2003 Labour Force Survey, DTI, March 2004.

12 Blackburn, R and Hart, M (2002) Small firms’ awareness and knowledge of individual employment rights, EmploymentRelations Research Series No 14, DTI, August 2002. The researchers defined a “small employer” as one employing less than50 workers.

13 “Seeing the big picture”, Brendan Barber, The House Magazine, 9 June 2003.14 For further information, see: Nowhere to turn: CAB evidence on the exploitation of migrant workers, Citizens Advice,March 2004.

15 The Rt Hon Nick Brown MP, Hansard, House of Commons, 27 February 2004, col 538.16 Source: Paragraph 5.27 of The National Minimum Wage: Fourth Report of the Low Pay Commission, Low Pay Commission,Cm 5768, March 2003.

17 Sadly, the DTI has recently ceased hard copy production of most of these booklets and leaflets, in favour of the texts beingavailable via the Internet only. For further information, see: “The paperless waiting room” in evidence, Citizens Advice,April 2004.



12. However, where the employer proves to be uncaring or intransigent, the principal (and in most casesonly) means of enforcement available is the making of a claim to an Employment Tribunal. Again, CABxcan and do provide advice on and assistance with the making of such a claim, and in some cases can providerepresentation at the Tribunal hearing itself.18 But the process is unduly legalistic and adversarial, and thusextremely daunting—especially to pregnant women, new parents, people with mental health problems, andother vulnerable individuals. Every year, about one-third of all ET claims are withdrawn by the claimant,with the most common reason given for such withdrawal being “stress”.19 And unpublished research by theDepartment for Constitutional AVairs indicates that, after relationship breakdown, the resolution of anemployment problem is the “justiciable event” with the greatest personal (ie non-economic) impact on theindividual concerned.20

13. For most low paid workers, the cost of legal representation at an Employment Tribunal hearing isprohibitive—there is no “legal aid”, and the resources of CABx and other sources of free representation areextremely limited. Increasingly, claimants face intimidation from some employers’ legal representatives, inthe form of unjustified threats of a counter claim for “costs” of up to £10,000.21 And, even where a claim issuccessfully pursued to its conclusion, a favourable ruling and the making of a monetary award by theTribunal may prove to be a hollow victory. Some employers simply fail to pay awards—which EmploymentTribunals themselves have no powers to enforce—and the legal, financial and other obstacles to enforcementthrough the civil courts are immense.22

14. Moreover, for many workers, the legal protection supposedly oVered by this system is in any caserendered meaningless by their fear of being victimised or even dismissed just for making a claim to anEmployment Tribunal. In particular, working parents, carers and those who—on account of their age, skillsor disability—face the greatest challenge in finding alternative employment are often unwilling to put theirjob at risk by “going to law”. As the former government minister, John Denham MP, has noted recently:

“It’s a vulnerable world. Mothers denied maternity pay may not want to risk a lengthyconfrontation when they have a new child on the way. Change and challenge can mean instabilityin income, benefits and tax credits. Get it wrong and your family’s life can becomemuch worse”.23

15. Citizens Advice has repeatedly suggested that, for such workers, there needs to be available, inaddition to the Employment Tribunal system, a more accessible and pro-active system of enforcement thatdoes not rely on individuals entering into such stressful, costly and damaging legal confrontation with theiremployer (or former employer).24

Pro-active Enforcement—The National Minimum Wage

16. In fact, in relation to just one statutory employment right—the right to the National MinimumWage—such an accessible and pro-active enforcement mechanism already exists.

17. The introduction of the National Minimum Wage (NMW), in 1999, was accompanied by theestablishment of a dedicated NMW enforcement agency within the Inland Revenue. The agency operatesa nationalNMWHelpline, investigates complaints (including anonymous complaints) from both individualworkers and third parties, and conducts unannounced, on-site inspections of carefully targeted employersabout whom no complaints have been made to check that they are meeting their obligations in relation tothe NMW.

18. The Government has stated that it established this accessible and pro-active enforcement regime forthe NMW because it did not want workers “to have to rely on taking action against their employerthemselves, as intimidation or fear of losing their job could prevent a worker from making a complaint [toan Employment Tribunal]”.25 And, despite its very limited brief and resources, there is broad support forthe Government’s view that the work of the Inland Revenue enforcement agency in enforcing the NMW

18 All 530CABx oVer general advice on employmentmatters, some 60%also oVer specialist employment advice from a dedicatedadviser, and some 70% oVer representation at employment tribunals. However, even where the bureau oVers specialistemployment advice and/or representation, this is likely to be provided by a single adviser who may also represent at othertribunals, such as welfare benefit tribunals. Many such advisers are in fact unpaid volunteers, some are employed but on apart-time basis only, and most have little if any clerical or administrative support.

19 Source: Findings from the 1998 Survey of Employment Tribunal Applicants, DTI, 2002.20 Report on consumer research, Consumer Strategy Board, DCA, (forthcoming).21 For further information, see: Employment Tribunals: the intimidatory use of cost threats by employers’ legal representatives,Citizens Advice, March 2004.

22 For further information, see:Hollow justice: the non-payment of Employment Tribunal awards by employers, Citizens Advice,(forthcoming).

23 John Denham MP, Fabian Society lecture, 17 May 2004.24 See, for example:Wish you were here: a CAB evidence report on the paid holiday provisions of the Working Time Regulations

1998, Citizens Advice, September 2000; Birth rights: a CAB evidence report on maternity and parental rights at work, CitizensAdvice, March 2001; and Fairness & Enterprise: the CAB Service’s case for a Fair Employment Commission, Citizens Advice,October 2001.

25 National Minimum Wage Annual Report, DTI/Inland Revenue, September 2003.



has been “a great success”.26 Since 1999, the enforcement agency has dealt with more than 13,000complaints, has revealed non-compliance with the NMW by more than 9,000 employers, and has identifiedmore than £15 million in arrears of wages.27

19. A key feature of this approach to enforcement is that it tackles non-compliance by employers withoutindividual workers having to put their job at risk by “going to law”. Since 1999, about 60% of all the NMWenforcement agency’s investigations have been instigated on the basis of “risk assessment” of tax creditinformation gathered by the Inland Revenue or other analysis, rather than as the result of a complaint froma worker or third party.

20. And, of course, a key benefit is that, acting at the level of the employer rather than the individualworker, it is capable of improving the lot of every worker in a workplace. In the experience of CABx, aworker who is not receiving his or her full legal entitlement to paid holiday, for example, is also likely notto have received a written statement of his or her terms and conditions. And it is likely that many if not allof his or her co-workers are being similarly treated.

21. But perhaps the most important lesson that can be drawn from the work of the NMW enforcementagency since 1999 is that, because much non-compliance by employers is inadvertent, rather thandeliberately exploitative, the mere intervention of the agency is in most cases suYcient to achieve full andwilling compliance. In other words, most “enforcement” is of a “soft touch” nature.

22. Citizens Advice has consistently argued that this accessible and pro-active approach to complianceshould be extended to some of the other statutory workplace rights, including most of the basic “work-lifebalance” rights introduced or enhanced since 1997.28 Equipped with equivalent powers of investigation andenforcement as the NMW enforcement agency, a “Fair Employment Commission”—whether it be a single,over-arching body or a number of separate bodies working together in a co-ordinated, joined-up way—could work to maximise employer compliance, eliminate the exploitation and intimidation of the mostvulnerable workers, and thus ensure that all workers are both properly rewarded for their work and able toachieve an eVective work-life balance. For, as Dr Howard Stoate MP has noted, “improving the quality ofwork experience of the working population of this country is a goal every bit as important as the goal of fullemployment”.29

23. Much as with the NMW enforcement agency, the key functions of the “Fair EmploymentCommission” would be to:

— investigate complaints (including anonymous complaints) from both workers and third partiesabout non-compliance with certain basic, statutory employment rights;

— conduct on-site inspections of carefully selected employers, targeted on the basis of “riskassessment” analysis of tax, national insurance, tax credit or other information;

— provide guidance and, where necessary, practical assistance to non-compliant employers on howto change their practice to ensure compliance with their statutory obligations to theirworkforce; and

— where necessary, undertake eVective enforcement action. This might include, as appropriate, theimposition of financial penalties, the referral of a case or cases to an Employment Tribunal, and/or the imposition of a “stop now” order preventing the employer from trading his or her business.Such enforcement, which would generally be necessary only in the case of “rogue” or criminallyexploitative employers, might well be undertaken by separate teams of oYcials (the “back oYce”)to those undertaking on-site inspections (the “front oYce”).

24. As noted above, much non-compliance stems from a basic lack of awareness of the statutoryemployment provisions. The work of the “Fair Employment Commission” could therefore include theundertaking of publicity campaigns aimed at increasing both employers’ awareness of their statutory dutiesand workers’ awareness of their rights and entitlements. And it could include the provision of information,“good practice” guidance and advice to both workers and employers through written material, telephonehelplines, and Internet websites.

25. In doing so, the “Fair Employment Commission” would “join up” the work of this nature currentlyundertaken by the Department of Trade and Industry, the Inland Revenue, the Advisory, Conciliation andArbitration Service (ACAS), the Small Business Service, theHealth and Safety Executive (HSE), the various

26 See, for example: Paragraph 5.19 of The National Minimum Wage: Fourth Report of the Low Pay Commission, Low PayCommission, Cm 5768, March 2003.

27 Source: Hansard, House of Commons, 1 April 2004, col 1593–4W.28 We have suggested that, at the very least, the remit of the Fair Employment Commission should include the statutory rightsto: a written statement of one’s terms and conditions, and regular, itemised pay slips; a weekly working-time limit of 48 hours,unless agreed otherwise; four weeks’ paid holiday, and Statutory Sick Pay; maternity leave and pay, and time oV for ante-natal care; adoption and paternity leave and pay; parental leave, and time oV for emergencies; and equality between part-timers and full-timers. The Commission’s remit might well also include employer compliance with the various tax creditschemes for working people.

29 Dr Howard Stoate MP, Hansard, House of Commons, 17 December 2001, col 125.



equality commissions, and others. As noted above, the “Fair Employment Commission” need not be asingle, overarching body. It could well be a partnership of new and existing bodies, working together in aco-ordinated, joined-up way.

26. In this context, Citizens Advice warmly welcomes the launch, in May 2004, of the one-stop BusinessLink website, providing a single point of access to government information and support for business.30 Aswell as providing access to government grants, loans and consultancy support, the site provides easy-to-useguidance on the basic statutory employment regulations and how to comply with them, to themutual benefitof the business and its workforce.

27. At the same time, the “Fair Employment Commission” could work to educate both workers andemployers about those workplace practices for which enforcement—whether by an arm of the Commissionitself or through the Employment Tribunal system—is not so appropriate. For example, changing attitudesto child-care responsibilities and “flexible” working arguably depends as much on increasing awareness ofthe productivity and other benefits to business of such “work-life balance” policies, and ultimately onchanging workplace culture, as it does on actual enforcement of legal rights.

28. Such a “Fair Employment Commission” could not cover all statutory employment rights (let alonecontractual rights), and so would sit alongside and complement the Employment Tribunal system, ratherthan replace it. For, whilst the accessible and pro-active approach to compliance of a “Fair EmploymentCommission” would obviate the need for many workers to take their case to an Employment Tribunal, andwould provide an alternative remedy for those who are unwilling or afraid to “go to law”, it would still benecessary and appropriate for many disputed cases—for example, those involving alleged breaches ofcontractual as well as statutory rights, or allegations of discrimination—to be resolved by an EmploymentTribunal (or, in some cases, the civil courts). Butwith the basic, statutory “work-life balance” rights, at least,the Employment Tribunal system could become a genuine remedy of last resort, with the Commissionproviding the first line of (light touch) enforcement.

29. A “Fair Employment Commission” would in no way involve the imposition of more “red tape” onbusiness. Fully compliant employers could expect to have no dealings with such a Commission. For the pro-active investigative work of such a Commission would be carefully targeted at those (mostly small)employers considered, on the basis of “risk assessment” analysis of tax, national insurance, tax credit andother information, likely to be breaching their statutory obligations to their workforce. And only thoseemployers that are clearly in breach of their legal obligations, yet do not respond positively to theintervention of the Commission, would have any reason to fear enforcement action.

The Challenge, and The Prize

30. The creation of such a “Fair Employment Commission”—whether in the form of a single, over-arching body with a range of complementary functions, or as a network of new and existing bodies workingtogether in a co-ordinated, joined-up way—would clearly be a significant and long-term undertaking. As afirst step, therefore, we believe that the Government establish a Task Force on Fair Employment, led by asenior Minister with specific responsibility for both employment rights and business support. The TaskForce could then oversee consultation on the precise role, remit, functions and structure of a “FairEmployment Commission”.

31. We recognise that this represents a major challenge for Government. The necessary funding isunlikely to be found within one departmental budget—so, ultimately, the Government will need to commitnew resources. But the potential prize—for workers, employers, trade unions and government alike—isgreat: making the current compliance and best practice of most employers the standard practice of all.

32. Workers—and especially low paid workers employed in small, non-unionised workplaces—wouldbenefit from enhanced access to their statutory employment rights, and thus from a better “work-lifebalance”. Employers—large and small—would benefit from the creation of a more level playing field,without risk of being unfairly undercut by an unscrupulous or criminally exploitative competitor, and fromthe availability of more practical, and better co-ordinated, business support services. The trade unionmovement would benefit from the extension of the culture of enforceable rights, in which trade unionmembership is more likely to flourish, to many of the currently non-unionised workplaces.31 TheGovernment would benefit from the resultant reduction in the potential burden on the EmploymentTribunal system, and from increased tax and national insurance revenue. And society as a whole wouldbenefit from the more likely success of the Government’s strategies in respect of a flexible labour market,work-life balance, and managed migration.

June 2004

30 At: www.businesslink.gov.uk31 “Union chiefs back workers’ rights enforcement agency”, Financial Times, 2 June 2004.



APPENDIX 5

Memorandum by the Confederation of British Industry

Executive Summary

1. The CBI believes that over the last two decades the strength of the UK’s flexible labour market hasprovided a source of competitive advantage for UK businesses. It has played a key role in making Britainan attractive place to do business. In an era of inexorably rising global competition, flexibility in the UKlabour market has never been so important. It is vital that UK companies continue to prosper at the heartof the EU economy and that productivity is improved to match businesses in the US and those in the Asian-Pacific rim countries.

2. There is a strong link between high levels of flexibility and both low unemployment and high companyperformance. TheGovernment wants tomake theUK“themost employment friendly country in the world”and recognises this requires a high level of labour flexibility. Labour market flexibility is important forbusiness because it allows employers to manage resources eYciently, improving productivity andcompetitiveness. It allows businesses to create jobs and adapt to changingmarket conditions and fluctuatingdemand. It is also important for society because it enables high productivity growth, allows regions to copewith asymmetric shocks without creating long-term unemployment and fosters the employment of labourmarket outsiders, particularly women, the young, older people and the long-term disabled.

3. The UK is frequently regarded as having high levels of flexibility. However, there is a danger ofcomplacency. It is clear that while the UK has high levels of flexibility in some areas, it has significantweaknesses in others, such as skills. The UK is improving in its areas of significant weakness, but theseproblems are deep-seated and are likely to take a long time to resolve. At the same time there is a real threatfrom new EU and UK regulation. For example, European Commission proposals on AgencyWork and onremoving the individual Working Time opt-out represent significant threats to areas in which the UK hasbeen traditionally flexible.

4. This response argues that:

— several key dimensions of a flexible labour market contribute to the UK economy;

— this framework of labour market flexibility has led to the UK’s unique position in a competitiveglobal economy; and

— new rafts of European employment legislation will only serve to further erode the UK’s flexiblelabour market.

Several key dimensions of a flexible labour market contribute to the UK economy

5. A recent CBI report on labour market flexibility identified a number of diVerent forms of flexibilitywhich together determine whether a labour market—overall—is responsive enough to the needs of itsemployers and workers. The report was written after a survey of CBI members, conducted by MORI,suggested that while the majority of companies still found the UK an attractive place to do business, thebusiness climate had deteriorated in recent years, and was expected to continue to do so. Each factoridentified in the report is relevant to employment creation and productivity, but each impacts in diVerentways and all are not of equal importance. Important factors in the report include:

— Skills flexibility—a skilled and adaptable workforce is necessary for company competitiveness andwider economic prosperity. Employers need to make sure their workforce’s skills are relevant tothe needs of businesses and can regularly update individual’s skills through appropriate training.Around one fifth of the UK workforce has low basic skills and although the UK is addressing theproblem and continues to improve on graduation rates, performance on vocational qualificationsand basic skills compares less favourably with key competitors like Germany.

— Functional flexibility—it is important to enable those employees who are willing to adopt newworking practices, such as teamworking and multiskilling, to boost the productivity of individualfirms. The flexibility is partly determined by the skill level and adaptability of employees, but canonly be achieved by the absence of practices such as demarcation and inflexibility of workingpractices.

— Flexible working time arrangements—the ability for employers to oVer employees flexible workingtime arrangements has been critical to the UK labour market. More employees than ever beforeare able to manage their time with greater eYciency through oVers of part-time work, temporarywork and annual hours agreements. In a service driven economy it ensures that staV are availablewhen customers want to be served—and this may mean peaks in business at lunchtime, in theevenings or through the night. In the manufacturing industry too, continuous shift production 24hours a day is often necessary to maximise productivity and returns on capital investment.Without these sorts of flexibilities jobs which could be created through business opportunities willbe lost. And working time flexibility is not just a one-way street—it often allows a much better fitwith employees’ lifestyle choices than the traditional five days a week nine to five.



— Numerical flexibility—refers to the ability of employers to carry out vital restructuring and initiateredundancies; excessive job protection legislation can create major disincentives to hiring.

— Wage flexibility—has been critical in maintaining the competitiveness of individual businesses inworld markets. If trading conditions are tough, businesses need to be able to contain wage costsand in some collective bargaining frameworks this can be very diYcult. And equally important, atthe bottom end of the labour market, low skill jobs can be priced away by excessive minimumwages. That is not to say that there should not be a minimum standard on wages—it just has tobe set at a realistic level.

— Geographical flexibility—it is important for the labourmarket to enjoy high levels of geographicalflexibility to allow workers who are willing to move between regions to find work.

6. Some of these flexibilities should be as highly developed as possible, but in others only modestcapability is generally desirable. So, for example, whilst some movement between regions by workers insearch of jobs is positive, the hollowing out of whole communities as people migrate is not. With skills, itis arguable that a country can never have a highly educated enough population or relax its drive to achievelifelong learning and reskilling, which the CBI supports.

This framework of labour market flexibility has led to the UK’s unique position in a competitive global economy

7. The key dimensions outlined have created a unique labour market in the UKwhen compared to otherEU countries—one which has led to consistently high levels of employment and job creation. Overallunemployment in the UK is down to historically low levels by international standards and productivitygrowth has kept pace with other G8 nations when in the 1970s it consistently fell behind. Perhaps mostimportantly after the huge shedding ofmanufacturing jobs in the early 1980s theUKhas successfully createdjobs in the service sector—in areas like finance, insurance, IT, media, healthcare, and hospitality.

8. This job creation partly reflects major eVorts by the Government and employers to upskill theworkforce—the UK, for example, nearly doubled the numbers of youngsters attending university in the lasttwenty years. It reflects the importance of the ability for employers to oVer flexible working contracts to staV

to meet business needs.

9. The UK has led the way in terms of flexible labour policies—the UK has the second highest rate ofpart-time work in the EU and a growing number of agency and teleworkers. The UK has the largest agencywork sector in the EU and large numbers of employees welcome the flexibility—over 80%of those whoworkpart-time do so because they do not want a full-time job. The UK also has one of the best records in the EUon employing both women and those over the age of 50. Flexible labour market policies particularly benefitsuch groups, who often have caring or other responsibilities outside of work meaning that they could notmanage an ordinary nine-to-five job. And although the Labour administration introduced a nationalminimum wage, it has been carefully set at a level that has—for the time being—avoided causing job losses.

10. Industrial relations have also been transformed. Industrial action in the private sector is now veryrare and this reflects a seachange in union philosophy. Partnerships between employers and unions to worktogether to promote the success of companies are now commonplace and where problems do occur they aremuch less likely to escalate into industrial disputes.

11. A final key strength is that successive governments and perhaps most notably the current Labouradministration have put considerable emphasis on active labour market policies. Under the New Dealscheme introduced in 1997, passive unemployment is not an option—either training or a subsidised jobmustbe taken in return for benefits. And there has been a crackdown on availability of disability benefits, withother benefits too being tailored to incentivise people to return to work.

12. Of course there are still weaknesses to be tackled. Regional unemployment still remains high,particularly amongst certain ethnic minority groups. And the skills base remains poor at the bottom end—with nearly 20% of the potential workforce either functionally illiterate or innumerate.

New rafts of European employment legislation will only serve to further erode the UK’s flexible labour market

13. Since 1997, the Government has campaigned for labour flexibility. It believes this is crucial to realiseone of its key priorities—full employment in the UK. The Government has introduced a number of newpieces of employment legislation andmany of these have been new family-friendly rights, including the rightto request flexible working, extendedmaternity leave and pay, parental leave, paternity leave and emergencytime oV for dependants. The sensible implementation of these policies demonstrates the success whichflexible UK labour market policies can deliver. These policies coupled with stable macro economic policeshas helped deliver some real successes for businesses. However, in addition to nationally introducedemployment law there has been an influx of new requirements from the EU which has meant theGovernment has introduced a cumulative total of 21major pieces of employment legislation since 1997. Notall of these have been suitable to UK business and there are developments simmering in the EU whichthreaten to undermine our current flexibility.



14. The European landscape now dominates the UK in a political and legislative sense. It is the UK’sability to tread the line between flexibility and regulation that makes, and will continue to make, the UK anattractive place for inward investment. The EU has undertaken a spectrum of reforms to labour marketpolicy in recent years, with the aim of introducing minimum standards. Many of these are relativelyuncontroversial and could actually help free up labour markets by making them accessible to more.However, there are also dangers and continual and growing signs that the EU intends to take labour marketprotection too far and in a way which could be extremely harmful to the UK economy. This new style oflegislation has caused policy-makers to pose a number of questions regarding the impact of such legislationon employers and employees.

15. Employers are now faced with a considerable management challenge in terms of the application ofresources in an evermore-competitive economic environment, withwhat they see as an increasingly inflexibleresource in terms of their employees. For example, many employers will face the challenge of implementingnew policies and practices to comply with regulations that will introduce the Information and ConsultationDirective. The same is also true for the 2000 Equal Treatment Directive under which the UK Governmentis required to introduce legislation banning age discrimination by 2006. In implementing this Directive theUK Government must not be seen to be goldplating, for example by abolishing normal retirement ages,particularly, when other EUmember states have not. The UKGovernment must listen to business concernsabout the practical consequences of removing retirement ages.

16. Other regulatory threats continue to appear from the Commission. If passed in its current form theTemporary Agency Work Directive will severely restrict company’s abilities to rely upon temps to fill in attimes of peak labour demand—essential if businesses are to be able to take advantage of sudden andunforeseen business opportunities. In a recent CBI study businesses revealed that should the draft directivebe passed in its current form it would damage business competition, introduce excessive red tape, deterpotential inward investment and reduce the number of temporary assignments without creatingnew permanent jobs. Many companies in industries ranging from hospitality, manufacturing,telecommunications and transport have argued that one of the main reasons they are located in this countryis because the UK oVers the ability to operate flexible workforce/resourcing strategies. The proposeddirective threatens to significantly erode the labour market flexibility businesses need.

17. There is a threat to remove the individual opt-out from the working time Directive, which allowsemployees who want to, to agree to work more than an average 48 hour week—allowing employers to relyupon overtime to fill labour shortages. The CBI believes that it is essential for the competitiveness of theUK economy for employers to maintain the right to ask their employees if they want to opt-out and worklonger hours. A significant number of UK companies use and value this important flexibility and one UKfirm has estimated that withdrawing the ability to use the opt-out would cost its business £300,000 per weekduring peak periods. Companies believe that the individual opt-out is also valued by employees as it givesthem greater autonomy over their working lives and provides them with important choice over when theywork.

18. Further damage to UK labour market flexibility could be caused if the Charter of FundamentalRights in the proposed Constitution Treaty is adopted in its current form. Although the CBI is supportiveof the principle of a declaratory Charter, setting out the fundamental rights currently recognised by the EU,there are real risks to the proposal to make the current aspirational Charter a legally binding document byincorporating it into the Treaty. It could transfer competencies to European institutions on matters whichare, and should remain, the responsibility of national governments, such as the right to strike and unfairdismissal.

19. A Commission document on corporate restructuring produced in 2002 suggested that more neededto be done to prevent companies restructuring if this would result in job losses, and the Commissionsuggested that companies should be banned from restructuring at all if they are in profit. Such a measurewould render companies paralysed to adapt to changing marketplaces and unable to compete in a globaleconomy. These are just a few of the reforms which have been suggested by the EU and which threaten botheconomic growth and job creation.

20. TheUKhas reformed itself over the last twenty years to become a globally competitive economy, andflexible labour market policies have been at the heart of these reforms.We only need to look at 1970s Britainto realise the damaging aVects that an overly restrictive labour market can have. Then the problems werecaused by excessive union power, but excessive legislation at either a domestic or a European level will havethe same eVect. There is a need for all European states to be strong in ensuring that the EU’s policies do notrestrict job creation and economic growth. Otherwise we risk leaving an EU unable to compete in the globalmarketplace.

21. Labour market flexibility is important for job creation and high productivity and has been a sourceof competitive advantage for the UK. DiVerent countries have relied on a range of options to deliverflexibility. Many EU states have sought to create high productivity, but have suVered from highunemployment and poor job creation. Conversely, the UK has high levels of employment, but our labourproductivity lags behind. UK companies are seeing their workforce flexibility restricted by EU regulationwhile still needing to play catch-up in terms of skills and functional flexibility. It is important the UKGovernment ensures the EU Commission recognises that the UK’s flexible labour market policies deliveremployment growth and choice for employees. Inappropriate EU legislation should be strongly resisted and



strategic alliances forged with supportive EU states. It is also crucial for the UKGovernment to avoid gold-plating EU regulation and continue to improve standards of education, particularly in literacy andnumeracy.

June 2004

APPENDIX 6

Memorandum by the Department of Trade and Industry

Introduction

1. The Government welcomes the Committee’s inquiry into employment regulation in the UnitedKingdom. This memorandum sets out the Government’s approach to regulating the labour market,describes the key measures it has introduced since 1997, considers their impact on the economy includingemployment levels and flexibility and, finally, looks to the future.

Summary

2. The UK labour market has performed strongly in recent years, supported by a stable macroeconomicframework as well as Government policies to achieve full and fulfilling jobs. These policies are intended toencourage partnership between employers, employees and Trade Unions, and to remove barriers to jobcreation and labour force participation.

3. The Government believes that eVective and well-focussed employment regulation plays a vital role incorrecting market failures and ensuring decent standards are maintained in the labourmarket. Unnecessaryor poorly designed regulation can however hinder employment growth and competition. In the 2003Budget,the Government set out clearly the twelve principles that would guide its interventions in the labour market.

4. The Government will always consider alternatives to regulation first, but will regulate when necessaryor when other options have failed to meet their objectives. The measures introduced since 1997 haveprovided substantial benefits to workers and helped raise business standards without damaging employmentlevels or adding substantially to business costs. Overall the United Kingdom remains the most flexiblelabour market in the European Union.32 The Government believes it has found the right balance betweenflexibility and security.

The Government’s Approach to Regulating the Labour Market

5. TheGovernment wants every individual to develop their true potential, regardless of their backgroundor talent. Full employment and fulfilling jobs are central to realising this. Employment legislation shouldbe seen in the wider context of ensuring full and fulfilling employment in theUK, alongside policies to ensuremacroeconomic stability, to increase productivity, to ensure thatwork pays, and that those looking for workhave the information and training opportunities that they need to enter or re-enter the workforce.

6. The Government’s employment relations programme aims to maximise potential in the workplace bypromoting a more diverse workforce, maintaining an eYcient and flexible labour market, and encouragingco-operative employment relations and ways of working that foster high performance. In its first term, theGovernment put in place a framework of decent minimum standards that balanced flexibility and fairness.In Full and Fulfilling Employment: Creating the Labour Market of the Future33, the Government set threebroad objectives for its employment policies in its second term:

— Full employment. Employment rates are currently amongst the highest on record, but more canbe done. Unemployment levels and inactivity in certain geographic areas and among certain ageand minority ethnic groups are still too high. Inactivity is a problem. Decent standards in theworkplace can bring more people into the work place. Whether by guaranteeing a minimumwageor giving rights to working parents, theGovernment helps raise employment and develop a diversepool of skilled labour.

— Diversity and choice. The employment rates of female and olderworkers are increased if the labourmarket oVers choice and diversity to individuals when they consider the hours that they are ableto work. Greater flexibility of hours worked will raises growth potential and leads to more jobs in

32 See International Monetary Fund United Kingdom—2002 Article IV Consultation Concluding Statement on http://www.imf.org/external/np/ms/2002/120902a.htm which states that “The UK labour markets are more flexible than those ofother European economies. This flexibility has significantly contributed to low unemployment and high participationrates. . .”.

33 See Department of Trade and Industry (2002) Full and fulfilling employment: creating the labour market of the future, London,URN 02/1051.



the UK. Choice is also expanded when individuals have higher skills levels. A critical tool for adynamic and flexible labour market is for individuals to have access to skills that are relevant,regularly updated and transferable.

— High productivity. Higher skills levels raise the productivity of workplaces. Productivity is alsohigher when we create the kind of workplaces that have high levels of commitment betweenemployers and employees. Academic literature has identified a wide range of ways of workingassociated with high performance.

Promoting a diverse labour force

7. The UK has a diverse population. The 2001 census showed that the ethnic minority population nowaccounts for nearly 8% of the population and that by 2014 there will be more people over 65 than under 16.Businesses with a diverse workforce are likely to attract a wider customer base, have the ability to recognisenew potential markets and to provide a better, more tailored service to meet individual needs. Businessesbenefit from taking action on diversity and equality not just in terms of better recruitment and retention,but also better staV morale and performance. The Government has a role to play in making sure thatparticular groups are protected against discrimination in the workplace through legislation and ensuringthat it is enforced.

8. The eVect of intervention in the labour market on employment opportunities, especially amongdisadvantaged or vulnerable groups, is an important policy consideration. Poorly designed regulation canbenefit insiders at the expense of outsiders, protecting those with jobs but making it riskier for firms to takeon new or inexperienced staV. Although employment protection is generally shown to have little or no eVecton the employment rates of prime-age males, several studies suggest that stringent employment protectiontends to decrease the employment rates of both young people and women.34

Maintaining an eYcient and flexible labour market

9. Labour market flexibility plays an important part in meeting the Government’s objectives for fullemployment and social justice. A flexible and eYcient labour market, combined with a stablemacroeconomic environment, implies an economy that is more competitive and productive, and whichprovides greater fairness. It also means an economy that is better able to respond to economic change.

10. A perfectly flexible labourmarket is one in which, following any change in the economic environment,the labour force would be immediately redeployed to its most eYcient use. The labourmarket can be flexiblein many ways: through how quickly wages respond to a shock; through the ability and willingness of labourto move into new jobs; and the ability of employers to alter employment quickly. In practice, there are costsand barriers to such instantaneous adjustment which means that it takes time for wages and the supply anddemand for labour to reflect fully this new economic environment. This is likely to imply a rise inunemployment or a drop in employment, either permanently or temporarily.

11. Labour market policies and institutions influence these three aspects of flexibility in the followingways:

— The tax and benefit system influences individuals’ decision to participate in the labour market andthe wages at and hours which they are prepared to work.

— Active labour market policies raise the eVectiveness of the unemployed and smooth theirreintegration into the labour market. They can also encourage and help those that are inactiveback to work. This can reduce the need for employers to raise wages and therefore increase themedium to long-run responsiveness of wages to unemployment.

— An appropriate degree of regulation can improve eYciency (though correcting market failures)and increase fairness and safety in the workplace. EVectively targeted regulation can also improvethe flexibility of the labour market by improving the quality of job matching and thereforereducing the cost of labour turnover to firms. However, if regulation is set ineVectively then it canconstrain the choices of employers and employees and thus reduce labour market flexibility.

Encouraging co-operative employment relations and ways of working that foster high performance

12. It is widely recognised that the UK faces a skills challenge35 and in 21st Century Skills, Realising OurPotential the Government set out its strategy to tackle this.36 It is not enough however that business recruitspeople with the right skills mix. It is how they are deployed in the workplace. In part this is a question ofwork organisation and how jobs are designed, but it goes further. Skilled staV are more likely to stay if they

34 The forthcoming OECD Employment Outlook 2004 will have a chapter on employment protection regulation and labourmarket performance and will consider these issues—publication date July 2004.

35 See Department of Trade and Industry (2003) UK Productivity and Competitiveness Indicators 2003 DTI Economics PaperNo 6 URN 03/1574.

36 See Department for Education and Skills 21st Century Skills, Realising Our Potential, launched in July 2003 at http://www.dfes.gov.uk/skillsstrategy/



are treated fairly (including equal pay), and provided with choice and flexibility in the hours and way theywork. They will bemore committed to company objectives if they are properly involved in decisions througheVective information and consultation. And theremust be investment in ongoing training to adapt skills andcompetences to specific tasks and job requirements as well as ongoing career development.

13. The promotion of such high performance workplaces practices increases incentives for employers toinvest in training and raise employees’ commitment (and hence productivity). Policies that fostercommitment in the workplace (equal treatment, partnershipworking, family friendly policies, low pay/equalpay, working time, worklife balance) will boost sustainable employment and encourage training. However,evidence from the 1998WorkplaceEmploymentRelations Survey (WERS) suggests that the take-up of suchpractices is not yet widespread in Great Britain.37

The European dimension

14. Much employment regulation stems from Europe. The Government supports the comprehensiveframework of decent minimum standards that has developed at EU level and that safeguards the core rightsof employees. Given the acquis that now exist at both national and EU level, any new proposals forlegislation need to be rigorously assessed for impacts on competitiveness and employment.

15. The Government is a strong supporter of the European Employment Strategy and welcomed the firmconclusions from the European Employment Taskforce, chaired by Wim Kok, on the reforms needed ifMember States were tomeet the employment targets set at the Lisbon Council inMarch 2000. The processesof sharing best practice and challenge through peer review that underpin the European EmploymentStrategy provide the necessary flexibility to tackle problems in a way that fits with the diVerent traditionsand structures of national labour markets.

Better policy making

16. The Government is committed to ensuring that regulations are fair and eVective and that all new andexisting regulation is necessary, does not impose a disproportionate burden on employers and meets thefollowing principles of better regulation.

— Proportionate: Regulators should intervene only when necessary. Remedies should be appropriateto the risk posed, and costs identified and minimised.

— Accountable: Regulators must be able to justify decisions, and be subject to public scrutiny.

— Consistent: Government rules and standards must be joined up and implemented fairly.

— Transparent: Regulators should be open, and keep regulations simple and user friendly.

— Targeted: Regulation should be focused on the problem, and minimise side eVects.

17. In 2002 the Better Regulation Taskforce produced a report on employment policy.38 It recommendedhow the policy making process could be improved, such as greater exploration of alternatives to regulation.It examined the help and advice provided to businesses by government and made recommendationsintended to help employers understand and administer employment rights, such as using commoncommencement dates for employment policy changes and piloting a shared HR resource. The Governmentis implementing all the recommendations.

18. As part of its response to the Better Regulation Taskforce, DTI has brought in changes toemployment law and practice on only two dates in each year: 6 April and 1 October. These commoncommencement dates apply to changes arising fromwithin theUK and onwhich theDepartment leads. Thefirst common commencement date was in April 2004. The harmonisation of commencement dates isintended to ensure that changes to employment policy are made in a co-ordinated fashion and providebusinesses, employee representatives and individuals with greater clarity and awareness about when changeswill be made. This should assist all parties to plan for new measures and help implement them eVectively.The adoption of common commencement dates for employment regulation has been welcomed by businessand employer organisations as a welcome innovation, introducing greater certainty about changes to theregulatory environment. A statement of forthcoming regulations in 2004 is available on the internet.39

19. In the 2003 Budget, the Government set out clearly the twelve principles that would guide itsinterventions in the labour market:

— intervention only where there is a recognised and significant problem requiring a governmentresponse;

— full consideration of policy alternatives, to keep distortions and regulatory burdens to aminimum;

37 See Cully M, Woodland S, O’Reilly A and Dix G (1999) Britain at work—As depicted by the 1998 Workplace EmployeeRelations Survey Routledge, London and New York.

38 see Better Regulation Task Force (2002) Employment Regulation: striking a balance, London available athttp://www.brtf.gov.uk/taskforce/reports/entry%20pages/emplawentry.htm

39 see Department of Trade and Industry (2004) Statement of Forthcoming Employment Regulations available athttp://www.dti.gov.uk/er/regs2004.htm



— benchmarking of new proposals against existing requirements in other OECD countries;

— assessment of the consequences for small firms in particular, and consideration of small firms’exemption where appropriate;

— testing for the impact on labour flexibility and employment opportunities, especially amongdisadvantaged or vulnerable groups;

— testing for the impact on productivity and growth;

— intervention will be subject to cost-benefit analysis and, for regulation, Regulatory ImpactAssessment;

— proper consultation in compliance with the Government’s code on written consultation, prior toa decision being taken;

— the Department of Trade and Industry will implement changes to employment regulations only inApril and October each year, unless European obligations require otherwise;

— information and support packages for firms, for all measures which have a potentially large impacton businesses. This will include a strategy to help businesses comply with any new legal duties;

— promotion of alternative means of resolving employment disputes; and

— where EU regulation might aVect competitiveness, evaluation by the Competitiveness Councilprior to a decision being taken to ensure proposals are not harmful to economic and employmentobjectives.

20. The DTI is committed to better policy making and delivering on these principles. We have been:

— overhauling our consultation procedures. More eVective consultation with businesses and theirrepresentative organisations and trade unions leads to better policy outcomes. A recent MORIsurvey of DTI’s stakeholders (MORI, May 2004) indicates that the most stakeholders believed itsconsultations have improved. DTI is spreading the success of the automotive industry-widegovernment forum to construction, chemicals and retail sectors;

— improving the quality of Regulatory Impact Assessments, including consideration of alternativesand better data on the costs and benefits;

— using of the Small Firms’ Impact Test to better understand the impact of the policy options onsmall businesses; and

— raising the profile of better regulation in Europe, including competitiveness testing.

21. A key part of ensuring better regulation is making sure that the latest available evidence is used forassessing the likely impacts of policies and adequately monitoring and evaluating them once they areimplemented. In this way it is possible to tell whether policies are having their intended eVect and whetherthere are any unintended consequences:

— All proposed regulations that are likely to have an impact on business are accompanied by aRegulatory Impact Assessment. These are posted on DTI’s website and those published in 2003have been collected in a compendium.40

— DTI’s monitoring and evaluation plan for employment relations legislation is supported by anextensive research programme and looks at the impact of the whole programme as well as theindividual strands. It also focuses on the impact on business, individuals, public services (such asthe Employment Tribunal Service) and the whole economy.41

— As part of a process of continuingly improving its analysis, DTI will soon set up a panel to adviseon latest evidence of potential problems in the field of employment relations and the best methodsto assess the impact of Government policy. The panel will include experts from outsideGovernment.

Key Measures Introduced Since 1997

Ensuring a national minimum wage

22. The statutory national minimum wage, introduced on 1 April 1999, forms part of the Government’soverall strategy to establish fairness in the workplace and to make work pay by ensuring that all workersreceive at least the hourly minimum rates set. The rates are based on the recommendations of theindependent Low Pay Commission whose members are drawn from the ranks of employers, employeegroups and academic experts. The Commission carries out a wide-ranging consultation and fact-findingexercise before arriving at its recommendations. The Low Pay Commission has said that the vast majorityof employers are complying with the national minimum wage. Overall awareness of the minimum wage ishigh and the enforcement system appears to be working well.

40 See Department of Trade and Industry (2004) 2003 Compendium of Regulatory Impact Assessments Employment RelationsResearch Series No. 28 URN 04/743 weblink http://www.dti.gov.uk/er/emar/errs28.pdf. Compendiums for previous years’RIAs will be published online in coming months.

41 To be published shortly.



23. The national minimum wage rate is currently £4.50 per hour for workers aged 22 or over. Adevelopment rate of £3.80 per hour applies to workers aged 18–21 inclusive. The rates from 1 October 2004will be £4.85 for those aged 22 or above and £4.10 for the 18–21 age group. The Government has alsoaccepted the recommendation of the Low Pay Commission to introduce a new £3 minimum rate for 16 and17 year olds (who have ceased to be of compulsory school age). Between 1.0 and 1.2 million low-paidworkers (around two thirds of who were women) stood to benefit from the minimum wage rate increaseson 1 October 2003, and our best estimate is that around 1.6 million workers stand to benefit from a furtherincrease agreed for 1 October 2004.

Promoting a diverse labour force

24. The Government is introducing tougher rules to prevent discrimination in the workplace. AEuropean Directive42 in 2000 established a general framework for equal treatment in employment andvocational training and required the introduction of legislation prohibiting discrimination againstindividuals on the grounds of religion or belief, age, disability and sexual orientation in the fields ofemployment, self-employment, occupation and vocational training.

25. The Employment Equality (Sexual Orientation) Regulations 2003 and the Employment Equality(Religion or Belief) Regulations 2003, which came into force in Great Britain43 in December 2003,implement the sexual orientation and religion strands of the Directive. The Regulations cover all aspects ofthe employment relationship, including recruitment, pay, working conditions, training, promotion,dismissal and references. They apply to all workplaces in England, Scotland andWales, large or small, bothin the private and public sector. Corresponding legislation in Northern Ireland also came into force inDecember 2003. Like most other equality legislation, the Regulations contain exceptions to the generalprohibition against discrimination. But these are strictly limited, have been carefully drafted and arejustified.

26. The deadline for implementing the age strand of the Directive is December 2006. The Directiverecognises that in some circumstances a diVerence of treatment on the grounds of age can be justified andthese need careful and sensitive consideration. The statutory redundancy payment scheme is to be amendedto remove elements that discriminate unjustifiably on grounds of age, as one aspect of the forthcominglegislation to combat age discrimination.

27. The creation of a commission for equality and human rights responds to the need to provideinstitutional support for the new discrimination legislation, the recommendations to provide such supportfor human rights, and the need for an integrated approach to tackle multiple-discrimination. It will alsoaddress the call from the private sector for there to be a single, coherent voice on equality and humanrights issues.

Maintaining an eYcient and flexible labour market

28. The Employment Act 2002 introduced a package of new and improved laws to give parents morechoice and more support than ever before to help balance childcare with work in ways that benefitemployers, employees and their families. The laws followed extensive consultation with parents, unions,employers and their representatives on what the new measures should be and how they should work:

— Mothers and fathers of children under 6 and disabled children under 18 have a new right to applyto work flexibly and their employers have a duty to consider their requests seriously. Employerscan refuse where it makes business sense to do so.

— Maternity leave has increased. All mothers can take 26 weeks’ ordinary maternity leave.Additional maternity leave has also increased to 26 weeks. The qualifying service for additionalmaternity leave has been reduced somost mothers can now choose to take up to one year oVwork.

— Payment of Statutory Maternity Pay (SMP) and Maternity Allowance were also extended to 26weeks and the rate increased to £100 per week (£102.80 from 4 April 2004) or 90% of averageweekly earnings if that is less than 26 weeks.

— Fathers were given the right to two week’s paternity leave with Statutory Paternity Pay paid at thesame standard rate as Statutory Maternity Pay.

— Adoptive parents can now take up to one year’s adoption leave with 26 weeks’ StatutoryAdoption Pay.

29. These measures are in addition to laws for working parents which were introduced by theEmployment Relations Act 1999 to implement the Parental Leave Directive:

— Parental leave helps parents take unpaid time oV to care for their child. Most parents have a rightto 13weeks’ parental leavewhich they can take up to their child’s fifth birthday. Parents of disabledchildren can take 18 weeks’ leave up to their child’s18th birthday.

42 2000/78/EC of 27 November 2000.43 In general employment relations legislation introduced since 1997 by the Department of Trade and Industry has applied toGreat Britain, with the exception of the NMW which applies to the whole of the UK.



— Time oV for dependants enables all employees to take a reasonable amount of unpaid time oV todeal with an emergency involving a dependant.

30. TheWorking TimeRegulations 1998 which implement the provisions of theWorking TimeDirectivecame into force on 1 October 1998. They give rise to rights and obligations relating to work and restincluding a limit on the average weekly working time to 48 hours, entitlement to 20 days paid leave andminimum daily and weekly rest periods. The Directive currently includes a provision that means MemberStates can give individuals the right to opt-out of the weekly working time limit, which the UK has adoptedin its regulations. The European Commission is currently reviewing this and other aspects of the Directive.TheGovernment is arguing strongly for the retention of the opt-out tomaintain the flexibility our individuallabour market requires, and the choice which many individual workers prefer.

31. Since its launch in 2000 the Work-Life Balance campaign has been demonstrating to employers thecase for adopting flexible working practices and showing that the provision of such opportunities enablesboth the business and the individuals within it to maximise their potential. Using case studies, a body ofresearch evidence and a dedicated website the DTI has highlighted the business benefits that can accrue tocompanies who have considered work-life balance, and then implemented, alternative, and more flexibleways of working. Historically practical help in implementing work-life balance initiatives was providedthrough the DTI Challenge Fund.Work life balance is now being delivered through the DTI’s new BusinessSupport products.

32. The Part-time Workers (Prevention of Less Favourable Treatment) Regulations, which came intoforce in July 2000 and implemented a European Directive, ensure part-time workers are treated fairly inrelation to full-time colleagues. Under the Regulations, part-timers should receive the same hourly rate ascomparable full-timers; not be excluded from training simply because they work part-time; have the sameentitlements to annual leave and maternity or parental leave on a pro-rata basis as full-time colleagues andbe treated fairly in the selection criteria for promotion and transfer or selection for redundancy. Six millionpart-time workers in the UK benefit from these provisions.

33. The number of people working on a fixed-term contract in the UK is between 1.1 and 1.3 million.Regulations introduced in 2002 to implement a European Directive protect employees on fixed-termcontracts, but have maintained flexibility for employers and employees. Fixed-term employees are nowentitled to the same pay and conditions as permanent ones and will be treated as permanent employees ifemployed on fixed-term contracts for more than four years without good reason.

34. The proposedAgencyWorkDirective aims to apply the principle of equal treatment to basic workingand employment conditions, including pay, to temporary agency workers. The Government believes thattemporary agency workers deserve appropriate protections, which is why the national minimum wage andworking time legislation make specific provisions to cover them. However, the Government remainsconcerned that the proposed qualifying period for equal treatment of sixweeks could have an adverse impacton the attractiveness of agency workers to user companies. This might reduce the numbers of jobs available.The Government is therefore continuing to seek a significantly longer qualifying period. There has been noformal discussion of the Agency Worker Directive since the June 2003 Employment Council which failedto reach a common position.

35. A public consultation exercise is due to take place in autumn 2004 on a draft of revised Transfer ofUndertakings (Protection of Employment) Regulations. This will be the final stage in an extensive processof formal and informal consultation on proposals to reform the Regulations, which safeguard employees’rights when the business in which they work changes hands between employers. The aim is for newRegulations to come into eVect in April 2005.

Encouraging co-operative employment relations and ways of working that foster high performance

36. The Government wants to see more high performance workplaces where workers, employers andtheir representativeswork in partnership to create a climate of good employment relations. TheGovernmenthas introduced awide range of collective and individual trade union rights, such as the right for trade unionsto be recognised for collective bargaining purposes; giving rights to paid time oV for union learningrepresentatives; the right to accompanied by a trade union oYcial or fellow worker in disciplinary andgrievance procedures; strengthening protections against dismissal for strikers on lawfully organisedindustrial action and strengthening trade union membership rights. The Government considers that ourframework of trade union rights sets the right conditions for achieving co-operative employment relations.

37. Legislation to implement the Information and Consultation Directive will come into force in Spring2005, giving employees in larger firms the right to be informed and consulted about the business they workfor and decisions aVecting the prospects for employment. The forthcoming Regulations illustrate thebalanced approach to employment legislation taken by the Government. A framework for implementationwas agreed with the CBI and TUC, following a wide-ranging public consultation exercise involvingindividual businesses, employer bodies and trade unions, as well as individual employees, employeerepresentatives, lawyers, academics, consultants and specialist organisations. The draft legislation does notimpose a uniform, rigid system of consultation on business but gives flexibility for firms to agree



consultation arrangements best suited to their particular circumstances. It also ensures employees gain thenew rights provided by the Directive, while allowing them to agree arrangements that they want rather thanhaving something imposed.

38. New regulations have been introduced to implement the dispute resolution provisions of theEmploymentAct 2002. Thesewill come into eVect on 1October 2004.New employment tribunal regulationsand rules of procedure, new Employment Appeal Tribunal regulations and a new Acas Code of Practice ondisciplinary and grievance procedures are expected to come into eVect on the same date, forming a coherentpackage of measures to promote the resolution of employment disputes, where possible without recourseto legal action. Public consultation has taken place on each of these measures, and an extensive guidancecampaign is underway to promote understanding of the changes.

39. The Partnership Fund has been an essential part of the Government’s non-legislative approach todevelop employment relations in order to achieve productivity improvements. The Fund initially supportedWorkplace Partnership projects within individual organisations .The expansion of the Fund introduced thecapacity to take forward bigger strategic projects. This provided the leverage to reach out beyond singlecompany projects to address sectoral and regional issues. The DTI has funded 249 projects and committed£8.42million on externally-led workplace projects. A further £3.82 million has been committed for StrategicPartnership projects.

Impacts of Regulation

Cost of legislation to business

40. Concerns about the compliance costs for business have been a recurrent theme of debatessurrounding implementation of employment legislation. It is important to distinguish between the costs toemployers of providing better working conditions and benefits for employees—sometimes called policycosts—and the costs to employers of administration, record keeping and other measures required todemonstrate compliance, which may include costs of defending employment tribunal applications (in caseswhere the complaint is unfounded)—sometimes called implementation costs.Most of the expressed concernhas been about implementation costs. A table of costs to business of the legislation so far is provided inAnnex B, which shows that cumulative implementation costs of the legislation so far are under 3p peremployee per week. Policy costs are about £4 per employee per week (or less than 1per cent of total UKwages and salaries). This does not include any business benefits.

41. Data on executive perceptions also provide a partial indicator of the cost to business of legislation.The annual survey of business executive perceptions in the International Institute for ManagementDevelopment’s World Competitiveness Yearbook suggests that the UK labour market is perceived to havea significantly better regulatory environment than other major European countries and Japan. However,since 1996–97 there has been some decline in this perception—in common with both France and Germany.



Source: IMDNote: A higher score indicates a better regulatory environment

Chart 1: Business executive perceptions of labour regulation

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Impact on small firms

42. A DTI survey44 of small and medium enterprises in 2000 found that 17% of SMEs mentionedgovernment legislation as a main factor acting as a constraint on growth. This was behind competition(33%), but above premises and rates (12%).45 A detailed examination of the kind of legislation or regulationsmentioned by employers as acting as a constraint on business performance found that employment laws wasthe most commonly cited. A substantial minority, 35%, identified benefits from employment legislation.46

43. What the surveys cannot provide is robust evidence on the size and real impact of any identified eVect.This is incredibly diYcult to estimate even using in depth qualitative methods. A qualitative study47 foundthat employers had great diYculty quantifying the impact of legislation.

44. The perceived burdens on business may to some extent be transitory. A study of the Working TimeRegulations—based on two sweeps of selected organisations a year or so apart—found that firms hadlargely adjusted to the administrative requirements by the time of the second visit.48

Impact on employment

45. OYcial data from the OYce for National Statistics show rising employment and fallingunemployment over the past decade in spite of the global economic slowdown in 2001. The employmentrate has risen steadily since the economy emerged from recession, reaching 74.9% in the first quarter of 2004,the joint highest since the series began in 1984. The unemployment rate (on the internationally recognisedILO measure) fell sharply during the second half of the 1990s, and at 4.7% in the three months to March2004 is the lowest since the series began 20 years ago. These changes to the labourmarket are not just cyclical

44 Blackburn R and Hart M (2002) Small firms’ awareness and knowledge of individual employment right Employment RelationsResearch Series no 14 Department of Trade and Industry URN 02/573.

45 These results are consistent with the findings of more recent surveys. See “A Government Action Plan for Small Business:The Evidence Base” available on http://www.sbs.gov.uk/content/analytical/evbaseregulation.pdf

46 These statistics come from diVerent questions in the survey and should therefore not be combined.47 Edwards P, RamMand Black J (2003)The impact of employment legislation on small firms: a case study analysis EmploymentRelations Research Series No. 28 Department of Trade and Industry URN 03/1095.

48 Neathey F and Arrowsmith J (2001) Implementation of theWorking Time RegulationsEmployment Relations Research SeriesNo 11 Department of Trade and Industry URN 01/682.



but also longer term. The OECD49 believes that the unemployment rate below which there starts to beupward pressures on inflation50 has fallen from 8 to 5.5% since the early 1990s. It is clear, therefore, thatthe measures that the Government has introduced since 1997 have not had an adverse eVect on aggregateemployment levels or rates of job creation.

46. A wide range of employment opportunities is available in the UK, which serves to increase the supplyof labour so that those workers who cannot take full-time employment remain engaged with the labourmarket. The incidence of part-time working picked up in the 1990s and it is possible that in recent years theincidence of those working on flexitime has been edging up slowly. Through both targeted regulation andspreading best practice, the Government has sought to increase opportunities for flexible working and tomaintain parents’ attachment to the labour market whilst they achieve their desired work-life balance.

47. The proportion and the range of part-time work is high in the UK, when compared with other EUMember States. The incidence of self-employment is about average. The incidence of temporaryemployment appears to be below the European average, although this is not at present particularlyindicative of relative flexibility between diVerent EU labour markets. In other EU countries, a higherproportion of “temps” have long-term, quasi-permanent relationships with their employers, as firmsattempt to side-step onerous obligations attached to permanent staV.

Source: Eurostat (European Labour Force Survey - 2002)

Chart 2: Part-time, temporary and self-employment (EU comparisons)

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Impact on labour market flexibility

48. Flexible markets, whether product, capital or labour markets, enable firms and individuals to adaptto rapid technological progress and strong competition in global markets, and the economy to sustain highrates of productivity growth and employment. The Government has published two reports reviewingmeasures to enhance the ability of the economy to adjust rapidly to changes in the economic environment,along side the 2003 Pre Budget Report and 2004 Budget.

49 OECD (2002b) Employment Outlook.50 This unemployment rate is termed the non-accelarating inflation rate of unemployment—or NAIRU for short.



49. Building on the results of academic work51 into the institutional determinants of labour marketperformance, HMTreasury has recently developed an indicator of labour market flexibility.52 The indicatorpools together the evidence on the institutional environment, thereby giving some indication of thesustainability of labour market outcomes and the progress of economic reform. It combines indicatorswhich reflect the impact of the tax and benefit system, active labour market policies and labour marketregulation, as well as union coverage and density, and the degree of union and employer co-ordination.

50. The chart below shows how the UK compares with other countries. The lower the indicator score themore flexible the economy.

Source: HM Treasury

Note: A lower value implies a more flexible institutional environment

Chart 3: An indicator of labour market flexibility

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51. The results are consistent with a view that labourmarket institutions are less stringent in theUK thanin continental Europe and suggests that the improved labour market performance observed in recent years,and reviewed in the section above, is well founded.

52. What the overall indicator cannot tell us is whether the UK economy has become more flexible overtime. For this we need to look at the individual components of the indicator. Overall evidence suggeststhat the tax and benefit reforms introduced since 1997 have improved the flexibility of the UK labourmarket. These have reduced the unemployment trap53 and the tax wedge54, which was already low byinternational standards.

53. Evidence suggests that since 1997 active labour market policies in the UK have helped with thetransition of those who are unemployed or inactive into work, have reduced the durations of their jobsearches and have had a positive impact on employment. However, there remain significant challengesaround tackling persistent economic inactivity.

51 Blanchard O and Wolfers J (2000) The role of Shocks and Institutions in the Rise of European Unemployment: the AggregateEvidence The Economic Journal 110 (March) C1-C33.

52 see HM Treasury (2003) EMU and labour market flexibility, HMSO.53 An unemployment trap is where those without work find that the diVerence between in- and out-of-work incomes is too smallto provide and incentive to take a job.

54 The tax wedge is the income tax plus employer and employee national insurance contributions, less cash benefits as aproportion of labour costs.



54. Since 1997, the Government has introduced a framework of minimum standards which include thenational minimumwage (NMW) and regulations on working time. Evidence shows that theNMWhas beenset at a level that has not reduced employment and the ability of the labour market to adjust to shocks.55

And where the working time regulations have had an impact on firms, this included an impetus to reviewworking practices and so to “work smarter”, a raised profile for the importance of working time in workerhealth and safety and some increase in labour costs.56

55. TheUK system of employment relations remains conducive to wage flexibility, and trade unions haveamodern role to play in enhancing labourmarket flexibility and in delivering our social and economic goals.Indicators on trade union membership show some decline in union density since 1997 and the decentralisednature of collective bargaining in the United Kingdom has continued to mean that relative wages can adjustacross industries, sectors and regions.

56. On balance theGovernment believes therefore that labourmarket flexibility has increased since 1997.This is consistent with findings of other research which showed that labour market flexibility, using asomewhat broader set of indicators, improved in all regions and countries of the UKover 1980s and 1990s.57

To extend academic research and data in this field, the DTI has recently commissioned ten research papersas part of its Labour Market Flexibility Small Grants Fund. We expect the results of this research to beavailable before the end of 2004.

57. The degree of flexibility and the ways in which that flexibility should be achieved are hard to judgeand depend on the country in question. Flexibility in one direction can be counter-balanced against lessflexibility in others. The recent strong performance of the UK labour market does, however, suggest that itis possible to combine flexibility and dynamism in the labour markets with minimum standards.Impact on working hours

58. There has been a reduction in long hours working since 1998, which follows a period when theproportion had been increasing continuously by small amounts.

55 See reports form the Low Pay Commission: weblink http://www.lowpay.gov.uk/lowpay/rep–a–p–index.shtml56 Neathey F and Arrowsmith J (2001) Implementation of theWorking Time RegulationsEmployment Relations Research Seriesno 11, Department of Trade and Industry URN 01/682.

57 see Monastris V. (2003) A panel of regional indicators of labour market flexibility: the UK, 1970–98 available athttp://www.dti.gov.uk/er/emar/events.htm and speech by Alan Greenspan before the HM Treasury Enterprise Conferencein January 2004, where he refers to the onset of greater flexibility in the US and UK in recent years seehttp://www.federalreserve.gov/BoardDocs/speeches/2004/20040126/default.htm



Chart 4

PROPORTION OF FULL TIME EMPLOYEES WHO USUALLY WORK OVER 48 HOURSPERWEEK

02468

101214161820222426283032

1984 1988 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

%

Men Women All

Source: Spring Labour Force Surveys, not seasonally adjusted.

59. One in five (3.7 million) full time employees report that they “usually” work more than 48 hours aweek. If asked in two consecutive quarters (to simulate 17 week period in the Working Time Directive) thisdrops to 14% (2.5 million). If asked over five quarters, the figure drops again to 9% (1.7 million).

60. Those who work over 48 hours a week are divided roughly into equal groups of: those who are paidovertime to do so, those whowork long hours as part of their basic hours and those who are working unpaidovertime.

Impact on labour disputes

61. The number of stoppages for 2003 (133) was the lowest on record. It was around one fifth of thenumber in 1990, around one tenth of the number in 1980 and just 3% of the number of stoppages in 1970.

62. The 499,000 working days lost in 2003 was very low by historical standards, lower than the 1990s(annual average 660,000) and only a fraction of the working days lost in the 1980s (annual average 7.2million) and the 1970s (annual average 12.9 million).

63. A time-series of the number of working days lost and the number of stoppages from 1970 to 2003 isshown in charts below.



Source: National Statistics

Chart 5: Number of working days lost and stoppages

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

30m

25m

20m

15m

10m

5m

0m

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Stoppages in progress (left hand scale) Working days lost (right hand scale)

Impact on tribunal cases

64. The recent downward trend in Employment Tribunal applications was reversed in 2003–04 as theyrose 16%, but the level remains 12% below the peak reached in 2000–01. The increase over the last year wascaused primarily by more cases being brought under Working Time Regulations and sex discriminationlaws.

65. The majority of applications fall in to three categories: unfair dismissal, unlawful deductions fromwages, and discrimination, which over the last six years have averaged 37%, 19% and 19% respectively ofall applications.

66. The number of applications associated with new employment rights and regulations has generallybeen relatively small. For example, national minimum wage applications have averaged 200 a year for thelast three years, or 0.2% of all applications, whilst applications under the Part-Time Workers Regulationshave averaged around 120 a year for the last three years, or 0.1% of all applications. Working TimeRegulations applications have beenmore significant, averaging 1,800 or 1.6% of all applications in their firstfive years, before jumping to around 11,000, or 9.7% of all applications in 2003–04.58

ANNUAL EMPLOYMENT TRIBUNAL APPLICATIONSLAST FOUR YEARS AND SELECTED EARLIER YEARS*

Year Employment Tribunal applications

1988–89 29,304

1992–93 71,821

1998–99 92,120

2000–01 130,669

2001–02 112,227

58 Research into the reasons for the growth in employment tribunal applications in the 1990’s shows that the expected probabilityof winning a case, the amount of the award and the industrial structure and labour force compositions are of relevance. SeeBurgess S, Propper C andWilson D (2001) Explaining the growth in the number of applications to industrial tribunals, 1972–97Department of Trade and Industry, ERRS No 10 URN 00/624.



Year Employment Tribunal applications

2002–03 98,6172003–04 115,042

Source: Employment Tribunal Service. * GB, notseasonally adjusted; Some statistics revised.

Looking to the Future

More evidence

67. While some initial findings are presented on the economic impact of the legislation, it is important tostate the provisional nature of these conclusions. A more authoritative analysis will take considerable time.The findings of the next Workplace Employment Relations Survey which is currently in the field will makea step change in our understanding. It is important also to stress that much of the legislation is relativelyrecent and will take some time to bed down.

Helping business: compliance and best practice

68. TheGovernment is working towards a significant increase in the number of business adopting policiesand practice which foster high performance workplaces and which comply with employment regulations.Key to this is the provision of easily accessible information, advice and guidance about employmentrelations, whether on legal requirements and rights or about good practice. The www.businesslink.gov.ukwebsite, with a highly developed interactive section on “employing people”, brings together information andtransactions from across government and has enabled us for example, to bring regulatory obligations andgood practice guidance from DTI, DWP, HSE, Inland Revenue and the Home OYce together in a simplestep by step guide to recruitment tailored to the needs of individual users. It is aimed specifically at smallbusinesses and is already attracting over 400,000 visitor sessions a month, over 30% above target. TheGovernment is developing a similar service for employees, to be launched next Spring as part of the newcitizens site www.Direct.gov.uk.

69. The Government is continuing to meet the needs of the public and business in more traditional ways.The DTI has for example produced and distributed information on employment rights in Portuguese tomeet the needs of migrant workers.

70. As well as improving information and guidance, DTI is oVering practical help in employment “bestpractice” to all organisations and business wishing to find out how to improve their performance throughbetter ways of working. DTI has already launched its package to implement best practice aimed primarilyat smaller businesses whichwill be delivered by Business Links. The scheme is to be extended shortly to coverlarge businesses. DTI is also piloting a range of shared HR services for small companies unable to aVorddedicated HR staV to encourage a more professional approach to employment.

71. One area where things frequently go wrong is when some form of dispute occurs in the workplace.The Government therefore included regulations in the Employment Act 2002 to encourage better disputemanagement and is preparing a £1million package of publicity, advice and guidance in preparation for thesecoming into force in October 2004.

72. In 2002–3 through its statutory duty to promote settlement of workplace disputes, Acas conciliatedin over 95,000 individual and 1,353 collective disputes and ran over 2,000 events promoting good practice.59

It has also began to pilot a new approach to assist business through mediation and the provision of adviceon an individual employment law issue by a third party. So far, small businesses have shown limited interestin mediation but the employment law visits have proved popular. The pilots are due to end in September2004. TheGovernment is currently looking at how to promote the use of alternative dispute resolution (suchas mediation) by raising awareness of its benefits, removing barriers to its use and developing cost eVectiveways to access it.

Future work and parent policies

73. A package of employment legislation came into force in April 2003 aimed at helping parents juggletheir work and childcare responsibilities, in ways that suit employers. The implementation of the legislationwas introduced alongside an awareness raising campaign that commenced six months prior to the law’sintroduction and a support package that included guidance consisting of, summary flowcharts, standardletters, “How to. . .” hints and tips, case studies, web-based interactive guidance and ongoing helplinesupport.

59 See Acas Annual Report 2002, Facts and Figures, page 39.



74. The Government committed itself when implementing the work and parent laws to make no furtherchanges until after a review of their impact in 2006. To help shape the review and future policy theGovernment in Summer 2004 is running a series of Ministerial roundtable discussions between employersand employees. These aim to hear about how individual needs are balancing their caring and workresponsibilities and facilitate dialogue to consider potential future options that meet both individuals andemployers needs. In addition, the Government is holding a “Citizens Jury” to explore issues in more depth.

Annex A

MEASURES INTRODUCED SINCE 1997

Note: This Annex was updated in February 2005

Individual Employment Rights

— Since 1 October 1998 the Working Time Regulations provide workers with the right not to workmore than 48 hours per week, and a minimum of 4 weeks paid annual leave, daily weekly and inwork rest periods and special protections for night workers and adolescent workers* (*protectionextended from 6 April 2003).

— The National Minimum Wage was introduced on 1 April 1999 and is currently £4.50 per hour.The rate for 18–21 year olds is currently £3.80 per hour.

— Since 1 June 1999 the qualifying period formaking a claim for unfair dismissal against an employerhas been reduced from two years to one.

— Protection for “Whistleblowers” came into force on 2 July 1999.

— Agreements to waiver the right to claim unfair dismissal in fixed term contracts abolished from 25October 1999.

— Since 15 December 1999 qualifying period for additional maternity leave reduced from two yearsto one.

— Since 15 December 1999 an employee who has worked continuously for an employer for a yearhas the right to take 13 weeks unpaid parental leave for each child born or adopted on or after 15December 1999. On 10 January 2002 parental leave was extended to parents of all children underthe age of five. The extension was backdated to cover children under the age of five at 15December1999 and those placed for adoption between 15 December 1994 and 14 December 1999.

— Since 15 December 1999 all employees have the right to a reasonable amount of time oV in orderto deal with emergencies involving a dependent.

— Since 1 July 2000 part-time workers can no longer be treated less favourably than comparable full-time workers.

— Since 4 September 2000 a worker attending a grievance or disciplinary hearing has the right to beaccompanied by a colleague or a trade union oYcial.

— Protection for employees on Fixed Term contracts came into force on 1 October 2002.

— From 6 April 2003 parents of children under the age of six or parents of disabled children underthe age of 18 have the right to apply to work flexibly.

— From 6 April 2003 paid maternity leave increased to 26 weeks and unpaid maternity leave to 26weeks, allowing a new mother to have up to a year oV in total.

— From 6 April 2003 Standard Maternity Pay (SMP) increased to £100 per week.

— From 6 April 2003 fathers have the right to two weeks paid paternity leave at the standard rateof SMP.

— From 6 April 2003 adoptive parents have the right to paid adoption leave at the standard rateof SMP.

— From 1 December 2003, protection against discrimination at work on grounds of sexualorientation.

— From 2December 2003, protection against discrimination at work on grounds of religion or belief.

— From 6 April 2004, a package of new rights for temporary workers and responsibilities foremployment agencies and businesses.

— From 1 October 2004, statutory dispute resolution procedures and revised Employment Tribunalregulations.

— From 1 October 2004, a new National Minimum Wage rate for 16–17 year olds and “fair piece”rates.



Collective Employment Rights and Trade Union Legislation

— The Government restored trade union rights to GCHQ within 13 days of coming to power.

— Deductions of trade union subscriptions from pay, or “check oV” regulations were simplified on23 June 1998.

— UK implementing regulations for the European Works Council Directive came into force on 15January 2000.

— Protections against unfair dismissal for employees taking part in lawfully organised industrialaction came into eVect on 24 April 2000.

— On 6 June 2000 statutory procedures for trade unions to obtain recognition in organisations withmore than 20 employees came into eVect.

— Law simplified and improved, including removal of requirement to name unionmembers in noticeof industrial action ballots on 18 September 2000.

Annex B

Note: This Annex was updated in February 2005

DETAILED BREAKDOWN OF THE GROSS COSTS TO EMPLOYERS OF EMPLOYMENTLEGISLATION IMPLEMENTED SINCE 1997

Measure Policy costs—annual Implementation costs— Implementation costs—recurring annual recurring one-oV

Working Time RegulationsIntroduction of Working £2.5 billion £10 millionTime RegulationsAmendments to remove 13 £30 million £8.1 millionweek qualifying period (25October 2001)Amendments to end opt- £24 millionout from certain provisionsof “The Young WorkersDirective” (06/04/03)

£100 millionChanges to calculation ofNight Hours WorkingHorizontal Amending £264 million, coveredDirective (2003) in £2.5 billion above,

except £81 million

National Minimum WageIntroduction of National £1 billion (1) £2–3 millionMinimum WageNMW 2000 increases Nil (1)NMW 2001 increases £450 million (1)NMW 2002 increases Nil (1)NMW 2003 increases £180–400 million (2)NMW 2004 increases £344–614 million (2)(including new rate for16–17 year olds)Fair Piece rates 2004 Nil £500,000

Employment Relations Act 1999Trade union recognition £7.8 millionOrdinary maternity leave £1.8 millionfrom 14 to 18 weeksReduced qualifying period £14 millionfor Additional maternityleaveTime OV for domestic £6.8 million £0.066 millionemergenciesRight to be accompanied £2.3 million



Measure Policy costs—annual Implementation costs— Implementation costs—recurring annual recurring one-oV

Employment Act 2002

Statutory Maternity Pay £25 millionrate and length increases

Equal Pay Questionnaire £0.2–0.4 million

Union Learning £2 million Y1, rising £1 million Y1,Representatives to £26 million Y8 £3 million Y8 (3)

Maternity Leave from 18 to £51–94 million £10–24 million26 weeks

Paternity Leave and Pay £23–39 million £7–13 million £10 million

Adoption Leave and Pay £1–1.5 million £1 million

Flexible working £290 million £6 million £34 million

Maternity leave and Nil Nil Nilpaternity, and adoptionleave and pay—April 2004amendments

Other legislation

Reduction of qualifying £2.5–10 million £2.6–3.8 millionperiod for unfair dismissal

Parental Leave £42 million £0.08 million

Extension of 1999 Parental £7–41 million, Y1–3;Leave Regulations £2–10 million Y4;

£1–2 million thereafter

European Works Councils £14 million (plus £8.4 £8.4 millionmillion one-oV cost)

Part time workers £27 millionregulations

Fixed Term Work £170–370 million £2 million

Employment Equality £1.1–1.6 million Y1 £2 million £14 million(Sexual Orientation) rising to £28–39 million

Y40

Employment Equality £2 million £14 million(Religion and Belief)

Revision of regulations for £6.3–15 million £5.2–6.8 millionthe private recruitmentindustry

Employment Tribunal none noneRegulations 2004

Statutory Dispute £35–48 million £39–73 millionResolution Procedures

TOTALS £5.4–6.2 billion £31–38 million £140–190 million

All costs quoted to two significant figures.(1) Revised downwards.(2) We expect this to be revised down when a new assessment is made.(3) Includes some policy costs.

The one-oV implementation costs total £140–190 million over the seven and a half years fromMay 1997to October 2004. This gives annual one-oV implementation costs of £19–25 million.

Recurring policy costs £4.30 per employee-job per week and less than 1% of total UKwages and salaries.Ongoing annual implementation costs are under 3p per employee-job per week.



APPENDIX 7

Memorandum submitted by the Engineering Employers’ Federation

Introduction

1. EEF has a membership of 6,000 manufacturing, engineering and technology-based businesses andrepresents the interests of manufacturing at all levels of government. Comprising 12 regional Associations,the Engineering Construction Industries Association (ECIA) andUK Steel, EEF is one of the UK’s leadingproviders of business services in health, safety and environment, employment relations and employmentlaw, manufacturing performance, education, training and skills.

UK Employment Legislation

2. As the table in the attached Appendix shows, UK business has had to cope with managing theimplementation of a considerable number of employment legislative measures in a relatively short periodsince the Labour Government came to power in May 1997. This table also shows that a further series ofemployment legislative measures are scheduled to be introduced over the next 12 months.

3. These are a combination of measures that have been driven by the Government’s own domesticagenda, such as the introduction of the National Minimum Wage and statutory trade union recognition,and the implementation of a series of European Directives covering working time, part-time and fixed termworkers, European Works Councils and, very shortly, information and consultation of employees and agediscrimination. In addition, we know that new European legislation on temporary agency workers andcorporate restructuring, as well as reviews of the existing Directives on working time and European WorksCouncils, are high on the European Commission’s agenda with the European social partners (UNICE andthe ETUC) currently being consulted by the Commission on possible changes to these Directives.

4. Unlike most of the previous Conservative administration’s employment legislative measures thatlargely sought to reduce the influence of the trade union movement in the workplace and did not directlyaVect individual employers, many of themeasures that have been introduced sinceMay 1997 impact directlyon the contractual employment relationship between employers and their employees. In particular, theintroduction of a series of minimum employee rights on pay rates, hours of work, annual holidays,disciplinary and grievance procedures as well as various family friendly policies go to the very heart of thiscontractual employment relationship.

5. As a result, the introduction of these employment legislative measures has inevitably involved aconsiderable amount of management time in ensuring that their company’s human resources policies,procedures and practices comply with this new legislative environment. In addition, it has been necessaryto ensure that all managers and supervisors are aware of these new employee rights so that the company isnot exposed to potentially expensive and time-consuming Employment Tribunal claims.

6. This need to give increased management attention to the practical aspects of the implementation ofemployment legislation has therefore inevitably meant that less management time has been able to be spenton their other equally important responsibilities. These include improving the productivity performance ofthe business and developing new products, processes and markets.

Labour Market Flexibility

7. EEF acknowledges that the introduction of many of these employment legislative measures has not,in themselves, had a directly adverse impact on the flexibility of the UK labour market. It also considersthat, if legislative measures on informing and consulting employees are implemented by the Government ina flexible manner, they have the potential to assist companies to improve their productivity performance.However, the need to implement such a large number of employment legislative measures over a relativelyshort period has inevitably had an impact on EEF members’ perception of the business environment inwhich they are now having to operate.

8. An illustration of the perceived impact of the ‘adjustment’ costs of these employment legislationmeasures is shown in the chart below that is taken from a recent EEF survey of 600 companies. It shows that,despite the higher levels of employment regulation inGermany andFrance, companies in these countries seeemployment regulation as being marginally positive for investment. By contrast, UK firms see employmentregulation as having a negative impact on their investment plans. This suggests that the adjustment to higherlevels of employment regulation is one factor that is deterring UK companies from increasing investment.



Chart 1

FACTORS AFFECTING INVESTMENT PLANS

Mean score where 5%significant positive impact and 1%significant negative impact on level of investmentplanned for next 12 months

Source: EEF/NOP 2003 EU Productivity Survey

Strength ofmarkets

Level ofcorporate

tax

Investmenttax

incentive

Grantsfor

investment

Employmentregulation

Skills ofemployees

Gov'mentattitude to

manufacturing

Employmentcosts

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

UK Germany France

9. There is little doubt from the comments that are frequently made by EEF members that it is theirperception that, since May 1997, they have had to operate in an increasingly more tightly regulated labourmarket which they regard, using somewhat loose terminology, as an indication of reduced labour marketflexibility. This view is now being reinforced by their concerns that possible changes to the Working TimeDirective, particularly the removal of the individual opt out from the average 48 hour working week, andthe possible introduction of expensive and restrictive European legislation on temporary agency workerscould have an adverse impact on the current flexibility of the UK labour market.

10. Labour market flexibility has a number of aspects and, as far as numerical flexibility is concerned, itis felt that the UK still remains in a relatively strong position in relation to many of its internationalcompetitors. However, EEF members are concerned that there is now an increasing danger that,unfortunately, this competitive advantage could gradually be being eroded due to a combination of theincreasing trend for an element of labourmarket deregulation in someEUMember States and the possibilityof additional European employment legislation.

Survey Evidence on Labour Market Flexibility

11. Hard data on labour market regulation is in short supply and the available data lacks the precisionrequired to draw firm conclusions. That being said, two sets of data were analysed in EEF’s Report“Bridging the continental divide”. Firstly, data from the World Economic Forum (WEF) that is based onexecutive opinions shows that, on their measure of overall flexibility, the UK has improved between 1997and 2001. This is largely due to a more positive assessment in the areas of unemployment insurance, wagesetting and pay-productivity links. However, the WEF measure does show a worsening in the UK’s scorein two areas—minimumwage regulation and ‘hiring and firing’ legislation. EEF does not oppose minimumwage regulations in general but does have some concerns about changes that will shortly be introduced bythe Government in the second of these areas.

12. Secondly, OECD data on Employment Protection Legislation (EPL) shows that, between 1990 and1998, the UK saw its advantage start to erode. However, this was due to reductions in EPL scores in 10 ofthe EU countries rather than an increase in the UK whose rating remained constant.



13. The DTI’s “UK Productivity and Competitiveness Indicators 2003” uses more recent data from theInternational Institute for Management Development (IMD) survey evidence on business executiveperceptions of labour market regulation. It shows that the UK has fallen from first place amongst the G7in the 1996–97 survey to third place behind the US and Canada in 2002–03. Although the UK is not aloneis seeing a worsening of its position over this period, the perceived deterioration was substantially greaterthan that in Japan, France and Germany. In addition, the ratings of the US and Italy have improved. As aconsequence, it can be seen that the UK’s advantage has therefore been partially eroded since 1996–97.

Some Concluding Remarks

14. EEF recognises that some of the employment measures that have recently been introduced have hadsome benefits for business with, for example, family friendly legislation helping to encourage more womenwith young children to remain in the labour market. They have therefore helped employers to avoid losingthe skills and experience that these employees have previously gained.

15. However, the implementation of these employment legislative measures has not been without cost tobusiness as the various Regulatory Impact Assessments that have been undertaken by the Governmentclearly demonstrate. Moreover, the costs of implementing these legislative measures are much moreapparent and transparent to individual companies than the rather more intangible benefits that maysometimes occur.

17 June 2004

Annex

UK EMPLOYMENT LEGISLATION INTRODUCED SINCE MAY 1997

Legislation Date in Force Main Components EU Legislation

Public Interest The Act received Royal Introduction of protection against NoDisclosure Act 1998 Assent in July 1998 dismissal or discrimination for

with the substantive individuals who discloseprovisions coming into information about certain kinds ofeVect from July 1999. wrongdoing.

Data Protection Act The Act received Royal The Act gives eVect to the EU Data Yes1998 Assent in July 1998. Protection Directive and brought

The main provisions most manual records within thewere phased in with data protection rules.many of the significantprovisions coming intoforce in October 2001.

National Minimum The Act received Royal Establishing a National Minimum NoWage Act 1998 Assent in July 1998 and Wage.

the associatedRegulations cameinto eVect in April1999.

Working Time The Regulations were Regulations providing for YesRegulations 1998 issued in July 1998 and maximum average weekly working

came into eVect in of 48 hours, minimum rest periodsOctober 1998. and four weeks’ paid holiday each

year.Human Rights Act The Act received Royal The Act gives the statutory rights No1998 Assent in November and freedoms guaranteed under the

1998 but did not come European Convention on Humaninto eVect until Rights.October 2000.

Employment The Act received Royal Increased the limit for NoRelations Act 1999 Assent in July 1999 compensation for unfair dismissal

with the provisions from £12,000 to £50,000 (nowphased in during 1999 £55,000) and introduced theand 2000. statutory procedure for recognition

of trade unions and the right foremployees to be accompanied atdisciplinary and grievance hearings.




Maternity and The Regulations came Changes to the maternity regime YesParental Leave into force in December together with the provision of 13Regulations 1999. 1999. weeks’ unpaid parental leave for

employees with at least one year’sservice who have parentalresponsibility for a child.

Transnational The Regulations on the The Regulations require certain YesInformation and introduction of transnational companies toConsultation of European Works establish mechanisms for informingEmployees Councils came into and consulting employees at theRegulations 1999 eVect in January 2000. European level.Regulation of The Act came into Creates the oVence of unlawful NoInvestigatory Powers force in October 2000. interception of a telecommunicationAct 2000 (subject to the Lawful Business

Practice Regulations 2000).Part-time Workers The Regulations came Part-time workers have the right to Yes(Prevention of Less into eVect in July 2000. pro-rata treatment with aFavourable Treatment comparable full-time worker, unlessRegulations) 2000 the employer can objectively justify

the less favourable treatment.Sex Discrimination The Regulations came Allows applicants to pursue indirect Yes(Indirect into force in October discrimination claims by identifyingDiscrimination and 2001. a “provision, criterion or practice,”Burden of Proof) rather than a requirement orRegulations 2001 condition. Burden of proof is on the

employer to prove it did notcommit the act complained of, oncean applicant establishes a primafacie case of discrimination.

Maternity and The Regulations came The Regulations amend the YesParental Leave into force in January provisions relating to parental leave(Amendment) 2002. in the Maternity and ParentalRegulations 2001 Leave Regulations 1999.Employment Act 2002 The Act received Royal The Act covers the following main Yes

Assent in July 2002 areas: (1) family friendly issues—although its provisions which include changes to maternityare being being phased and parental leave, the introductionin during 2003 and of paternity and adoption leave and2004. The family the right to request flexible working;friendly rights, (2) dispute resolution via statutoryincluding the right to disciplinary and grievancerequest flexible procedures; (3) employmentworking, came into tribunal reform (4) new rights forforce on 6 April 2003. union learning representatives; andThe provisions dealing (5) introducing equal paywith dispute resolution questionnaires.will come into force inOctober 2004.

Fixed-term Employees The Regulations came The Regulations aim to ensure that Yes(Prevention of Less into force in October those on fixed-term contractsFavourable Treatment) 2002. receive employment conditions thatRegulations 2002 are no less favourable than those of

a comparable permanent employee.

Working Time The Regulations came The Regulations restrict the Yes(Amendment) into force in April working hours of young workers,Regulations 2002 2003. those over the minimumschool

leaving age but under 18, to 8 hoursa day and 40 hours a week.

Maternity and Parental The Regulations came The most significant changes are the NoLeave (Amendment) into force in November extension of ordinary maternityRegulations 2002 2002 but generally have leave from 18 to 26 weeks and the

eVect only in relation extension of additional maternityto employeeswhose leave to end 26 weeks from the endexpected week of of ordinary maternity leave. The




childbirth began on or qualifying period for additionalafter 6 April 2003. maternity leave is reduced to 26

weeks at the beginning of the 14thweek before the expected week ofchildbirth.

Flexible Working The Regulations came The Regulations deal with the No(Eligibility, Complaints into force in April eligibility requirements of theand Remedies) 2003. statutory right to request a contractRegulations 2002 variation to change the terms and

conditions of an employee’scontract of employment to allowfor flexible working.

Flexible Working The Regulations came The Regulations deal with the No(Procedural into force in April procedural requirements of theRequirements) 2003. statutory right to request a contractRegulations 2002 variation to change the terms and

conditions of an employee’scontract of employment to allowfor flexible working.

Paternity and The Regulations came The Regulations relate to the new NoAdoption Leave into force in December rights to paternity and adoptionRegulations 2002 2002 but generally have leave provided for in the

eVect only in relation Employment Act 2002.to childrenborn oradopted on or after6 April 2003.

Employment Equality These Regulations The Regulations make unlawful Yes(Religion or Belief) came into force on direct and indirect discrimination,Regulations 2003 2 December 2003. harassment and victimisation on the

grounds of religion and belief,which includes religious beliefs andsimilar philosophical beliefs.

Employment Equality The Regulations came The Regulations make unlawful Yes(Sexual Orientation) into force on direct and indirect discrimination,Regulations 2003 1 December 2003. harassment and victimisation on the

grounds of sexual orientation.

Working Time The Regulations came The main working time provisions Yes(Amendment) into force on 1 August are the average 48-hour workingRegulations 2003 2003. week; four weeks’ paid annual

holiday; rest breaks; healthassessments for night workers; andan 8-hour limit on night working.In short, the Regulations extend themain working time provisions tomost workers in the previouslyexcluded sectors.

Race Relations Act The Regulations came They amend the Race Relations Act Yes1976 (Amendment) into force on 19 July 1976 (RRA), in accordance with theRegulations 2003 2003. EC Directive. In particular, they

contain a revised definition ofindirect discrimination andintroduce a new definition ofharassment.

Equal Pay Act 1970 The Regulations came They amend the Equal Pay Act No(Amendment) into force on 19 July 1970 by providing for back pay toRegulations 2003 2003. be awarded for the period of six

years before the day the proceedingswere instituted.

Sex Discrimination Act The Regulations came They make it unlawful to No1975 (Amendment) into force on 19 July discriminate after the end of theRegulations 2003 2003. employment relationship by

subjecting an employee to adetriment.




Conduct of The Regulations will The Regulations govern the NoEmployment Agencies come into force on conduct of employment agenciesand Employment 6 April 2004. and employment businesses.Businesses Regulations2003

Employment Act 2002 The Regulations will The Regulations bring into eVect No(Dispute Resolution) come into force on the provisions of the EmploymentRegulations 2004 1 October 2004. Act 2002 which provide for dispute

resolution via statutory disciplinaryand grievance procedures.

Disability The Regulations will The Regulations amend the NoDiscrimination Act come into force on Disability Discrimination Act 1995,1995 (Amendment) 1 October 2004. in particular, by extending it toRegulations 2003 small businesses, expressly

prohibiting harassment on heground of disability and amendingthe rules on justification.

National Minimum The Regulations will The Regulations will introduce a NoWage (Amendment) come into force on system of fair piece rates for outputRegulations 1 October 2004. workers.

Transfer of These Regulations are The Regulations will amend the YesUndertakings expected during late TUPE Regulations and implement(Protection of 2004 or 2005. the EU Acquired Rights Directive.Employment)AmendmentRegulations

Age Discrimination These Regulations are The Regulations will implement the YesRegulations expected to be finalised age discrimination aspects of the

during late 2004 or EU Employment Directive.2005 and will beimplemented fromOctober 2006.

Information and These Regulations will These Regulations implement the YesConsultation of come into force on a EU Directive on “Establishing aEmployees Regulations phased basis between General Framework for Informing2004 March 2005 and and Consulting Employees in the

March 2008. European Community”.

APPENDIX 8

Memorandum by the Equal Opportunities Commission

Summary

This submission sets out the EOC response to the Trade and Industry Committee Inquiry into UKEmployment Regulation.

— The EOC believes that the achievement of gender equity has a major part to play in promotinglabour market flexibility. By the year 2010 only a third of the work force will be white, male andunder 45, so it is clearly in the interests of the economy as awhole thatwomen aswell asmen shouldbe able to reach their full potential in the labour market. A flexible labour market can enable themto do so.

— Regulations aimed at providing for flexible working need to be backed up by informationcampaigns designed at raising awareness of employee’s rights, and, just as importantly, giving linemanagers the hands-on support they need to implement flexible working. In particular,more needsto be done to promote awareness of fathers’ rights to request to work flexibly.

— We also believe that, while a regulatory framework helps organisations to get policies in place, thekey to flexibility is an ongoing dialogue between employers and employees that enables them toreach a mutually satisfactory arrangement.



— We would like to see the development of a national skills strategy driven by a high-level allianceacross government, to ensure a consistent approach from all relevant parties to tackling gendersegregation in training and work, including opening up flexible working in all sectors and at alllevels.

— We very much welcome the Government’s pledge to open up the right to request to work flexiblyto carers looking after disabled or older adults and would like to see this implemented as soon aspossible. We would also like to see the right extended to parents of older children.

— In the meantime we would like to see employers open up flexible working to other employees whoalso need to adjust their hours of work eg parents of older children and carers.

— We support flexible employment as a means of encouraging older workers to remain inemployment, or to return towork after taking time out to care for disabled or older adults. As withany group returning to work after a lengthy period of absence, flexible working will need to bebacked up by specialist support and training opportunities.

— EVorts need to be made to overcome long hours working, so as to decrease pressure on workerswho are also carers, and enable them to continue to contribute to the economy.

Introduction

1. The Equal Opportunities Commission (EOC) is the statutory body for sex equality in Great Britain.The EOC welcomes the opportunity to submit evidence to the Trade and Industry Committee in respect ofits inquiry into:

— The contribution labour market flexibility makes to the UK economy.

— Whether the current degree of flexibility is appropriate or desirable, and, if not, what measures theGovernment should take.

2. The EOC believes that the achievement of gender equity has a major part to play in promoting labourmarket flexibility. With women now making up half the workforce the position of women in the labourmarket has a major impact on UK productivity.

3. From the Government’s point of view three elements of labour markets are seen as particularlyimportant for economic growth: an increased labour supply; flexibility so as to be able to adjust to newgrowth opportunities; and that “well-functioning labour markets reward workers according to theirperformance and skills”. While the achievement of gender equity is central to these three elements ofeconomic growth it is still the case that both Government and employers remain of the view that genderequity is an “add on”, something to be pursued only after greater productivity has been achieved.

4. However, by the year 2010 only a third of the work forcewill bewhite, male and under 45, so it is clearlyin the interests of the economy as a whole that women as well as men should be able to reach their fullpotential in the labourmarket. Future predictions show that the economywill need an extra 2million peoplein the next 20 years, only a quarter of whom will be school leavers.

The Role of Employment Regulation in a Flexible Labour Market

5. Several pieces of employment legislation underpin the flexible labour market. For the purposes of thissubmission we are looking at the regulations providing parents with the right to request to work flexibly,the regulations protecting part-time workers against less favourable treatment, and the working timeregulations, which set a maximum limit on how many hours people can work. All of these regulations arecomplex and awareness of them—amongst both employers and employees—is low.

6. While a regulatory framework can help to encourage the changes in practice that are conducive to anexpansion of flexible working, the regulations need to be backed up by information campaigns designed atraising awareness of employee’s rights, and, just as importantly, giving line managers the hands-on supportthey need to implement flexible working. More eVective use of the existing provisions plus much moresupport and encouragement to employers would help a lot. The key to flexibility is an ongoing dialoguebetween employer and employee that enables them to reach a mutually satisfactory arrangement.

What We Mean by Flexible Working

7. For the purposes of this submission:

— By flexible working we mean the ability of workers and employers to negotiate variations inworking hours, times of work, work organization and place of work.

— By part-time working we mean hours of work up to and including 30 hours a week.

— By full-time working we mean hours of work in excess of 30 hours a week.

— By long hours working we mean hours of work in excess of 48 hours a week.



The Benefits of Flexible Working

8. Flexible working can:

— Enable businesses to increase their productivity by improving recruitment and retention, reducingabsenteeism and developing a positive relationship with their workforce. Those firms that havesuccessfully introduced flexible working, such as Lloyds TSB and BT, stress that there is a solidbusiness case for doing so.60

— Enable men and women to work in the jobs best suited to their skills and abilities. The UK labourmarket remains strongly gender segregated by sector, by occupation and by hours worked. Thisconcentration of women and men into diVerent kinds of job, known as occupational segregation,is a key issue for government and employers in Britain today. It damages UK productivity bycontributing to skills shortages and the gender pay gap.

— Enable women to maintain continuity of employment after they have had a child. Despite almost30 years of the right to return to work after maternity leave, a shortfall in childcare places, coupledwith an absence of flexible working, mean that for many women the only way to return to workis to drop down into a less skilled, lower paid, but part-time job.

— Facilitate a more equal sharing of caring responsibilities between men and women. Fathers arekeen to play a more active role as parents, but rarely have access to flexible working. Mothers,fathers and carers need to be able to choose whether or not to combine caring with paid work andto get the support they need whatever choice they make. This means opening up access to flexibleworking for all parents and carers in all types of job.

— Enable people caring for adult dependents to carry on working. There are three million workingcarers in the UK. 1.4 million women and 1.6 million men care for a disabled or older relative orfriend. Many carers are forced to give up work due to a lack of flexible employment.

— Enable older workers to carry on working in the years up to and beyond their normal retirementage. With fewer young people entering the labour market flexible working can provide employerswith a means of retaining older workers.

Flexible and Part-time Working

9. Flexible working includes, but is not synonymous with part-time work. The two are often confused,with part-time work being seen as oVering a worker suYcient flexibility to enable a balance to be struckbetween work and home.While this may often be true, it is also true thatmany part-time workers often havelittle or no ability either to negotiate variations in their hours or patterns of work or to decline changes thatare imposed on them. There is a need to ensure that part-time workers, just as much as those working full-time, are able to negotiate hours and patterns of work that enable them to balance work with caringresponsibilities.

10. There is also evidence from part-time employees for a desire for more hours, not fewer. The TUC’sAbout Time report found that while over 10 million employees said that they would like to work shorterhours, over two million said that they need more paid working hours. Part-timers accounted for more thanhalf of this group even though they constituted only a quarter of the employee workforce. While overall 8%of the workers in the survey said that they wanted to work longer hours in their current jobs, this rose foroccupations with a large number of women working part time for low wages (eg 13% in personal servicesand 14% in both sales and customer services and “less skilled” occupations.61)

11. The verywelcome improvements to the legal framework for employing part-timeworkers have servedto mask the fact that the part-time work sector remains structured around its origins as a low-skilled andinsecure segment of the labour market. Research commissioned for the EOC shows that women are morelikely to enter part time work and are less likely to leave it. Women are not using part time jobs as stepping-stones into full time employment, but remain in part time employment for lengthy periods of time62. Thisnot only contributes to the gender pay gap, but may also mean an increased reliance on benefits to top upincome. Women working part-time are also less able to save for their retirement and often remain in jobswith poor pension provision, leading to a greater reliance on state benefits in retirement.

The Distribution of Flexible Working

12. An approach to the management of work that is based upon flexibility, rather than upon rigiddivisions into full-time and part-time work would help to ensure that skilled women do not get trapped inlow skilled, low paid part-time work on account of their caring responsibilities. However:

— The distribution of flexible working across the economy is highly uneven.

— Most flexible workers are women.

60 People Management 3 June 2003.61 TUC, About Time, p6.62 Career Paths of Part-Time Workers, EOC, forthcoming.



— Flexible working tends not to extend to middle and senior ranking managerial and professionalposts. This makes it diYcult for women to maintain their labour market position once they havehad a child. It also makes it diYcult for men to take on a greater share of responsibility for caringfor their children.

— There is evidence that many women, even when exercising the new right to request flexibleworking, move to a lower grade job when taking up the option to work flexibly.

— There needs to be greater flexibility and accessibility within both the job market and childcareprovision, to allow parents to co-ordinate work and family commitments.63

Occupational Segregation

13. Flexible working is more prevalent in sectors that employ a large proportion of women, such as retailfinance, and relatively uncommon in sectors employing predominantly men, such as manufacturing. It israrely available in senior jobs. The UK labour market remains strongly gender segregated by sector, byoccupation and by hours worked. Women hold only 1% of construction jobs and 8% of engineering jobs,while almost all nursery nurses and childminders are female.

14. This gender segregation is both “horizontal” and “vertical”. Horizontal segregation presents adownward pressure on women’s labour market position by crowding women into female dominatedoccupations and limiting access to a broader range of male-dominated occupations and sectors of economicactivity. Vertical segregation limits women to lower status jobs within occupational groups, restricting boththeir opportunities of higher paid employment and the pool of talent available to employers. Both theseeVects are compounded by the concentration of part-time and flexible work options in female dominatedoccupations, and their absence elsewhere.

15. This concentration of women and men into diVerent kinds of job is a key issue for government andemployers in Britain today. The EOC has recently published the interim findings of a major investigationinto workforces that are divided along gender lines. The investigation focuses on Modern Apprenticeshipsbut draws out wider lessons for employment and training in the UK.64 The investigation identified acorrelation between skills shortages and under-representation of women in key sectors. This makesoccupational segregation not just a “gender issue”, but also a barrier to addressing skills shortages andincreasing the productivity and competitiveness of the economy as a whole. Recruiting from only one halfof the population prevents women and men from working in the areas best suited to their skills and abilitiesand can only make it harder to increase overall productivity.

16. To redress this imbalance the EOC would like to see the development of a national skills strategydriven by a high-level alliance across government, to ensure a consistent approach from all relevant partiesto tackling gender segregation in training and work. The strategy should incorporate eVective incentives forlevering real change, including targets for measuring progress. While initially the strategy should focus onModernApprenticeships and vocational education theGovernment should lookmore widely, with the EOCand employers, at ways of tackling occupational segregation, including opening up flexible working in allsectors and at all levels.

17. Women’s occupational segregation is especially concentrated among those who are employed part-time, where the economics of supply and demand result in low pay. The average wage of a woman part timeworker is £7.77 per hour, compared to the average male full time rate of £12.87 per hour65. For men, thehigher the percentage of men in an occupation, the stronger is the tendency to work full-time or even longerhours. Women cluster in those occupations that allow some measure of flexible working—part-timeworking, term-time working and job-sharing. Extending flexible working to all sectors, in all sizes oforganisation and all levels of seniority is key to breaking downoccupational segregation and thereby helpingto overcome skills shortages in those areas where women are significantly under-represented.

Maintaining Continuity of Employment

18. Anyone who has a period out of employment, for whatever reason, experiences diYculties whenreturning to it, but all too often women returning to the workplace after childbirth take lower skilled workin order to have some level of flexibility:

“A significant proportion of women who take a break from the labour market suVer downwardmobility on re-entry to the labour market after childbirth/care...The absence of part-time workthroughout the economy means that some mothers will be working at levels beneath theirqualifications”66

63 Talking About Childcare, Daycare Trust April 2004.64 Plugging Britain’s skills gap: challenging gender segregation in training and work, EOC May 2004.65 ONS (2003) New Earnings Survey 2003.66 The impact of women’s position in the labour market on pay and implications for UK productivity, Walby & Olsen. WEU/DTI, 2002.



This tendency towards downward occupational mobility is particularly marked in the UK. Elsewhere inEurope women are better able to maintain their employment status when they become mothers and this isin part due to a greater willingness to make part-time working available in more senior posts.

19. In jobs where there is an expectation that full-time work involves working far in excess of contractedhours, it is even more diYcult for mothers to re-enter full-time work after maternity leave. The lack offlexible working options and the prevalence of excessive hours in managerial posts acts as a strongdisincentive for women who are trying to balance work with family responsibilities to seek to progress andincrease their earning capacity. It also undermines organisation’s ability to make the most eVective use oftheir human capital.

The Right to Request to Work Flexibly

20. The ability of parents to reach their full potential at work has been helped significantly by the newframework of parental rights that the Government has introduced. The EOC welcomes the new right andhopes that it will lead to an expansion of flexible and part-time work for mothers and fathers. We welcomethe Government’s commitment to review the new right in 2006 to see how it is working. We would like tosee the right extended to parents of older children. In the meantime we hope that employers will open upflexible working to other employees who also need to adjust their hours of work eg parents of older childrenand carers.

21. There is some evidence that the right is not working as eVectively as it could. In the period Januaryto March 2004 the following issues were raised with the EOC:

— Refusal of requested change of hours.

— Refusal resulting in job loss.

— Unfavourable treatment such as being told they were unsuitable for promotion because of theirchildcare responsibilities.

— Job share problems such as being expected to find a replacement or revert to full-time work if jobshare partner leaves.

— Policies not being promoted to fathers of young children.

22. In certain circumstances some of the above situations could amount to breaches of the SexDiscrimination Act eg excluding fathers from the option to request to work flexibly. Much more needs tobe done to raise awareness of the right to request to work flexibly and of the benefits to both employers andemployees of agreeing to this.

The Length of the Working Week

23. The length of the working week is also a key factor in enabling mothers and fathers, and carersgenerally, to balance work and family responsibilities. While working hours in the UK average around 38hours, similar to the EU average,67 this headline figure disguises the significant polarisation, between fulltime and part time workers, and between men and women, that distinguishes the UK labour market fromother EU countries. If the full time hours of UK workers are compared with other EU countries the UKfar outstrips the EU average for the proportion of full time workers doing over 48 hours a week. Accordingto the Spring 2002 quarter of the Labour Force Survey (LFS), 21% (3.8 million) of full-time employeesreported usually working over 48 hours a week in the UK, this includes paid and unpaid overtime(equivalent to 16% of all employees). While 26% of full time male workers stated that they usually workedover 48 hours (compared with 10% across other member states), only 11% of full time female workers didso. More eVort needs to be made to overcome long hours working, so as to decrease pressure on workerswho are also carers, and enable them to continue to contribute to the economy.

A More Equal Sharing of Caring Responsibilities

24. More than 50% of parents have no access to flexible working, but while employers generally recognizethe need of mothers for flexible working, the needs of fathers go largely unacknowledged. Twenty four percent ofworkers work part-time and of these 82%are women.Whilst almost 50%of female part-timeworkerslimit their hours as a result of their caring responsibilities, only 4.6% of male part-time workers do so68. Thelargest group of male part-time employees is aged under 25 and therefore least likely to be working part-time because of caring responsibilities.

67 Long hours working in the UK; a summary of statistical information, DTI, April 2003.68 Advancing Women in the Workplace, Thewlis et al, Women & Equality Unit/ EOC 2004.



25. Almost 40% of fathers routinely work more than 48 hours a week, compared to 6% of mothers69.Where mothers are working long hours surveys indicate that they still carry the burden for the mainhousehold and caring tasks.70 And where fathers work long hours, they are least likely to be involved in thecare of their children.71

26. O’Brien and Shemilt’s reanalysis of the 2000 DfES Worklife Balance Survey found that while over80% of fathers were generally happywith their worklife balance, this dropped to 60% for those working over48 hours a week and 50% for those working 60 or more hours72. Excessive hours amongst men, andparticularly fathers, cement the status quo on caring responsibilities and prevent parents in particular frombalancing work and family life eVectively.

27. The type of flexibility that fathers would prefer is generally diVerent to the type of flexibility generallypreferred by mothers. Both are keen to see a greater use of flexitime, but fathers are more likely to wantflexibility of working hours over the day and week without a reduction in their salary, whereas mothers aremore likely to opt for greater reductions in time with the inevitable drop in pay. This suggests that openingup flexible working to fathers might not be as diYcult or as costly as it might at fist sight appear to be.

28. However, fathers have reported to the EOC and to others that the fact that the right to request towork flexibly is open to fathers as well as to mothers is not widely known by either fathers or employers.More needs to be done to promoterawareness of fathers’ right to request to work flexiblyCaring for adult dependents

29. There are currently 5.2 million carers in England and Wales, with 1.6 million of these providing atleast some unpaid care to an older or disabled person, as well as working full-time. Projections indicate thatmore than one in 10 women in the next generation will at the age of 45 be simultaneously caring for both aparent and a child under 18.We verymuchwelcome theGovernment’s pledge to open up the right to requestto work flexibly to carers looking after disabled or older adults and would like to see this implemented assoon as possible.

Older Workers

30. Britain’s birth rate is falling but at the same time life expectancy is increasing and for the first timethere are now more over-60s than under 16s in the population. There are moves towards later retirementages or longer pension contribution periods, greater flexibility in retirement and a relaxation of the barriersto working while receiving a pension. The timing of retirement can be influenced by caring responsibilities.The 2001 census showed that more people in their 50s are carers than in any other age group, about 1 in 5.Older carers commitments are often hidden, with individuals less able to negotiate flexible working patternswith their health and personal life taking the toll, or leading them to leave paid employment.

31. Later retirement will not suit everyone and the ability to carry on working will depend upon anemployee’s fitness and health. Encouraging flexible working may however, enable workers to remainattached to the labour force for longer, rather than going onto incapacity benefits prior to retirement. Wesupport flexible employment as ameans of encouraging older workers to remain in employment, or to returnto work after taking time out to care for disabled or older adults. As with any group returning to work aftera lengthy period of absence, flexible working will need to be backed up by specialist support and trainingopportunities.

The Impact of the Restricted Availability of Flexible Working

32. The majority of parents and carers would like to be in paid employment, but caring responsibilitiesand inflexible employers compound problems with accessing suitable and aVordable childcare or eldercare.Caring for children or for adult dependents is one of the most important jobs anyone can do, yet oftenparents and carers struggle to be able to balance caring with other responsibilities. Opening up opportunitiesfor flexible working is one of the most eVective ways of providing parents and carers with the supportthey need.

33. The restricted availability of flexible working impacts on men and women in a number of ways:

— The inability to work flexibly in higher paid posts impacts on the gender pay gap.Women still earnsignificantly less than men, especially where they work part-time (eg a low skilled woman withchildren will earn £0.5 million less in her life than her low skilled male partner73). Women’s lowerearnings result in lower pensions: women’s average retirement income is only 57% of men’s.

69 Working Fathers—Earning and Caring, O’Brien and Shemilt, University of East Anglia, EOC 2003.70 DTI working time research note, 2002.71 Working Fathers—Earning and Caring, O’Brien and Shemilt, University of East Anglia, EOC 2003.72 Working Fathers—Earning and Caring , O’Brien and Shemilt University of East Anglia, EOC 2003.73 Women’s incomes over the lifetime, Rake k (ed), Women’s Unit 2000.



— Almost four in 10 mothers, more than one in 10 fathers and almost one in five carers have eithergiven up or turned down a job because of their caring responsibilities74. The ability to negotiatevariations in working hours, times of work, and so on, would enable many more people to remainin gainful employment while fulfilling their caring responsibilities.

— Many fathers would like to be more involved in caring but are unable to be so because they thinkit is financially untenable, or their employer will not provide the flexibility they seek.

The Barriers to an Expansion of Flexible Working

34. The main barriers to an expansion of flexible working are:

— Unfavourable perceptions of flexible working. Senior level employers fear that introducing flexibleworking will have an adverse eVect on profits, while at line management level many managers areunaware of, or sceptical of, the benefits of flexible working. Amongst workers there is a perception,particularly amongst men, that taking up flexible working will be detrimental to their careerprospects. An EOC survey found that while around four in 10 workers say their boss wouldrespond positively if they asked for flexible working arrangements, another four are not at all sureand a sixth say their boss would certainly not respond positively.

— Improvements to the legal framework for employing part-time workers have served to mask thefact that the part-time work sector remains structured around its origins as a low-skilled andinsecure segment of the labour market.

— A failure to recognise the importance of continuity of employment in maintaining and improvinghuman capital. Anyone who has a period out of employment, for whatever reason, experiencesdiYculties when returning to it. The unavailability of flexible working, coupled with the shortageof good quality, aVordable childcare means that for many women the only route back intoemployment is through part time work.

— The impact of the domestic economy on the market economy goes largely unrecognised. Moreattention needs to be paid to building bridges between the domestic and market economies—childcare support, for example, is closely tied to employment and household status, yet if womenare to maximise their contribution to the market economy, support needs to be extended to themwhile they are in education or training.

The Benefits of Opening Up Flexible Working

35. We consider that there would be considerable benefits to employers, employees and the economy toopening up flexible working at all levels, in all occupations, and in all sizes of business. These include:

— Improvements in the UK’s ability to compete in the world economy. So long as women remainsignificantly disadvantaged in the workplace the UK economy will continue to miss out on theircontribution. The loss of experience, investment in training, and talent from women forced intoand then stuck in low skilled part time jobs is a waste to the economy as a whole. An expansionof flexible working would enable more women to work to their full potential. It would also allowparents more time with their children, giving them a better start in life and reducing antisocialbehaviour.

— Improved productivity. Businesses not using flexible working are cutting themselves oV from alarge part of the working population. Skills shortages are already aVecting productivity and insome sectors have led to inflated wage costs. Absence levels are also a major cause of concern forUKemployers. Flexible working practices can increase productivity by improving recruitment andretention and reducing absenteeism—recent research has found that organisations that haveintroduced flexible working have experienced reduced absenteeism, often as an unexpected bonus.

— A better balance between work and home. With almost four in 10 mothers, more than one in 10fathers and almost one in five carers having either given up or turned down a job because of theircaring responsibilities the immediate benefits to parents and carers are obvious. In the longer terma labour market wherein all workers are able to negotiate variations in their hours and patternsof workingwill help to reduce the disadvantages experienced by those whose caring responsibilitiesmake them liable to the perception that they are somehow less committed than other workers, orless able to reach their full potential.

— An end to the demarcation between jobs for mothers and jobs for others.

— Flexible working associated with flexible retirement would reduce the costs to the state ofsupporting parents and carers who have not been able to build up a suYcient pension to maintainthem in their retirement. It would also enable older workers generally to carry on working.

74 EOC survey.



— A closing of the gender diVerences in lifetime earnings. We would expect to see a narrowing of thegender pay gap, especially in respect of the gap between those working part-time and thoseworking full-time.

Conclusion

36. As female earning power is limited by the lack of career prospects and discrimination against part-time workers so gender stereotypes become more rigid. Mothers who want to, or need to, work are mostlyforced onto the “Mummy track” as childcare responsibilities are seen as a sign of lack of commitment. Andwhen there is not enough money to allow choice on how people manage the demands of work and home,it sets a pattern that perpetuates inequality in the workplace. We need organisations to accept they cannotmake the most of the talent available unless they account for people’s caring responsibilities. The EOC willshortly be launching a general formal investigation into flexible and part-time work, which will makesuggestions on how to tackle the barriers that prevent Britain’s economy from capitalising on parents’ andcarers’ skills. Opening up opportunities—and equalizing pay—for flexible and part-timeworkingwill be keyto providing Britain’s parents and carers with the support they need if people’s expectations are truly goingto be met.

June 2004

APPENDIX 9

Memorandum by The Federation of Small Businesses (FSB)

1. The Federation of Small Businesses is the UK’s leading non-party political lobbying group for UKsmall businesses existing to promote and protect the interests of all who own and/or manage their ownbusinesses. With over 185,000 members, the FSB is also the largest organisation representing small andmedium sized businesses in the UK. The FSB’s membership employs 1.25 million workers.

The Contribution Labour Market Flexibility makes to the UK Economy

2. The UK small and medium enterprise (SME) sector is of key importance to the UK economy. Thereare 3.8 million small businesses in the UK employing over 50% of the UK’s private sector workforce. Over97% of firms in the UK employ less than 20 people. Small firms contribute over 50% to the UKGDP whichin equates to £500 billion in monetary terms75.

3. The SME sector is responsible for 64% of all commercial innovations and large companies look tosmall niche businesses for research and development and supplies. TheUKeconomy depends upon a fruitfulpartnership between large and small businesses. Indeed, small businesses produce large economies.

4. The UK has one of the most flexible labour markets in the EU, which has enabled the UK to be oneof only three countries to exceed all three of the EU 2010 employment targets already76. As a consequenceit is no coincidence that the UK has one of the healthiest economies in the EU, which, is strongly supportedby the small business sector.

5. In the last five years, the UK was one of the few advanced economies that came close to matching theeconomic performance achieved by the United States. The UK’s growth rate of GDP per capita outpacedother European countries like Germany, France, Italy, and Sweden, and lagged only somewhat behindAustralia, the United States, and the Netherlands. Only Ireland, Finland, and a number of European andAsian middle-income countries outpaced it significantly.77

6. The UK currently has one of the highest levels of labour force utilisation in the OECD. The UK liesahead of the Continental European countries although behind only Japan and the United States. The UKhas a lower unemployment rate thanmany peer countries, and working hours per employee in theUK againfall between US and Continental European levels. Labour productivity is often seen as the sole measure ofeconomic performance. The success in integrating a larger share of the potential workforce into the economyis an important economic and social achievement which, the UK deserves credit for. However, there is noroom for complacency because this is due in part to the substantial increase in employment in the publicadministrative sector.

7. Flexibility of the labour market determines the speed and ability of business to adapt to economicchange. This is particularly necessary within the SME sector, which, by comparison to big business do nottend to have the same financial resources to weather significant economic changes and thereby rely on thelabour market mechanism to maintain their profitability.

75 Small Business Service.76 OECD Report.77 UK Competitiveness: Moving to the next stage. Professor M Porter and Christain H M Ketels. May 2003.



8. The UK economy has largely been able to endure the global downturn of the last three years betterthan peer countries because of this flexibility in the labour market. This is has been helped by thecomparatively benign conditions which allow self employed and small (1–2 person) companies to start up.Amajor and important exception is the IR35 scheme. This reduces the ability of small businesses to competewith larger ones, and new businesses to compete with established ones. The flexibility which is the mainadvantage for small businesses is lost and some are strangled by this measure. A loss or reduction in labourmarket flexibility would have a significant impact in our ability to prosper in diYcult market situations.

Whether the current degree of flexibility is appropriate or desirable, and, if no, what measures the Governmentshould take?

9. UK business has seen significant changes to employment law in recent years. Almost all these imposerestriction on the freedom of contract and thus reduce flexibility. They have led, to a greater or lesser extent,to greatly increased paperwork, to wider jurisdiction of Tribunals, to more applications to Tribunals, torising awards by Tribunals and thus to apprehension of trouble when considering to increase the staV of asmall business. Small businesses have struggled to keep upwith new and changing legislation. The diYcultieshave been demonstrated by the increase of approximately 40,000 applications to Tribunals since 1997 anda three-fold increase since the early 1990s78. The consequence is a massive use by our members of ouremployment law helpline. We attach the figures for in April 2004 (Annex A). It can be seen that a total of5,186 questions were raised in that month and of these a whopping 1993 were concerned with actual orpotential termination of employment problems. By breaking down the subject matter of calls received weare able to demonstrate the width of enquiry and those areas of regulation which give rise to the greatestproblems.

10. The typical UK small business consists of an owner/manager (who generally works very long hours)who employs a few staV

79. The resources of such businesses are generally focussed on meeting customerdemand in the most eYcient and cost-eVective way. Expenditure for additional, administrative and supportstaV is not something small businesses can aVord. These tasks inevitably fall upon the owner/manager toundertake when not servicing customer demand thereby extending the hours worked. Hence small businessowner/managers have struggled somewhat to cope with the changes to employment law. Employees in suchbusinesses generally add benefit by their flexibility in relation to hours and duties undertaken.

11. Whilst the SME sector has adapted to take on the changes to employment legislation it is clear thatthey have reached saturation point in regard to the amount of employment law that they can take on board.A recent survey of FSB membership demonstrated that the number of businesses to provide all their staV

with a contract of employment was only 40%. They must of course provide terms and conditions. A further12%oVer contracts of employment to some of their staV

80. This backs up anecdotal evidence which, suggeststhat a large number of small businesses consider employment law a daunting prospect which they prefer toavoid by not taking on extra permanent staV.

12. New forms of legislation such as the dispute resolution regulations will cause significant diYcultiesfor small businesses, which, are likely to get caught out on matters of procedural error rather than actualwrong doing. Whilst we welcome the objective of the regulations we are unconvinced that they will addressthe objective and due to their overwhelming complexity may indeed lead to further complications attribunal. We consider that Government must do all in its power to educate employers and employees on thenew regulations and procedures. By contrast the SME sector have coped with the flexible workingregulations that came into force in April 2003 under the Employment Act. These regulations reflect thecurrent flexible practices that exist in most small businesses. We consider these regulations to have been wellwritten granting fairness and flexibility to both the employer and employee respectively.

13. The FSB considers that claims for unfair dismissal set at one year are tolerable. We would not,however, like to see this qualifying period reduced.

14. In regard to the recent review of the Working Time Directive and the opt out from the 48 hourworking week, small businesses need flexibility of the labour market to enable them to cope with the peaksand troughs experiencedwithin the business cycle. For this reason the SME sector has welcomed the 48 houropt out and the flexibility it gives business in enabling it to operate eYciently. Whilst extending the referenceperiod from the current 17 weeks to 52 weeks would enable businesses to cope with the cyclical demands,we consider that this is still insuYcient to enable business to operate eVectively andmeet the competitivenessgoals as set out in the Lisbon agenda. Extra paperwork would be required of small businesses who chooseto opt-out but nevertheless have to keep a record of employee hours over a year’s reference period.

78 Employment Tribunal Service.79 Survey of the FSBmembership demonstrated that themajority ofmembers (57%) employ between one and four full-time staV.“Lifting the Barriers to Growth” 2004.

80 Federation of Small Businesses, “Lifting the Barriers to Growth” 2004.



15. No evidence has as yet been provided as to the negative health eVects of the opt-out on UK workerscompared to continental employees not working under the opt-out. The Commission and EuropeanParliament view has been strongly influenced by the Barnard report which surprisingly did not consult withthe Federation of Small Businesses or any other specific small business representative. No such report wascommissioned in any other member state. The communication from the Commission has also beeninfluenced by the social dialogue in which the FSB is not represented. A more appropriate way to give fulleVect to the second recital of the Directive would be to have a small employer exemption for employers withless than 20 employees, with a right for such employees to opt in to the 48-hour working week.

16. Similarly our members would not wish to see the Agency Workers Directive implemented in a formthat granted equal pay and conditions to temporary workers after 6 weeks. Whilst most businesses paytemporary staV the same or more than equivalent permanent staV they object to the unnecessaryadministrative complexity of oVering the same benefits such as pensions etc. and it is this factor that willdeter them from using temporary agency workers. The directive as originally drafted would be a highlydamaging for flexibility but the amendments made by the European Parliament are satisfactory.

17. Small businesses generally oVer more flexible working arrangements than big business because of themore informal atmosphere within a small business. It is for this reason that the SME sector has found theformalising of employment relations administratively burdensome. Rather than highlight specific pieces oflegislation that have been particularly onerous on SMEs it is more accurate to say that the main obstaclehas been the sheer amount and complexity of employment legislation. A recent FSB survey found that 60%of members were dissatisfied with the complexity of legislation, 59% with the volume, 46% with the rate ofchange, 55% with compliance costs and 54% with the interpretation of legislation81. These figures refer tolegislation as a whole.

18. The FSB feels that no additional employment regulations are necessary bearing in mind the hugevolume of forthcoming employment laws already in the pipe line which are shortly due to come intoaVect namely:

(a) Part III of the DDA 1995, removing the small business exemption (eVective 1.10.04).

(b) The new statutory disciplinary procedures (eVective 1.10.04).

(c) The new tribunal practice and procedure regulations (eVective 1.10.04).

(d) The information and consultation directive (eVective 2005) which, will in due course apply tomedium sized business.

(e) Age discrimination legislation (eVective Dec 2006).

The government has already committed itself to implementing these regulations and without more, thesewill be a huge burden on SMEs. We very strongly feel that no further legislation is necessary.

19. The FSB considers that the way in which EUDirectives concerning employment law come into forceis most unsatisfactory. It originates in the so-called Social Dialogue in which the FSB is unrepresented. Itis geared to the views and conditions of large businesses, to internationals and public sector trade unions.It frequently gives dispensations to collective agreements, which small businesses cannot take advantage of.Large businesses and public sector employers have substantial human resource departments which givethem an increasing competitive advantage. The impact on small businesses, despite the eVorts of the FSBand other small business organisations, is usually ignored. Although the UK probably has the most flexiblelabour market in the EU, it has other global competitors who are more so. UK flexibility is inevitablyreducing under the weight of legislation. Althoughmuch of this comes from the EU,Whitehall has a culturaltradition of gold-plating when transposing EU directives.

20. In conclusion, the flexibility of the UK labour market is one of our most important assets. Wherepracticable flexibility should be increased. The current degree is not appropriate because:

(a) The legislation is too complex to administer. A major review should be undertaken in order toexamine how it can be simplified.

(b) The legislation is geared to large, frequently international businesses and public sector bodies.Inadequate consideration is given to its eVect on small businesses and their employees in theprivate sector. Small business exemptions should be applied where the legislation is inappropriateeither to the mischief at which it is aimed or the needs of employers and employees alike.

(c) The legislation changes too often. There is hardly a pause without a new or amended regulation,causing unproductive time wasting in understanding it, avoidable costs in implementing it, andmountains of paper and paperwork. All of which is demonstrated by the use made of our legalhelpline.

81 Federation of Small Businesses, “Lifting the Barriers to Growth in UK Small Businesses, 2004”.



Annex

FSB CALL REPORT PERIOD FROM: 01/04/2004 to 30/04/2004

Category: Calls:

EmploymentAge discrimination 4Care standards issues 5Children & Young Persons 15Constructive dismissal 66Contracts of Employment 986Data protection 13Directors 8Disability discrimination 83Disciplinary action 1,258Dismissal 282Employers liability 55Employment status 180Equal Pay 3ET claims and procedures 125Fixed term contracts 3Flexible working 17General 32Grievances 96Health & Safety 48Holiday queries 181Immigration and work permits 18Incapacity 266Information and consultation 6Lay-oVs 12Left message 239Maternity 107Minimum Wage 28Mobility 1New Legislation 9Non-employment 88Parental leave and family 17Part-time workers 8Paternity and adoption leave 11Pensions 6Performance reviews 31Race discrimination 3Recruitment 8Redundancy 407References 14Restrictive covenants 16Retirement 10Sex discrimination 22SSP 110Tax query 13Temporary and agency workers 3Trade Unions 2TUPE 102Unfair dismissal 58Wages claims 45Working Time Regulations 44Wrongful dismissal 22

Totals: Employment 5,186



APPENDIX 10

Memorandum by the Graphical Paper & Media Union

THE GPMU’s EXPERIENCE OF UNION AVOIDANCE AND UNFAIR LABOUR PRACTICES

Introduction

The GPMU supports the TUC submission made to the Committee on Employment Regulation which,in line with the terms of reference of the Committee, is much more general. This submission is intended tocomplement that of the TUC by drawing attention to specific concerns that the GPMU has in regard theactions of some companies who are hostile to any idea of trade union recognition.

Since June 2000 when the recognition procedure introduced by the Employment Relations Act 1999 wasbrought into force the GPMU has managed to achieve recognition in over 120 work places. The vastmajority of these agreements have been reached by voluntary means, or with the assistance of ACAS. Inaddition the GPMU has a detailed knowledge of CAC procedures, which we have had to use on a numberof occasions. Arising from this involvement we also have experiences of union avoidance and anti-uniontactics and campaigns used by employers in order to pressurise their workers against joining a union, orsecuring union rights at work and otherwise thwart legitimate union organising campaigns, where workershave freely chosen to join our union and wish to negotiate with their employers the right to unionrepresentation and collective bargaining at the workplace.

We have seen at first hand how employers use US styled union avoidance practices to deny workers avoice in the workplace and how they have not only aVected the GPMU as a union but have been verydetrimental to individuals who have suVered stress, through both intimidation and loss of job just for tryingto uphold their rights to be represented by a trade union.

The provisions of the current Employment Relations Bill will address in part some of these issues; theclauses that cover co-operation with the ballot; reasonable access; the outlawing of inducements to workersnot to attend access meetings; the outlawing of coercion of workers to disclose how they voted; dismissingor threatening to dismiss workers; and the use of undue influence.

However, it will be down to the Secretary of State to outline what the penalties will be for breaking thenew law for these unfair practices.

The GPMU wants to put on record to the Trade and Industry Committee its experience on the groundand therefore stress the importance of making sure that the practices used by the companies listed below donot go unchecked.

The GPMU also makes some further proposals that should inhibit such practices in the future.

Many of the union avoidance techniques currently being used in the UK emanate from the USA. Someof these tactics are listed below:

Typical Anti-union Tactics Experienced by The GPMU are:

— The threat of closure of the plant/business or part of it, if the union gets recognition includingmoving work to another part of the country or to another country.

— Individual job loss threats.

— Actual sacking of trade union representatives and activists.

— Pay and promotion inducements for those who denounce the union either openly or workingagainst the union or simply by not joining.

— Holding a company ballot in advance of an independently conducted ballot.

— Complete denial of any access to a union including preventing leaflets being given to theemployees.

— Holding anti-union meetings at the workplace.

— One on one meetings, lead by supervisors who are given the task of breaking union organisationin their department, sometimes with their own employment under threat.

— Proposing changing to the bargaining unit—either splitting it or combining with it with others ofdiVerent trades.

The second part of this document will provide the Committee with examples of how these tactics havebeen used against the GPMU. The final part will concentrate on measures, further to those in theEmployment Relations Bill currently going through Parliament, that the GPMU believes should be takento prevent anti-trade union practices taking place.



Examples

Newspapers

The Daily Mail and Trust Group (NorthcliVe Newspapers) are a large national company with many sitesacross the UK. The GPMU along with the NUJ have members in many of these sites. They steadfastly useunion avoidance and anti union techniques to deny their employees union recognition and discourage unionmembership.

As a result of GPMUactivities through the involvement of laymembers at the place of their employment,the company have initiated and carried out a systematic anti union campaign on at site level orchestratedat group level.

There are a number of examples of anti-union practice within NorthcliVe Newspapers and some are setout below.

Stoke Sentinel

Although the company de-recognised the union in the late 1980’s many employees kept their unionmembership. However, union members were put under continued pressure to withdraw from unionmembership.

In February 2000 a leading GPMU lay representative was dismissed, and another was made compulsoryredundant, we believe to “set an example” to other workers.

GPMU members were concerned about being overlooked for promotion/better jobs and many felt thattheir jobs were at risk if they continued to be members of the union.

When the GPMU applied to the CAC for union recognition the company immediately set up a staV

association. Our members were then bombarded with anti-union material, and put under continualindividual pressures from the company to withdraw from union membership.

They were told that GPMU recognition would result in the loss of contract work because customerswould not place contracts with a union recognised plant and that future investment would not happen. Ourmembers were also informed by the company that if they voted for GPMU recognition, a decision wouldbe taken at group level to close the plant andmove the work to one of the other Daily Mail sites where therewas no union involvement.

We did hold a ballot under the auspices of ACAS, but because of the anti-union actions by the companywe lost the ballot.

The Printworks (Gloucester) Ltd

At the same time as theGPMUwasmaking an application to CAC for union recognition, the senior shopfloor representative who was canvassing union support within the workplace, was dismissed. Thisrepresentative subsequently won an employment tribunal award for unfair dismissal on the grounds of tradeunion activity.

The MD and his management staV continually intimidated the workforce in an attempt to pressure theminto not joining the union. Workers had to fill in questionnaires asking if they were members of the union.Those that were union members were then “invited” into the manager’s oYce and told that the companywas prepared to make people redundant in order to keep the union out.

When the case went before the CAC panel the company produced 13 letters signed by employees, whowere alsoGPMUmembers, indicating that they did not support theGPMU claim for recognition, and wereresigning their union membership.

Five of these members subsequently wrote to the GPMU explaining how they had been coerced by thecompany into signing them. They were prepared for us to forward these letters to the CAC, however,because the CAC would be obliged to copy them to the company we decided not to.

The GPMU subsequently lost the ballot for union recognition.

Swansea Evening Post

The GPMU approached the company to discuss voluntary recognition and subsequently lodged a CACclaim. Our senior rep with a flawless work record was dismissed.

Two women members said they were prepared to take on the union representative role. However theywere subjected to continual intimidation and harassment and were forced to resign their union positions.

Given the approach taken by the company and the experiences at Stoke and Gloucester we felt that wehad no other option but to withdraw our CAC claim.



West Country Design & Print

In this case the company used promotion in an attempt to thwart union organising.

When the GPMU submitted its CAC claim, the company promoted and increased the salaries of certainGPMU members and one of our key activists was oVered promotion and transfer to another site.

Before the Admissibility Hearing with the CAC the company organised a petition against unionrecognition. They held a meeting of the workforce and also had one-to-one meetings with the workers, afterwhich a number of GPMUmembers resigned their union membership and signed the petition. Our activistshave also reported that one worker who was oV sick was visited at home so that they could sign thecompany petition.

The company also produced pro-forma letters for the workers to sign. The company acknowledged thatthe letters were drawn-up by the company and they provided both the letters and the petition to the panel.

The panel gave us the benefit of the doubt and declared the claim admissible. However we lost theBargaining Unit decision and as a result of that decision and the company’s actions we withdrew the claim.

Bristol Evening Post & Press

We have not at present submitted a recognition claim to the CAC for Bristol, but we are in the processof mapping the workplace and organising our campaign.

The company has already created a climate of fear at the site, many of the workers that the union has hadcontact with tell the same story, “the company will get rid of you if you join the union”.

The company has since closed one of the departments and announced a review of all sections, which hasled to fear of job losses and resulted in a reduction in union activity within the plant.

Most recently there has been a restructuring programme within the print department leading toredundancies and enhanced payments for our two main activists.

Commercial Printing and Packaging

Red Letter, Leeds

Red Letter is a direct mailing company owned by the St Ives Group since 1997.Many, if not most, St Ivescompanies have a long history of collective bargaining with the GPMU and its predecessors.

Red Letter, together with all other companies on the Bradford site was set up under the umbrella ofHuntersArmley, Leeds, as non-union following the 1993wages dispute.Many of the originalmanagers wereat the Bradford site as St Ives employees.

During the campaign leading up to the access period, the GPMU’s only access to Red Letter employeeswas standing outside a site gate used by some 400 employees from six diVerent companies.

Union members attempting to recruit inside advised us that they experienced constant harassment andwe have examples of anti-union propaganda issued to members.

A campaign of intimidation was carried out, mainly by supervisors, evidenced by two written and signedtestimonies from two of our members. The first denies upgrading specifically on the basis of unionmembership; the second suggests job availability to an employee’s relative providing she drops her GPMUmembership. Our representative, whilst being shown a room set aside for “surgeries” during the 20 dayaccess period by the Human Resources Director and plant manager, was stopped in the corridor and askedwhether “this was what she really wanted”. On replying “yes” she was told: “No XXX, is this really whatyou want”. Our rep would be prepared to make a statement to this aVect. Similarly, once the GPMU hadbeen through the CAC process and succeeded in winning the ballot, the company asked those in thebargaining unit who didn’t want union collective bargaining to sign forms expressing that wish.

Consequently, clause 2 of the final agreement identifying the bargaining unit carries the sentence: “Thoseemployees who have elected to negotiate their terms and conditions of employment individually are notcovered by the agreement”. Consequently, the concept of collective bargaining has been undermined.

Amazon.co.uk

In April 2000, the GPMU approached Amazon with a view to gaining access to workers within thecompany. In June 2000 GPMU local oYcials met two HR managers who made it quite clear that Amazonwould not be allowing the GPMU access to the workforce.

In August that year the GPMU started leafleting Amazon workers from outside the company, whichresulted in some workers joining the GPMU. Membership took oV in December that year and reached apeak of about 100 by March 2001 when the GPMU believed it was approaching the 50% level. Again we



asked Amazon management to meet us. Press interest in this was growing and in the summer of 2001 theunion met with Amazon management three times where they told us they were now willing to cooperate ina ballot of the workforce on union representation.

Meanwhile back at the distribution depot Amazon’s anti-union machinery (based on the practices usedby the company in the USA) was clicking into action. Besides pay rises and carefully selected promotions,there were also dismissals. In May and August our two most prominent union reps were sacked. Thecompany then improved some conditions and took the first steps towards setting up a staV association.

The company then held its own ballot denying GPMU any involvement or access to the workforce. Priorto the ballot taking place the management held interviews with each individual employee and meetings withgroups of workers to ask why they needed a union and tomake sure they were aware of the company’s viewson union membership. In addition the company distributed a sample ballot paper to make it clear howemployees should fill it in. On the day before the ballot the workers were issued with T-shirts bearing thewords “Tell the GPMU yesterday’s gone” and “Vote NO”.

Consequently the company won this ballot.

Europackaging UK Ltd.

Euro-packaging Ltd employs over 200 people at its Birmingham Sparkbrook site, 175 are GPMUmembers. Urdu is the first language of many of them and some speak only Urdu. The GPMU sought tonegotiate a voluntary recognition agreement but the company categorically refused.

Then the company began to issue redundancies notices, whichwere predominantly targeted at trade unionactivists. Appeals hearings against dismissal were diYcult as the company refused translators other thancompany management.

The company then began to move machinery to other sites and threatened a major redundancy program.

The refusal to negotiate a recognition agreement with the GPMU and at the same time the bullying andintimidation of the employees by the company resulted in a ballot for industrial action. The ballot wascarried with 131 votes in favor with one vote against.

The company then threatened more redundancies and the possible closure of the Sparkbrook site unlessworkers returned to work and accepted all company ‘proposals’ without negotiation.

They also brought in temporary workers to cover the work whilst the workforce was out on strike.

The combination of the resolve of the workforce to remain solid in their industrial action and thesupportive actions of the GPMU Parliamentary Group at Westminster made the company agree tonegotiate a voluntary recognition agreement with the GPMU.

John Brown/Derry Print

John Brown and Derry Print a commercial printers in Nottingham purporting to be two separatecompanies operating from the same premises. The employees were paid by the two diVerent companies, butthey not only shared the same production area they also shared the same machines.

The GPMU has a majority membership amongst the production workers. However, if they were treatedas two companies separate companies they would have been below the 21 employee threshold and thereforewould have fallen outside of the statutory recognition legislation. Also with the combined workforce we hadover 50% of the bargaining unit and therefore a right to automatic recognition.

The companies continued to maintain that they were completely separate organisations, however, theCAC concluded that the companies were “associated”.

This is a case where almost each stage of the CAC procedure has been used, with the company failing toimplement CAC decisions by simply ignoring them. The CAC wrote to both the company and the GPMUsaying it would hold a hearing, but the company did not attend. The CAC decided to specify a legallybinding bargainingmethod but the company did not respond. TheGPMUhas twice written to the companybut they have not replied.

The company has completely ignored the decision of the CAC and the only course of action open now isan application for contempt of court. This case has highlighted the loopholes that are open to companiesthat wish to frustrate the legislation.

Opasco Ltd. Crawley

As soon as the GPMU started to recruit members at this company the employer began to threatenredundancies and allegedly threaten anyone who joined the union with violence.

When the CAC case was lodged, the employer distributed a seven page anti-union document to theworkforce. Although the GPMU was granted access meetings, the employees were warned not to go andwere oVered time oV instead of attending the GPMU access meeting.



During the postal ballot the employer attempted to collect ballot papers from people’s homes anddelivered them to the ballot box.

The GPMU subsequently lost the ballot.

Lonsdale Business Forms

Following an organising campaign within this company GPMU membership reached over 60% of therelevant bargaining unit. The union approached the company to meet to discuss recognition and thecompany has refused. The company also begun their anti-union activities, threatening closure of thebusiness and immediately prior to the ballot they wrote to all employees informing them that if the vote forrecognition of the GPMU was carried, that Lonsdale would close the company.

Anson Packaging, Cambridgeshire.

Whilst the GPMU was still building membership before lodging a CAC case, the company held its ownballot, giving no access or opportunity for the GPMU to put its case. The company unsurprisingly won theballot and could have used the result in evidence to the CAC had we continued.

Rocor, Cambridgeshire.

Similarly here the company held a ballot while we were building membership but denied us any access.The company won the ballot but the strength of our membership allowed us to finally reach a voluntaryagreement.

RITRAMA (UK) LTD

Ritrama (UK) Ltd is a manufacturer of ‘point of sale’ material for the retail industry. At the time of ourrecognition campaign the Chairman was Dr Len Evans who started the company. He subsequently sold itto a group based in Italy with plants elsewhere in Europe. He remained in situ at the Manchester plant anddealt with our claim for recognition throughout.

Whilst there is much ‘anecdotal’ evidence of bullying and intimidation in the workplace, with ourselvesonly able to rebut accusations with our members whilst the non-members’ reasoning depended only onwhether or not they took a leaflet from us, the only concrete evidence that can be supplied is that on the dayof the ballot each employee received in the post a letter signed by the Italians Head of the Group implyingthat a vote for union recognition would necessitate a serious examination of investment policy in the UK,specifically the purchase of a £3 million machine.

Cromwell Press, Wiltshire.

This is a typical example of the problems we encounter when trying to organise within companies.

Each time theGPMU leafleted the workers, the manager would come out and shout at the organisers andtry and ensure no leaflets were taken by his staV. Several times he called the police. He also warned staV thatthey would be sacked if they joined the union. Our members within this company have advised us that thelevel of fear in the workforce is at such a level that it would be impossible to win a recognition ballot.

Recommendations

1. Access during a ballot period

The GPMU believes that access should not just be allowed during the ballot period but should beextended to allow the union access from the time that the application is accepted by the CAC panel. At thepresent time the employers have unrivalled access to the workforce to run Union avoidance and use unfairlabour practices and campaigns.

2. “StaV Associations”

At present an employer can reach a voluntary agreement with a staV association without any test ofsupport, relating to any bargaining unit they chose, without any need to justify why they have chosen thatparticular bargaining unit. This would then block a recognition application by an independent trade unionfor all parts of the company covered.

There is no provision for the agreement with the non-independent union to cover pay, hours and holidays,as there is under the statutory regulations for independent trade unions. As a result the staV associationagreement could merely cover grievance and disciplinary issues.



Although there are provisions in the recognition legislation to have staV associations de-recognised, inpractice these provisions are unusable. This is firstly because the employer determines the bargaining unitwith no provision for challenge and because the application has to be made by an individual and cannot bemade by an independent trade union. Employees could be risking their jobs if they attempted to pursue aclaim of de-recognition. In addition there is no right for the trade union to have access to the employeesduring a de-recognition ballot.

To date these provisions have not been used successfully.

3. Appropriate Bargaining Unit

A requirement of the bargaining unit is the need for it to be “compatible with eVective management”. TheGPMU experience is that in determining the bargaining unit; the employers attempt to widen the unit toinclude not only other categories of workers but also diVerent geographical sites. The sole aim in thisapproach by companies is to dilute union membership and support and is not related to eVectivemanagement.

4. Criteria used for ordering a ballot

When the legislation was first being introduced, the trade unions were led to understand that where it wasdemonstrated that a union had 50%! membership there would be no requirement for a ballot. Howeverfollowing requests from the CBI additional qualifying conditions were inserted into the legislation.

The GPMU believes that the government should repeal these conditions and where a trade union has thenecessary 50%! this should be suYcient to grant recognition without a ballot.

5. Periods for Negotiation: 20 days should be reduced to 10

The schedule sets out periods of 20 days between panel decisions. The purpose of this time allowance isto facilitate the possibility of a voluntary agreement being reached either at the next stage of the claim or toconclude a voluntary agreement on recognition itself. While the GPMU acknowledges that the governmentmay have genuinely felt that employers would in the spirit of the recognition legislation have used these timeframes constructively, the GPMU experience is diVerent.

The practice has been that the employers in many cases use these time frames and any extension that theCAC are prepared to give, to undermine the trade union application, to intimidate the workforce and enactanti-union activities. During this period the trade union has no access to the workplace and is unable toprotect members against hostile actions of the employer.

As a result of our experiences the GPMU calls on the government to limit the 20 day periods specified inthe legislation to 10 days with extensions to be given only when both parties agree there is a genuine needfor an extension. Our experience shows that if all the stages of the CAC procedures are used by a companyto try and thwart a union recognition application the total time taken can be in excess of six months.

6. Re-admissibility test

The GPMU is also concerned with time restraints imposed by the CAC when a re-admissibility test isrequired.

We have been required during the course of seven days to increase membership and/or run a petition toshow increased support, with no access to the workplace. However, at the same time the employer with fullaccess to the workforce has run an anti-union campaign in order to undermine support and have theapplication invalidated.

The GPMU does not consider either the time limit imposed or the lack of access and the pressure underwhich the employer put workers, to be acceptable.

7. The requirement of a 40% “yes” vote

The GPMU believes that the 40% yes vote is an unnecessary and unfair requirement that is not usedelsewhere. In all other elections known to the GPMUan abstention is treated as a non-vote not as a no vote.It cannot be determined that those who do not vote do not support the trade union claim.

8. Collective Bargaining Method

Although the legislation imposes a collective bargaining procedure on the parties, the GPMU has foundthat some employers are unwilling to bargain in good faith. Employers attempt to undermine unionrecognition in a number of ways:

— by refusing to negotiate;



— attempt to enforce diVerent pay bands and conditions; and

— stating that the trade union can only negotiate at one point during the year; and that for the restof the year the employers can change terms and conditions including pay.

The GPMU has had experiences where there has been a need to return to the CAC for advice followingan employer’s refusal to negotiate or discuss any of the three statutory issues. We believe these employersare biding their time, and will apply for de-recognition as soon as the legislation allows.

In addition the GPMU believes that where statutory recognition has been awarded that training andpensions should be part of the statutory bargaining agreement.

9. Small businesses and trade union recognition

TheGPMUsupports the submissionmade to theCommittee byKDEwing andAnnHock “EmploymentRegulation, Small Businesses and Trade Union Recognition: A Two Tier Workforce”. This providesevidence that trade union recognition law should be extended to companies with fewer than 21 employees.The GPMU is in full agreement and supports the arguments put forward in this document.

APPENDIX 11

Memorandum by the National Group on Homeworking (NGH) and Oxfam GB’s UK Poverty Programme

NGH and Oxfam would like to ask the Select Committee to consider the case of the employment statusof UK homeworkers as part of its inquiry into employment regulation, and this submission sets out someof the issues that homeworkers face.82

In the UK, there are hundreds of thousands of homeworkers, or outworkers, who manufacture goods athome in the same way as other workers manufacture goods in a factory83. These workers, primarily womenandmany from an ethnicminority84, produce goods acrossmany diVerent sectors, including textiles, printedand paper products, electronics, plastics and rubber, and undertake many diVerent tasks, includingtrimming, assembly, packing, machining, soldering and sewing.

Homeworkers provide manufacturers and their suppliers and sub-contractors with a much more flexiblelabour force than an on-site factory labour force might. Manufacturers are able to draw on an army ofworkers when they have a tight deadline to meet, but often have no commitment to employing theseindividuals when order levels are low and there is no work. In the current global trading climate, in whichproducers are under enormous pressure from retailers to hold costs as low as possible, this flexibility isvaluable in order to win orders. In some ways, this “flexible” employment can suit the worker, who oftenlacks alternatives to earn a livelihood. For example, she may have caring responsibilities that make workingfrom home convenient. However, it is essential that these workers have equal access to the same protectiveemployment rights aVorded to on-site workers to protect homeworkers (and other types of worker) fromunscrupulous employers, given the competitive pressures in modern supply chains.85

SinceOctober 2004, homeworkers have been entitled to the full level ofNationalMinimumWage (NMW)for their work, even if, as is usually the case, they are paid by the number of pieces produced. The new rulesrequire employers to show, by means of time and motion studies (or other tests) that a fair piece rate systemis in place and therefore should be able to show how their homeworkers are able to earn the NMW for thehours worked. However, NGH and Oxfam believe that it is unlikely at present that many of homeworkerswill dare to claim their entitlement to the NMW.

Homeworkers are not necessarily classified as employees of the company, which supplies their work. Ina recent case, homeworkers who trim rubber products in Hampshire had been dismissed as a result ofasserting their statutory right to be paid the NMW. An Employment Appeal Tribunal ruled in September

82 This submission is based on chapter 3 of the briefing paperMade atHome, published inMay 2004 and co-produced byOxfam,NGH and the TUC http://www.oxfam.org.uk/what—we—do/issues/trade/bp63—homeworkers.htm

83 NGH estimate that there are possibly over a million homeworkers in the UK, and theDTI estimate that over 100,000, at least,are entitled to the National Minimum Wage.

84 Adequate statistics are not available about the ratio of men and women undertaking homework. Research suggests that upto 10% of homeworkers may be men (Huws 1994: 4 and Felstead et al., 1996: 91). Enquiries to NGH’s advice line suggeststhat the number of men carrying out homework may be growing, particularly in areas of industrial decline (for example, inSouth Wales) and in rural areas, where there is little alternative employment and lack of transport.There are also problems with statistics on ethnic minority homeworkers. It is likely that the figures provided by Huws of 46%(Huws 1994: 5) and Felstead of 54% (Felstead 1996: 91) are too high, due to their sampling procedures, which focused onurban areas with high ethnic minority populations. Ethnic minority homeworkers are also more likely than the rest of thepopulation to work in manufacturing homework. For example, Labour Force Survey statistics suggest that in 1994approximately 70% of female Pakistani and Bangladeshi homeworkers were involved in the production of textiles, clothing,and footwear. The remaining 30% are engaged in other craft-related occupations (Felstead and Jewson 2000: 79). InAustralia,homeworkers are often Vietnamese women, and in India they are often women from Muslim minorities.

85 For more details about these pressures, see “Trading Away our Rights” published by Oxfam in February 2004. http://www.oxfam.org.uk/what–we–do/issues/trade/trading–rightts.htm



2004 that they should not be considered to be employees86. As a result the homeworkers who had all workedfor the company for over five years were not then able to make a claim for unfair dismissal and/orredundancy. When the NMW came into force, many workers, such as these, who had previously workedunder a verbal contract, had to sign a written contract. In their written contract, the Hampshirehomeworkers’ employer deemed that the homeworkers were casual, self-employed workers, despite someof them having worked for the same sole employer for over 10 years. The homeworkers signed the contractbecause they would have lost their work if they did not. As a result, homeworkers, who had successfullyclaimed their right to be paid the National Minimum Wage, had no legal comeback when their employersubsequently stopped giving them work, since, being “self-employed”, they could not have been maderedundant or have been dismissed.

Homeworkers, such as theHampshire rubber trimmers, are not running their own businesses on their ownaccount. They are being paid a wage for a task completed in their home under instruction by the company.Most do not have any other “employer”—in fact one of the Hampshire workers was asked by her employernot to take on any other paid employment87. They are integral to the company’s production line, makingup a third of the company’s entire workforce, and they do not share in the profit of the company that theywork for.

The government has yet to decide how to respond to its consultation on employment status issues,undertaken over a year ago, which included the employment status of homeworkers. Unless the governmentchanges the law to give homeworkers employment status, just as piece-rate workers in factories haveemployment status, the entitlement to the NMW will be meaningless for many homeworkers. Theiremployers know that they can continue to underpay their workers illegally because any worker who claimscan be dropped from the payroll. We are asking the government urgently to address this anomaly.

UK Poverty ProgrammeOxfam GB

APPENDIX 12

Memorandum by the National Outsourcing Association

1. Introduction

This document contains the response of the National Outsourcing Association (“NOA”) to the House ofCommons Trade and Industry Committee’s inquiry into UK employment regulation.

The NOA is an organisation which represents the interests of businesses which have an interest in theoutsourcing of services, including both businesses outsourcing certain of its functions (referred to in thispaper as “transferors”), and the service providers which are engaged to provide those services (referred toin this paper as “new service providers”).

The response is based on the following premises:

(a) The competitiveness and eYciency of theUK economy is strengthened by the practice of outsourcing.Outsourcing assists undertakings in concentrating on the core areas of their business, whilst allowing thirdparties to provide non-core services (services which will often be the specialist function of that third party).

(b) UK employment regulation should not unduly restrict or discourage the practice of outsourcing.

(c) The aspect ofUK employment regulationwhich has the greatest impact on outsourcing arrangementsis the, so called, EC Acquired Rights Directive 77/1 87/EEC (“ARD”) as implemented in the UK by theTransfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”).

(d) It is accepted that the ARD and TUPE will continue to operate in some form similar to their currentprovisions, and that the UKGovernment is restricted from derogating from the requirements of the ARD.

(e) The operation of TUPE has created many legal and practical problems and uncertainties. Thoseuncertainties create significant diYculties for undertakings when negotiating and executing an outsourcingarrangement. Those diYculties have the eVect of discouraging some undertakings from proceeding withoutsourcing arrangements and create an inflexible workforce. Resolution of the problems, and clarificationof the uncertainties, would improve flexibility in the context of outsourcing, which the NOA considers isbeneficial to the eYciency and competitiveness of the UK economy.

(f) This paper outlines some of the key practical problems and uncertainties and the NOA’s view as tohow they may be addressed. (It is to be noted that the Government is in the process of revising the TUIPEregulations and it is possible that some, although not all, of the concerns outlined in this paper will beaddressed by those amendments.)

86 Appeal No UKEAT/0150/04/DM.87 In this case as a supermarket checkout assistant.



2. The Application of TUPE to Outsourcing Arrangements

One of the most significant diYculties facing undertakings considering an outsourcing arrangement isdetermining whether TUPE applies to the particular proposed outsourcing arrangements. If it does, allemployees in the business being outsourced will transfer to the new service provider, if it does not, noemployees will. The question is, therefore, often of fundamental importance to the nature of thearrangement, yet the answer is rarely categorically clear. The case law on the question has been inconsistent,often providing diVerent answers to factually similar scenarios, and oVering little assistance to undertakingswhen determining whether their proposed arrangements trigger TUPE.

The NOA would greatly welcome certainty in this area.

The Government issued, for the purposes of public consultation, proposals for the reform of TUPE inSeptember 2001 following the amendment of the ARD. In those proposals, the Government sought viewson providing for the blanket application of TUPE in all arrangements involving service provision change,subject to a small number of carve-outs. These proposals go much further than the ARD.

TheNOAdoes not consider that TUPE should be extended further than is required pursuant to theARD.The NOA considers that a blanket application of TUPE to such situations would only be practical if, as theGovernment proposes, carve-outs are introduced. However, the NOA believe that the definition of therelevant carve outs will inevitably lead to further uncertainties and will not resolve the current diYcultieswhich undertakings face. The NOA would encourage the Government to consider further, ways in whichcertainty can be achieved without extending the scope of TUPE.

3. Requirements to Provider Identical Terms and Conditions of Employment

Under the ARD and TUPE, a new service provider is required to provide identical terms and conditionsto employees who transfer to it under TUPE. In practice, it is simply not possible in some cases to do so andthe lack of flexibility will often force a new service provider into a position where there is no option but tobreach these requirements. The NOA would welcome guidance from the Government as to how itanticipates undertakings should deal with these very real problems, whilst complying with their legalobligations. The following are some examples:

— Stock-related benefits. The provision of stock-related benefits, such as stock options and restrictivestock, to employees in the UK is commonplace. The value of those benefits is tied to the value ofthe employers’ business (reflected in their share value). The aim of the benefit is to tie theemployees’ interest to the success of the employer, thereby motivating the employees to worktowards the success of the employer’s business. When an employee transfers to the new serviceprovider, it is neither practical nor sensible for the benefit to be continued to be tied to thetransferor’s share value. In some cases the new service provider may have in place its own stock-related benefits that can be provided to the employee. However, such a replacement will constitutea breach of TUPE and give the employee the right to bring a claim for breach of contract. Theprovision of similar benefits is not suYcient under TUPE. In other cases, the new service providermay simply not have a mechanism to provide the same benefit.

— Benefits provided through insurance schemes. A number of benefits commonly provided toemployees are provided under insurance schemes provided by third parties, such as private healthinsurance and long-term disability insurance. Although often similar, the exact terms andconditions of the policy will vary. The only way of ensuring that the new service provider exactlyreplicates the benefits is to take out an identical policy. However, commonly the new serviceprovider will have its own schemes in place and it would not be commercially viable to adopt anew policy for a limited number of staV, as well as the administrative ineYciencies of runningadditional policies. It is more sensible for an employee to join the new service provider’s existingschemes. The TUPE Regulations do not permit that to happen.

— Bonus and Commission Schemes. Often, bonus and commission schemes will have provisions thattie the value of the benefit to the financial success of the employer in a particular period. It isimpractical andmakes little sense for the employee’s bonus following the transfer to be determinedin accordance with the transferor’s performance, rather than the new service provider. Howeverthat will be the eVect of TUPE in many cases.

— Collective Agreements. If an employee’s terms and conditions are determined by collectivenegotiation between a union and the transferor, it is possible (if that is a provision in theindividual’s contract of employment), that following the transfer of employment to a new serviceprovider, that the employee’s terms and conditions will continue to be negotiated between theunion and the transferor, notwithstanding the fact that the transferor is no longer the employer.The result is that the new service provider has no control over the terms and conditions of its ownemployees.

— Restrictive Covenants. Restrictive covenants create particular problems. Depending on thedrafting of the particular restriction, it is possible that a restrictive covenant whichwas enforceableby the transferor against an employee, loses its enforceability upon transfer either because itsconstruction does not make sense when interpreted in the light of the new circumstances, or



because in the light of the new circumstances it becomes too wide to be enforceable under UK law.its construction makes no sense in the light of the transfer. Moreover, an attempt to agree newrestrictive covenants with the employees following transfer will be void under TUPE as a variationto terms and conditions. Therefore, the new service provider can be left without any protectionagainst competition and/or solicitation in respect of transferring employees.

4. Inability to Harmonise Terms and Conditions of Employment

The NOA accepts that the ARD and TUPE aim to ensure that a transfer of a business in which they areemployed does not detrimentally aVect an employee’s terms and conditions. In practice, a new serviceprovider will often benefit from harmonising some or all terms and conditions of its employees, includingthose acquired under TUPE.

TheNOA respects the fact that an employer should not have the right to impose new terms and conditionson an employee unilaterally. However it is often the case that an employee is happy to consent to changesto their remuneration package. Often, the new service provider will propose that certain existing benefits arereplaced with diVerent benefits that it already has in place, with no overall reduction in the value of thepackage.

However, even if all parties consent to the changes, such changes are void under TUPE (although it maybe the case under existing law it is possible tomake such changes if the changes are for an economic, technicalor organisational reason entailing changes in the workforce, but that will not often be the case and can raiseother diYculties).

The NOA considers that the parties should be free to make such changes if the parties are in agreementconsistent with the fundamental concept of freedom of contract under UK contract law. If it is deemednecessary, there are ways in which the interests of the employees can be safeguarded, such as providing thatthe eVect of the changes must be clearly explained, and that the employer must be given a reasonableopportunity to consider this.

The NOA welcomes the Government’s proposal to amend TUPE to make clear that changes which aremade to an employee’s terms and conditions of employment for an economic, technical or organisationalreason entailing changes in the workforce (an “ETO” reason) are valid. However, the meaning of the term“ETO” reason is uncertain, and almost certainly does not go far enough to permit a reasonable and sensibleharmonisation.

5. Occupational Pension Schemes and Related Benefits

TUPE does not currently apply to occupational pension schemes. The NOA would not welcome anyextension of TUPE to cover such schemes.

There have been a number of recent cases which indicate that certain subsidiary benefits often providedby an employer through the medium of a pension scheme policy, such as certain early-retirement andredundancy payments are covered by TUPE despite the fact that the underlying policy is not. That positionappears to ignore the reality that the collection of benefits are provided as a package and that the componentparts will not be commercially available separately to a new service provider at commercially viable rates.This is particularly the case in relation to early-retirement benefits: in practice it may be impossible for thenew service provider to make appropriate provision.

The cases are also unclear as to exactly which subsidiary benefits are covered by TUPE creating diYcultiesin complying with TUPE obligations.

The NOA would welcome a legislative reversal of those cases or, at least, greater clarity, by way ofGovernment guidance, as to what benefits are covered.

6. Statutory Indemnities

Under the current TUPERegulations, a new service provider that inherits employees as a result of TUPEalso inherits all liabilities in respect of those employees. Often those liabilities will have been caused by theunlawful acts of the transferor such as: personal injury claims arising at work; breach of contract; unfairdismissal claims; and discrimination claims etc.

The NOA respects the fact that TUPE strives to protect employees in these circumstances and does notpropose reducing that protection. However, the allocation of liability between the transferor and the newservice provider in such circumstances is often inequitable.

Undertakings experienced in negotiating such arrangements will often address the issue in their contracts,whether by adjusting the price of the contract or by appropriate indemnities in the agreement. However, inmany circumstances the parties will not do so, either because they are not suYcientlywell advised, or becausethey fail to identify that the arrangements trigger TUPE.



In order to address that issue, the NOA would support the introduction of statutory indemnities, whichwould apply unless the parties agreed otherwise. The indemnities would provide that a new service providerwould have a statutory right to bring a claim against a transferor in respect of any employment-relatedliabilities it inherits and which have arisen out of acts or omissions of the transferor prior to the date oftransfer. It would be essential, however, that the parties have the ability to contract out of those indemnitiesand determine their own allocation of risk. The provisionwould act as a safety net rather than as a restrictionon the parties’ ability to negotiate freely with each other.

7. Obligation to Inform and Consult

Under TUPE, a transferor has an obligation to inform representatives of employees who will transfer aspart of an outsourcing arrangement about certain details regarding the proposed transfer. In addition, thetransferor has an obligation to consult with employee representatives about any transfer-related measureswhich the transferor or the new service provider envisage taking in respect of their employees.

The existing TUPE regulations are not clear as to when such information and consultation should takeplace and determining the appropriate time often causes diYculties. The Regulations say that they shouldtake place “long enough before a relevant transfer” to enable consultation to take place.

A particular problem that arises in the UK is that since many employers in the UK do not already haveformal information and consultation bodies set up, transferors need to undertake elections amongst allaVected employees in order to appoint appropriate representatives. Therefore, if the information andconsultation obligations are triggered too early, the transferor must disclose the proposals to all potentiallyaVected employees despite the fact that the discussions are embryonic.

In the early stages the commercial sensitivity of the proposals are significant and it is inconceivable thatan employer will disclose the discussions. The employer is, therefore, forced to choose between not goingahead with a particular arrangement or breaching the information and consultation obligations.

The NOA believe from its members’ experience that it is not in the employees’ best interests to know attoo early a stage of the proposed arrangements. Many proposals do not ultimately proceed, and informingemployee that it might, may cause considerable concern and unrest amongst employees. It is not uncommonfor employees to suggest that they have been told too early since negotiations can often continue for manymonths if not for more than a year and the employees are left with the uncertainty concerning their ownpositions. The NOA would welcome greater certainty on this question, by way of Government guidance,as to the point at which the information and consultation obligations are triggered.

8. Transfer of Employee-related Data

When parties enter commercial discussions about an outsourcing proposal, a new service provider willtypically require information concerning the terms and conditions of those employees who will transfer toit if TUPE applies. The information is necessary in order to assess the cost of providing the services followingthe transfer and, therefore, to price the contract.

It is not always possible or practical to provide that information about the employees in an anonymousform. If the transferor provides information about identifiable individuals, it will be in breach of the DataProtection Act 1998 (“DPA 1998”) if it is not possible to satisfy one of the pre-conditions to processing thatdata under Schedule 2 (Personal Data) or Schedule 3 (Sensitive Personal Data) to the DPA 1998. Providing“sensitive data” creates particular diYculties under the DPA 1998, albeit that it will be necessary to providenew service providers with some “sensitive data”, such as employees with health problems and who may beon sick leave, and employees in litigation over race or religion (which are “sensitive” for these purposes).

Whilst, the transferor is permitted to transfer data (whether sensitive or not) if it obtains the explicitconsent of each employee concerned, that is often not practicable because of the number of employeesconcerned and/or realistic because of the commercial sensitivity of the proposed arrangements.

Schedules 2 and 3 of the DPA 1998 permit the transfer of data (whether sensitive or not) if the transferorhas a legal right or obligation to provide it. The NOA would, therefore, support an amendment to TUPEwhich conferred on a potential transferor a legal right to provide to the new service provider such data asis necessary for the new service provider to assess the financial and other implications of inheriting theemployees who would transfer to it from the transferor. For that information to be useful to the new serviceprovider, the right should apply at any time during genuine negotiations.

9. Legal Obligation to Provide Information to a New Service Provider

The Government, in its 2001 consultation paper, proposed imposing on a potential transferor anobligation to provide to the new service provider details of all rights and obligations which the transferorhas in respect of the employees who will transfer. Whilst the NOA supports the introduction of the right forthe transferor to provide the new service provider with such information (without incurring liability underthe DPA 1998 as described in Paragraph 3 above), it considers that an obligation to provide details of allrights and obligations is unworkable.



It is common commercial practice for a new service provider to undertake due diligence in relation to theemployees it may inherit during the course of the commercial negotiations. However, the degree of duediligence which a new service provider considers necessary varies considerably depending on the nature ofthe arrangements proposed. It will not always be the case that a new service provider will require exhaustivedetails about such liabilities, either because the value of the deal lies in other aspects of the arrangements,because the workforce is minimal, or because the legal risk is covered by appropriate indemnities. The taskof complying with such an obligation would often be considerable and would increase the need for legalinvolvement. It is to be noted that no such similar provision applies in respect of a sale of shares whichinvolves similar acceptance of risks which a seller is not obliged to disclose (although would commonly doso as part of a due diligence exercise).

In practice, parties to an outsourcing arrangement will commonly allocate pre- and post-transferliabilities by way of indemnities into the outsourcing arrangements, minimising the need to have suchinformation.

To the extent that the Government remains committed to imposing such an obligation on a transferor,the NOA would strongly welcome the following features connected to the obligation:

— specific details in the legislation detailing exactly which rights and obligations should bedisclosed; and

— a right for the parties to agree between them to opt-out of the obligations and/or to waive anyliability for failure to comply with them.

10. Offshoring

The NOA considers that, in certain circumstances, TUIPEmay have extra-territorial eVect in that it mayapply to the outsourcing of functions from the United Kingdom to other jurisdictions, either within theEuropean Union or beyond (commonly referred to as “oVshoring”). The position is currently unclear.

It is generally unrealistic to expect employees to transfer on mass to a new jurisdiction and the NOAbelieve that it was never intended that TUPE or the ARD would apply to such situations (as is the case inFrance and other EU jurisdictions). The NOA would welcome clarification, by way of Governmentguidance, that TUPE does not apply to outsourcing arrangements to jurisdictions outside of the UnitedKingdom.

The NOAwould strongly object to any new employment regulation which had the eVect of restricting thepractice of oVshoring.

17 June 2004

APPENDIX 13

Memorandum by Popularis Ltd

EMPLOYMENT REGULATION, SMALL BUSINESSES AND TRADE UNIONRECOGNITION: A NEW TWO-TIER WORKFORCE

Introduction

1. On 6 June 2000 the recognition procedure introduced by the Employment Relations Act 1999 wasbrought into force. The procedure has been very successful and has led to a significant number of newrecognition agreements. Amajor concern for a number of trade unions, however, is that the procedure doesnot apply to employers who employ less than 21 workers. There is no comparable exclusion in either of thetwo previous statutory recognition procedures which operated in this country (in 1971 and 1975), and thereis no comparable exclusion in any other major western democracy.

2. The small business exclusion has a number of consequences, not the least of which is that a large sectorof the workforce is denied the right to trade union representation and the right to engage in collectivebargaining. This in turn has a number of implications for a range of issues including gender paydiscrimination, skills and training, and health and safety at work. Yet the small business sector is a sectorwhich is growing, so that the impact of the small business exclusion is likely to grow, particularly in light ofthe government’s commitment to the expansion of the number of small businesses. Unless this exemptionis removed, we will see the emergence of a new two—tier workforce: one to whom trade union recognitionapplies, and one to whom it does not.



Small Businesses and Employment Law

3. The idea of thresholds for employment rights is not new, though they have always been controversialby focusing on the position of the employer rather than the rights of the worker. The general rule has beenthat the law should apply equally to everyone, and that workers are entitled to the protection of the lawregardless of the number of people they work beside. But although employment rights typically apply tosmall businesses, the small business is sector is characterised by low levels of trade union membership, lowlevels of trade union recognition, and low levels of collective bargaining coverage.

4. These low levels of worker representation are paralleled by what has been referred to as the “weakhuman resource policies, a high level of low pay and extensive use of dismissal as a disciplinary device” insmall enterprises. Small businesses score badly on matters like low pay, equality policies, and some aspectsof health and safety, with the “rate of fatal injury in small manufacturing workplaces . . . more than doublethose in medium and large workplaces” (HSC, 2001). Small businesses also score badly when it comes toemployment tribunal applications, where the sector has been over—represented.

Small Businesses, Trade Union Recognition and Collective Bargaining

5. Trade union recognition is a precondition of free collective bargaining. The right to bargaincollectively in turn is recognised as a human right by a number of international human rights treaties bywhich the United Kingdom is bound. These include ILO Convention 98, which provides by article 4 thatMeasures appropriate to national conditions shall be taken, where necessary, to encourage and promote thefull development and utilisation of machinery for voluntary negotiation between employers or employers’organisations and workers’ organisations, with a view to the regulation of terms and conditions ofemployment by means of collective agreements.

There is no qualification which says “except in the case of small businesses” or “except in the case ofemployers employing fewer than 21 workers”.

6. The obvious implication of the small business exclusion is that more than a fifth of the labour force isdenied the right to trade union recognition and representation unless their employer agrees. 24,695 millionemployees are employed by 1.2 million employers, and of these employees:

— 1.6 million are employed by employers who have between 10 and 19 employees;

— 1.5 million are employed by employers who have between 5 and 9 employees; and

— 2.3 million employed by employers who have between 1 and 4 employees.

21.8% of the people employed are employed in businesses employing less than 20 employees.

Small Businesses and Women’s Rights

7. The importance of collective bargaining for women has recently been emphasised by the ILO in thefollowing terms:

The ability of women to exercise freely their rights to join trade unions and have their interests representedon a par with those of their male colleagues is vital to the achievement of both gender equality and tradeunion strength. Not only should women take their place at the negotiation table but gender issues will haveto be made more explicit during the collective bargaining process to ensure that any agreement reflects thepriorities an aspirations of both women and men.

This concern that women should take their place at the bargaining table is undermined by the smallbusiness exemption in the statutory recognition procedure. This is partly for the obvious reason that womenlike men will be excluded from collective bargaining in a large number of cases. But it is also because theexemption bears harder on women than it does men.

8. The exclusion of small businesses from the trade union recognition procedure means that women aremore likely than men to be denied the right to have their trade union recognised by their employer.

Table 1

MALE AND FEMALE EMPLOYMENT BY SIZE OF WORKPLACE(PERCENTAGES)

All males femalesNo of employees:

1 to 19 28.9 26.2 31.720 to 24 4.9 4.6 5.225 to 49 14.6 13.7 15.650 to 249 24.8 27.1 22.3250 to 499 9.3 10.2 8.4



All males femalesNo of employees:

500 or more 17.5 18.2 16.8No. of employees 23,650,979 12,289,934 11,361,045

Source: Labour Force Survey

Table 1 deals with the position in companies with 20 employees or less. It shows that female employmentin small workplaces is higher than the average, and higher than male employment in small workplaces.However, it conceals the fact that there is a higher incidence of both female employment and small businessemployment in some sectors more than others.

The Gender Pay Gap and Collective Bargaining

9. A continuing problem faced by women workers in the United Kingdom is the gender pay gap whichstubbornly refuses to close. Recent figures suggest that the gender pay gap in Britain is among the highestin Europe, at 19% for full time employees and 41% for part time employees. The EOC has identified anumber of possible explanations for the position in the United Kingdom, despite almost 30 years of equalpay legislation. One explanation is the decline in collective bargaining coverage, so that less than 1 in 3workplaces is now covered by a collective agreement. The exclusion of a quarter of the workforce fromlegislation giving workers the right to trade union recognition cannot but be significant. It is all the moresignificant for the fact that the trade union representation deficit is highest among the groups excluded, thatis to say the small businesses.

10. But not only are women losing out on collective bargaining, they are also losing out on some of thelegal rights which arise as a result of collective bargaining or which depend upon the trade union beingrecognised. These rights include:

— the right to paid time oV for trade union duties and training in these duties, as well as the right tothe disclosure of information about the undertaking;

— the right to trade union representation on health and safety matters, important because tradeunion representatives are likely to have greater expertise and to have undergone training; and

— the right to be consulted in the event of a business transfer, with trade union representation likelyto be more eVective than representation by a fellow employee untrained for such a role.

There is in addition to the foregoing the right to make use of the full services of union learningrepresentatives who only have the right to time oV if their union is recognised. It is not clear why thegovernment should assume that women are prepared to accept reduced access to skills and trainingopportunities.

The Practice Elsewhere

11. An examination of the position in other countries is striking for the fact that there is no parallelexclusion of workers in small firms from the coverage of workplace protection laws. All major industrialcountries in Europe and beyond have legislation providing for some form of worker representation. So faras thresholds are concerned, some have no minimum threshold: one worker is enough. Some require two ormore for the purpose of collective bargaining. Still others have a threshold before various forms ofworkplace representation must be established. But that threshold varies, and in no country is there anexclusion of workplaces employing as many as more than 20 people.

11. The position in selected countries is as follows:

— In France it is compulsory to establish workers’ delegates in all enterprises employing at leasteleven employees.

— In Spain workers’ delegates must be established in enterprises employing more than 10 workersand enterprise committees must be established in enterprises employing 50 or more.

— In Germany and Austria the duty to establish a works council applies in relation to enterpriseswith more than five employees, though it is for the employees to take the initiative to request theemployer to establish a works council.

— In The Netherlands, “a representative body of the employees has to be established if either theemployer or the majority of the employees so wish” in enterprises with more than 10 employees.

— In theUnited States, there is nominimum threshold of employees an employermust employ beforean application is made for recognition (or certification as it is called there) under the statutoryprocedure.

— In Canada the position varies from Province to Province. In two Provinces the threshold is two,and in another the Act applies only to employers who employ at least three employees. Otherwisethere is no threshold.



— In New Zealand the position “based on the principle that employees who wish to bargaincollectively are entitled to do so—presumably as long as there are two members employed by theemployer”.

— In Sweden a trade union has “the right to negotiate with an employer on matters which concernthe relationship between the employer and such members of the union who are or have beenemployees of the employer”. One member is enough.

Support by the Small Business Service

13. British law on trade union representation is arbitrary, discriminatory, and irrational, as well asinconsistent with international law and out of stepwith the practice of other countries. Sowhat is to be done?The first step that government could take to address the representation gap in small businesses would be touse its resources to bring to the attention of small businesses some of the benefits of collective bargaining.Although there is a large recognition gap in small businesses, it is often overlooked that there are many smallbusinesses that do recognise a trade union.It is also overlooked that small business growth does not simplyrequire entrepreneurs, but that it requires individual workers who are also prepared to make investmentsand take risks. There are steps that could be taken in the first instance without the need for legislation.

14. The Small Business Service ought to promote the interests of small businesses in a way that takesaccount of the interests of the employee as well as the entrepreneur, and in a way that has regard togovernment policy in other areas. These include fairness at work, pay equity between men and women,reducing the number of tribunal applications in an era of expanding employment rights, promoting thetraining of the workforce, and giving workers a voice in decision making. It is the responsibility of the SBSto remind employers of these policies and the diVerent ways by which they can be eVectively developed. Anumber of very simple steps could be taken in the first instance by the SBS to discharge what should be aduty to address the representation gap and the employment practices in small businesses. These include:

— Investigation: conducting research into the performance of companies which recognise a tradeunion. Although there is a trade union representation gap in the small business sector, there aremany small businesses which do conduct collective bargaining. Why do they do it, and what arethe benefits?

— Dissemination: publishing information about the results of research conducted about trade unionrepresentation in small businesses. This would include explaining the diVerent benefits to smallbusinesses where there is a recognised trade union and collective bargaining.

— Partnership: working with public authorities (such as ACAS), interested trade unions, andrepresentative small business organisations to increase understanding and awareness of eachothers concerns, and to provide trade unions with an opportunity to explain their role.

The Need for Legislation Options for Change

15. In terms of government initiatives to deal with the representation gap in the small business sector, itis thus important to emphasise the role of government through agencies such as the Small Business Service.But even though there is much that could be done without changing the law, it is diYcult to escape from thefact that some kind of legal support will be necessary to underpin a serious trade union role in the smallbusiness sector. The most obvious solution would be to remove or reduce the threshold so that moreworkers would have access to the statutory recognition scheme. There are, however, other options whichmay also be pursued. Three “alternative” options to the repeal of the small business exception in thestatutory procedure are as follows:

— Converting the right to be accompanied on grievance and disciplinary matters into a right to berepresented on all matters relating to the employment relationship.

— Extending the range of existing national collective agreements so that they apply to all the workersemployed in an industry including those in non union companies.

— Removing statutory restraints so that contractors may contract with suppliers on terms that thelatter recognise a trade union or observe collective agreements.

16. But although there are a number of options for addressing the small business exemption, they are nota full solution to the simple expedient of removing the exemption altogether. The case in favour of repealingthe exclusion of small businesses from the statutory recognition procedure is a strong one. It is based on thefollowing considerations:

— The exclusion is arbitrary, diVerent from other small business privileges in employment law,without explanation or justification.

— The exclusion is irrational in the sense that it reinforces poor employment practices and a high levelof employment tribunal complaints from the small business sector.

— The exclusion is contrary to the requirements set by minimum international standards, which arelegal obligations binding upon the United Kingdom.



— The exclusion runs contrary to the concerns of the ILO that steps should be taken to encouragerather than exclude collective bargaining in small companies.

— The exclusion is discriminatory in its application in the sense that it denies women more than menthe opportunity to engage in collective bargaining.

— The exclusion has discriminatory implications in the sense that certain statutory rights areconditional on the employee’s union being recognised.

— The exclusion has discriminatory implications in view of the fact that the gender pay gap is likelyto be higher where there is no collective bargaining.

— The exclusion has no parallel on the scale of the British legislation in the workplace representationlaws of any other major country in Europe or North America.

About the Authors

Keith Ewing is Professor of Public Law at King’s College, University of London. He is President of theInstitute of Employment Rights.

Anne Hock founded Popularis Ltd in December 2000. Popularis Ltd is named in Statutory Orders asIndependent Scrutineer for the purposes of trades union ballots and elections, and as Qualified Person forthe purposes of trades union recognition and de-recognition ballots.

The information provided in this evidence has been taken from the report, “Trade Union Recognition isSmall Enterprises” by KD Ewing and Anne Hock (c) Popularis Limited. The report was supported by theTrades Union Congress, and the unions Amicus, GPMU, KFAT and UNIFI.

APPENDIX 14

Memorandum by the Professional Contractors Group Limited

THE CONTRIBUTION LABOURMARKET FLEXIBILITY MAKES TO THE UK ECONOMY

WHETHER THE CURRENT DEGREE OF FLEXIBILITY IS APPROPRIATE OR DESIRABLEAND IF NOT, WHAT MEASURES THE GOVERNMENT SHOULD TAKE

Introduction: Who is the PCG?

The PCG was formed in 1999 to provide independent contractors and consultants with a representativevoice. The group has developed, rapidly, to a full professional body, representing a wide range offreelancer interests.

In 2003, the Group successfully achieved ISO9001 accreditation

Executive Summary

Freelancers provide a flexible resource for industry and growth in themarket outstripped predictions untilrecently. Regulation, both of an increased amount and, at times contradictory has taken its toll on thefreelance market. As there is no Statutory Right to be Self-Employed, each Government department judgeson its own how to treat them. This uncertainty has increased the burden of regulation. This can typically beshown in the way the Work Permit regulations are assessed diVerently when dealing with Freelancers thanPermanent workers. Freelancers are expected to operate in the openmarket. This diVers to treatment by thetax authorities which has in the last few years sought to re-classify some self-employed and treat them, fortax as though they were employees.

Another break on the use of freelancers has been the movement to oVshore. OVshore resources, althoughon first glance seem cheaper is not reflected in a true analysis of the overall cost of using them. In additionthey are less flexible than freelancers as long-term relationships common to oVshore arrangements may notmatch the prevailing market conditions through the life of the contract.

Freelancers need a reduction in the amount of regulation but what regulation there is must be consistentand a Statutory Right to be Self-Employed may indeed allow for those working in the market to know whatthere status is under various legal and tax issues.



The Case for Freelancers1. “A few smart leaders with a good pool of contractors can do a better job [with open source

support tools] than IBM or any other outsourcing vendor can with its proprietary tools. That isbecause your IT department will better know your needs, and will have those needs at heart”—Robert X. Cringeley; Silicon Valley Commentator.

2. Freelancers are highly trained, motivated and experienced

3. PCG Survey Results88

3.1 50% had degrees

3.2 15% had a Masters

3.3 83% had undertaken specialist training

3.4 76% had ongoing training programmes which they self-financed.

4. Freelancers provide services in a number of sectors of which the UK is a leading contributor

4.1 IT

4.2 Financial Services

4.3 Interim Management and Management Consultancy

4.4 Oil and Gas

4.5 Telecommunications

4.6 Design

4.7 Publishing

4.8 Media

5. Freelancers;

5.1 Increase staYng flexibility

5.1.1 Freelancers are aware that they are always in a given position for a finite period of time. Thismeans that industry can utilise their services as and when required.

5.2 Are of High Calibre

5.3 Assist in transferring knowledge to a client’s permanent staV

5.4 Are Cost EVective

5.4.1 31–51% increase over basic salary cost for permanent employees against 12–18% for afreelancer89

5.4.2 75% of Corporate Companies find freelancers cost less than equivalent permanent employees

The Growth of the Freelance Market

1. In 2000 33% companies surveyed predicted they would be using freelancers; in 2001 51% of thosesurveyed, actually did89.

2. In his book 2010: A New Business Landscape Professor Richard Scase predicted that (by 2010) 40%of workers will have migrated to the freelancer sector.

3. Between 1979 and 2001 the number of professional and managerial workers who were self-employedgrew by 300%.

4. Centre for Labour Market Studies Paper; The Changing place of work quotes an increase of 71% inProfessional and Technical Home workers from 1992–200090.

Regulation

1. There is currently no statutory right to be self-employed. This means that the status of the self-employed freelancer is dependent on the treatment by various bodies from clients, to numerous governmentdepartments. Certainly among Freelancers there is a desire for some form of Right to be Self-employed.

2. The diVering treatment of freelancers by various groupsmeans inevitably that they suVer the downsideof treatment.

For Example;

2.1 Under current Government Work Permit rules a foreign worker brought in under the various Visaschemes cannot replace a permanent employee. A Freelancer however is expected to operate within marketconditions and can be replaced with impunity.

88 PCG Members Survey(s) taken during 2003.89 London Business School Research undertaken during 2003.90 Center for Labour Market Studies; The Changing Place Of Work.



2.2 The Worker caught under IR35 working through an intermediary pays tax as if the entire income ofthe intermediary was a wage. However the same department considers the same company to be a businessand has to not only pay Employee taxes but also those of employer, meaning that a freelancer workingthrough an intermediary is nominally paying the highest tax rate of any worker in the country as they arethe only ones responsible for both Employee and Employer taxes.

2.3 The DTI expects the same worker to have Employers Liability Insurance. In eVect a statutoryrequirement for the Incorporated Freelancer to Insure himself (or herself).

3. Increased Regulation is acting as a brake on a freelance business creating opportunities as thefollowing two quotes indicate:

4.“The excessive amount of Employment Legislation is actually stopping my company growing becauseif I were to take on employees I would spend a disproportionate amount of time on regulatory issues ratherthan creating further employment opportunities.”—Freelance IT Consultant, Peterborough.

5. “We have hit the first limit—five full time employees. If we take on anyone else, even on a part timebasis, a whole raft of further regulations apply to the businesses, ranging from Health and Safety,Environmental, Employment and Pensions. I would have to employ someone else full time to maintain thedocumentation”.

6. The varying treatment of freelancers is, in some instances, reducing the flexibility theymay oVer clients.This is because tax inspectors are failing to diVerentiate between accepting new work from a client becausethey have to (ie they are controlled, and thereby employed) or because it makes perfectly good businesssense.

7. 6.7% of PCG members have faced a PAYE investigation.88

8. Of those 40% went on to be IR35 investigations.

9. Over 99% of IR35 investigations, lasting from a few months to three years, ended in favour of thetaxpayer when the taxpayer paid for Professional representation either directly or through some form ofProfessional Expertise Insurance.91

10. 83% of PCG members do not feel IR35 should apply to them.

11. Because the Inland Revenue has used the PAYE Compliance Visit to determine if a worker owesmoney under the Intermediaries legislation, the worker has no way of knowing having determined his statusif he is to be investigated (and such investigations are increasing). Together with the need for complex legaladvice this has meant many small IT Companies investing in tax investigation insurance. Like all insurancethis must be purchased in advance.

How the Treatment of the IR35 Caught Freelancer is Adversely Affecting the Level of Skills

Available

1. .Net (dot net) one of the top 10 most requested skills has gone through three versions in three yearswith a 4th due next year. On average Skills in IT have a lifetime of approximately two years.

2. 61% of PCG members would invest in more training if they could aVord it.92

3. 66% of PCG members consider training an important or essential part of their business.

4. As Training was not an allowable expense under IR35 this aVected the training spend of 47% ofmembers.

5. The IR35 caught worker are the only workers in the country who cannot get tax free training. The TaxOYce consider it the responsibility of the workers “deemed” employer (the client), the client expects it to bethe responsibility of their actual employer (the workers Limited Company.

6. Training costs for the caught worker are increased by the NI and Income tax paid on the cost of thetraining. This increase in cost equates to approx 40%–60% (Employers, and Employees National Insuranceplus the Income tax paid on the turnover of the company).

How Offshoring is Damaging to the Freelance Market

1. Proponents including some Government Ministers have said that oVshoring jobs will createopportunities to create jobs in the UK. However (as an example) since 1986 net flows of capital betweenIndia and the US have been towards India. As OVshoring increases this can be illustrated by the relativelevels of inward investment each country attracts as illustrated by the following table93;

88 PCG Members Survey(s) taken during 2003.91 Taken from claimants under the PCG’s own Insurance products.92 PCG Training Survey.93 Published in The London Evening Standard 17 September 2003.



Country Previous Position Current Position

China 1 1United States 2 2Mexico 9 3Poland 11 4Germany 4 5India 15 6United Kingdom 3 7Russia 17 8Brazil 13 9Spain 7 10

2. Value of Inward Investment has dropped 60% from $62billion to $25billion.

3. According to Work Permits and foreign labour in the UK Labour Market Trends available fromhttp://www.statistics.gov.uk/pdfdir/lmt1103.pdfSuccessful applications for Work Permits in 2002—129,000Successful applications for Work Permits in 2001—115,80094

Total applications in 2002—155,200

This would mean 16.88% were refused or to put it another way you have a better than 4 out of 5 chanceof getting a work permit approved.

4. Government policy treats the replacement of Freelancers diVerent to that of full time permanentemployees. Work Permits consider it illegal to replace permanent workers but not freelancers. What thismeans is that utilisation of freelancers is going down as they are replaced by oVshore workers which overallwill result in less investment coming to the UK. This can be demonstrated by the following chart95.

22000

20000

18000

16000

14000

12000

10000

8000

6000

4000

2000

0

23512

06 Sep1999

01 Apr2000

01 Nov2000

01 Jun2000

01 Jan2002

01 Aug2002

01 Feb2003

21 Nov2003

5. The above chart shows how opportunities have declined during much of the period when WorkPermits were being granted at an increasing rate. This chart refers to both permanent and freelanceropportunities. Indeed it can be seen that the number of adverts declined from 16,000 (at any given point)to 4,000 in the two years 2002–03. A Period when 244,800 work permits were granted; 17% of them inComputer Services; (which would equate to 19,686 granted in the Computer Services).

94 Work Permits and foreign Labour in the UK Labour Market Trends available fromhttp://www.statistics.gov.uk/pdfdir/lmt1103.pdf

95 http://www.jobstats.co.uk



6. According to the following table94 the country that provides the highest number of work permitworkers is India.

Country 1995 2002

USA 37% 11%Japan 10%Indians 21%South Africans 9%Australia & New 9%Zealand

7. However the biggest producer of Software is the United States, not India which has only recentlystarted producing software.

8. There is considerable anecdotal evidence that workers brought in from out of the UK do not have theskills that are required and freelance workers are often asked to train foreign workers before having thereown contracts terminated.

9. Western European companies wasted six billion Euro last year96 as a result of poorly structured IToutsourcing deals and badly managed relationships with their services providers, according to theGartner Group.

10. Only 21.1% of companies reported a cost savings greater than 20% as a result of their IT outsourcingeVorts, according to a recent survey conducted by people3, a Gartner, Inc. company. Conversely, 18.4% ofcompanies did not achieve any cost reductions, while 9.2% experienced an increase in costs from their IToutsourcing contracts. That equates to approximately twice as many people seeing higher costs or no actualsaving against those saving 20% of a budget.

11. Examples of factors relating to additional costs include time and eVort spent during the transitionperiod (on knowledge transfer, addressing cultural diVerences, putting infrastructure in place), disruptionin the current work processes, increased turnover of IT employees who possess critical IT knowledge andskills, lost productivity, and lowered employee morale. All of those factors can erode and even exceed thepotential cost savings from the outsourcing eVorts.

12. The number of board level executives who were satisfied with the business benefits derived from theiroutsourcing contracts reduced from 86% in 2001 to 50% in 2002.

13. Another problem with Outsourcing is it adds a layer of management. In any structure where layersare added, costs go up. Further the outsourcing company by its very nature will want to provide as little aspossible for as much money as possible; after all it is responsible to its own shareholders! The client havingsought to reduce their costs wants to have as much done for as little as possible. These two requirements aremutually exclusive. What this leads to is a slower reaction in the company and increased costs when marketforces lead to changes not foreseen in negotiating the original outsourcing contract.

14. In creating an oVshore arrangement the extra level of management is created in the interface betweenwork retained in the Western Company, and that sent abroad. The costs of this are of course related to thecosts within the West, since that is where the interface must be created.

15. This interface also does not assist in increasing productivity. In fact like all such interfaces it reducesproductivity since it makes no contribution to production.

16. The problem with oVshore software development is typically two-fold. In one sense, the oVshoredeveloper’s cultural diVerences can’t relate very well to the foreign end-users (us), and that can lead toproblems. But far worse is a problem that is almost the opposite: The oVshore coders are treated as justthat—coders—with all architectural decisions being made 12,000 miles away. There is virtually no input tothe architects from the coders because none is sought. That means problems that ought to be noticed early—and probably are, but oVshore, not the UK, are noticed too late.

17. The large IT companies think in terms of billable hours, and the way to maximize billable hours isby having lots of workers. Headcount is everything.

18. When Outsourcing companies send work abroad Profits will rise, but no head counts will drop. Headcount will rise, in fact, because the heads are so much cheaper. Productivity for these oVshoring companieswill not rise. It will fall. It will fall simply because of the added overhead to support those longer informationsupply lines. And service to customers will not improve at all.

19. The answer to IT productivity is to first decide who the customer is, and that isn’t the CIO, it is theCEO and the janitor and anyone in between with a computer. Once we all agree on who is the customer thenpurchasing decisions get easier. Truly useful products are bought when they are needed by customers.

94 Work Permits and foreign Labour in the UK Labour Market Trends available fromhttp://www.statistics.gov.uk/pdfdir/lmt1103.pdf

96 Gartner Group Survey.



20. Dr Adam Kolowa CEO of Parasoft Corporation, a software manufacturer located in SouthernCalifornia was quoted97.

21. Kolawa said that there are four major issues—and their subsequent long-term consequences—thatcompanies need to consider before deciding to oVshore any project: (lack of) quality assessment; real projectcosts; Intellectual Property (IP) concerns and loss of jobs in the U.S. Ignoring any of these, Kolawa said,could have devastating results.

22. “If companies continue to send projects oVshore, high paying technology jobs will be gone—an entiregeneration of highly educated and skilled workers will be lost. Who will teach the next generation?” askedKolawa. “Wewill lose our place as leaders in innovation—wewill lose all thatwe have created—to the short-sighted illusion of saving a few dollars.”

23. Kolawa said that it is a commonmisconception that oVshore projects are of higher quality than theirdomestic counterparts. “This is the claim of many companies which have bought heavily into this strategy.”Kolawa asked, “But does quality really go up in projects that are sent overseas?What are the criteria used formaking such claims?” Without additional testing after the project is finished—an added expense—Kolawabelieves that companies’ claims of higher quality production oVshore could simply be mythical.

24. The real costs of the outsourced project have to be calculated. Kolawa says, “Sure, your labour costsmay have gone way down, but what did you spend on communication costs? What about transportationcosts? Flying your staV over to consult and flying the consultants back to train your staV—those bills couldbe outrageous!”

25. Kolawa warned that there are other hidden costs involved with oVshoring. Perhaps the originalspecifications of a job were not followed and the project needs to be reworked or revised. Kolawa stressed,“The time you spend sending a project back overseas could cause you to incur delays and penalties whichmore than justify keeping production in the U.S.” Kolawa said there is yet another point to be considered.“What if you cut too much staV initially and have to quickly revise an oVshored project to meet a deadline.You cannot expect a new hire to have the same competence level that your long-term development staV did.”

26. Protecting Intellectual Property is another concern that Kolawa believes is paramount to anybusiness’ longevity. He pointed out that even after signing a mountain of NDA’s with an oVshore company,they could inadvertently pass along a fundamental tip to a competitor, who has also contracted with them—an incalculable hidden cost.

27. “It doesn’t take a rocket scientist to realize that oVshoring exposes companies to greater risk of IPloss, even if that loss is accidental or unintentional. Are the IP copyright laws in the oVshore country as strictas they are in the United States? If not, is it worth exposing your business engine to competitors just to getthat reduced project overhead?” said Kolawa. “Remember: once your prize application is in yourcontractor’s brain, there is no way to get it back out—or to know where it will go.”

28. 78% of executives who have outsourced an IT function have had to terminate that agreement early98,according to a November 2002 study from DiamondCluster International, a Chicago managementconsultancy. The top reasons for CIO dissatisfaction: poor service, a change in strategic direction and costs.

29. In an article in Chief Information OYce magazine and available here; http://www.cio.com/archive/030103/home.html the following was said;

30. CIOs are finding that if they want something done right—or at a lower cost or in a more strategicfashion—they’ve got to do it themselves. “Reinsourcing is becoming more common,” says RudolfHirschheim, the Tenneco/Chase International professor of information systems at the University ofHouston, who is conducting a study of the trend. “Many companies are finding that outsourcing simplydoesn’t provide the cost savings they had hoped for.Or they find themselves burdened by the contract, whichdoesn’t allow them the flexibility they need.”99

31. In another article (see http://www.cio.com/archive/030103/home—claudio.html) ForemostInsurance had originally outsourced the work for financial reasons but, according to Claudio, savings nevermaterialised. In fact, costs were escalating. “They didn’t have a strong contract that allowed the customerto reap the benefits of total cost of ownership going down over time,” explains Claudio.

32. Although Farmers would have to pay $4 million in cancellation fees and early termination penalties,Claudio’s financial analysis showed that the company could recoup those initial costs within a year and thenbegin to save money.

33. The entire reinsourcing process took six months and was completed in September 2000. Claudio saysthe move paid oV. “Within the first year, we began saving about $6 million a year.”

34. Again in another article (http://www.cio.com/archive/030103/home—gross.html) He found that IT’sservice levels were less than satisfying. For instance, it took up to a month to deploy a new computer for anemployee. Another red flag: Calls to the help desk weren’t getting answered in acceptable time. As a result,IT was getting a bad name

97 http://www.contractoruk.com98 November 2002 Study by DiamondCluster International.99 CIO Magazine: http://www.cio.com/archive/031003/home.html



35. CEO made operational excellence and customer service top corporate goals. Outsourcing wasnegatively aVecting those two new priorities.

36. Gross says he would never again sign a long-term outsourcing contract. “It’s too diYcult to maintainaccountability and maintain passion,” he says.

37. The problems of outsourcing however are not just within the US Software-SI chief executive PhilBrooks, 42, is an international expert on legacy modernisation and was an adviser to the UK Governmenton Y2K modernisation he was quoted in Contractoruk (see http://www.contractoruk.com/cgi-bin/item.cgi?id%9437&d%193&h%220&f%223 ) “The negative side of outsourcing is beginning to surface andit is all to do with cultural communications,” he says.

38. “It’s the one thing the west has really still got going for it in terms of IT workers and it means someroles will or at least, should, never be outsourced to an oVshore provider.”

39. The communications “interface” betweenwestern client and oVshore resources provider is the biggestsingle factor in this success or failure, Brooks says.

40. “The size of the interface is the crux at the moment. There’s going to be perhaps billions of dollarsgoing to be lost over this one simple concept—it’s going on behind the scenes at the moment. It’s simmeringbelow the surface. Some real humdingers of problems, big ones, and it’s all down to this one concept of theinterface,” he says.

41. “The intricacies, the accents, the empathy and comprehension mean we always have to be on homeground with some roles,” he says. “That makes us feel completely safe.”

42. “We provide oVshore services of specialist skills that we think add value from a skills as well as a costpoint of view to western companies, wemanage that resource from a very small interface, we front it up witha layer of US and UK consultants and a mix of our own architects.”

43. Brooks says a good example of an interface that has been set too wide is the model used by Indiansoftware giant, Wipro Technologies.

44. Despite the eVorts of some Indian companies to bridge the cultural divide as they act on behalf ofhands-free western clients, scare stories remain about others.

45. “One instance was with a global investment bank that had outsourced its databases. When one thatformed the backbone to its global trading system went down the manager in the west put the call in to findout what was going on”.

46. “The database analyst (DBA) responsible for the system had gone home and stuck the potentialproblem on his ‘to do’ list for the next morning, in the meantime the bank was losingmillions of pounds andthe Indians had no comprehension of the criticality of the situation. We tend to take the level of importanceabsolutely for granted here,” he says.

47. Another problem with oVshoring is that changes in IT are constrained by the contract termsnegotiated when the original oVshoring contract was signed. These constraints may be completely diVerentto the prevailing market conditions, aVecting a company’s ability to react to market changes.

Conclusion

1. Freelancing provides a cost eVective way of bringing skills into a company.

2. The freelancing market having grown at rates outstripping predictions is now being slowed by thecurrent trend for oVshoring and a contradictory regulatory environment.

3. Taxation changes are making it increasingly harder for freelancers to train in new skills in modernindustries with short skills lifetimes.

4. There is an increasingly apparent need for a Right to be Freelance.

June 2004

APPENDIX 15

Memorandum by The Recruitment and Employment Confederation

1. The following evidence provides the perspective of the UK recruitment industry on the Trade andIndustry Committee’s inquiry into UK employment regulation, in particular, with regard to thecontribution labour market flexibility makes to the UK economy and to the question of whether the currentdegree of flexibility is appropriate or desirable.



Background

2. The Recruitment and Employment Confederation (REC) is the trade association for the recruitmentand staYng industry in the UK. We have 5,000 individual members and 6,000 corporate members,representing over 50% of the recruitment and staYng industry in the UK.

3. Ourmembers provide both temporary and permanent recruitment services to public and private sectoremployers in all sectors of the economy. Our 6,000 corporate members range from small independentbusinesses to multi-national organisations.

4. Employment agencies and recruitment businesses are employers in their own right. Within this contextthe REC fully endorses the evidence given within the context of the current enquiry by businessorganisations such as the CBI and the British Chambers of Commerce.

5. The following evidence focuses primarily on the eVective provision of temporary work in the UK,which is one of the key corner stones of a successful labour market. As well as providing a vital service forbusinesses, temporary work is increasingly recognised as a way of enhancing labour market inclusion andemployment opportunities for individual workers. The amount of regulation already governing this sectoris often underestimated and any future legislation must be developed and implemented in a way that doesnot aVect the viability of temporary work in the UK.

6. As the representative body for the UK industry, the REC is able to provide detailed information onthis area which is why this paper focuses primarily on this area.

The Contribution Labour Market Flexibility Makes to the UK Economy

7. Labour market flexibility has enabled the recruitment industry in general, and the temporary workmarket in particular, to develop at an unprecedented rate. This has produced substantial benefits forindividual job-seekers as well as for employers. It has also enhanced the direct contribution that the industrymakes to theUKeconomy. The latest REC industry survey100 shows that industry turnover has now reached£24.5 billion, an increase of 6.6% on the previous year.

8. Labour market flexibility favours the provision of eVective recruitment services to business and job-seekers and has led to the development of an increasingly vibrant and successful industry. The contributionto the UK economy is substantial.

TemporaryWork Enhances LabourMarket Inclusion and ProvidesOpportunities for Individuals

9. The following overview of recent research and data provides real evidence that temporary work isincreasingly seen as a viable alternative to permanent employment and is a key means of enhancing labourmarket inclusion. The importance of temporary work from the perspective of individual job-seekers furtherhighlights the contribution that labour market flexibility makes to the UK economy.

10. For individual job-seekers, temporary work provides a way into the labour market and a crucialstepping stone into full employment. There are a number of reasons for the increasing popularity oftemporary work from the perspective of individual workers. Flexibility is one of the key factors as thetemporary worker can chose when to work and can accommodate other activities such as caringresponsibilities, travelling or studying. Temporary work is increasingly seen as a means of developing skillsand overall employability as experience can be gained and new skills developed by working in diVerent rolesfor a variety of organisations.

11. As well as developing overall employability, temporary work provides a way back into the labourmarket for individuals who have been excluded for a substantial period. The reality is that employers aremore likely to “take a chance” when taking on temporary rather than permanent staV.

12. As a result, the role of flexible and temporary work in enhancing diversity in the work place isincreasingly recognised. For example, a number of agencies are focusing on encouraging older workers backinto the labour market—one of the specific objectives identified under EU targets for the Lisbon Agenda.Temporary work—with the flexibility it aVords the individual and the employer—is a means of achievingthis goal. For all individuals who have been out of the labour market for some time, the first step back isthe hardest to achieve. Temporary work provides a means of achieving this first step, especially where theemployers are able to oVer long-term assignments which provide a substantial work-based experience.

13. Recent data conforms the benefits of temporary work from the job-seeker’s perspective. For example:

— 70% of temporary workers responding to an REC survey believed that temping improvesemployability101.

— Another REC survey showed that nearly 50% of temporary workers actually moved to apermanent job within the organisation which they had been assigned to as a temp102.

100 REC/PWC Recruitment Industry Survey 2003–04.101 REC Survey, July 2002.102 REC Survey, May 2002.



14. But, temporary work does not simply provide short-term and intermediary solutions. The trend istowards longer temporary assignments which provide greater value for both the company and thetemporary worker. In theUK, for example, a majority of temporary work assignments last over six weeks103

and an increasing number of individuals actually prefer the temporary work option because of the flexibilityit aVords.

15. Further evidence of changing attitudes towards temporary work was generated through the RECsurvey of temporary workers in July 2004. Flexible working is increasingly seen as a choice rather than anecessity. Of all the temporary workers surveyed:

— only 25% had not worked as a temp before;

— only 18% said that they would not work at temporary work in the future; and

— only 46% of the temporary workers interviewed said that they would actually prefer to be workingin a permanent position.

16. The idea that temporary work is necessarily second rate, and that temporary workers are somehowdisadvantaged and exploited is being dispelled once and for all. The REC’s recent survey confirms theevidence from previous research. For example, a CIPD study of employee attitude surveys showed thatemployees on fixed term or temporary contracts were actually more highly motivated, and more satisfiedwith their jobs, than employees on permanent contracts. A survey by Blue Arrow Research of over 600agency workers showed that nine out of 10 individuals enjoyed temporary working104.

Temporary Work is Vital for BUsiness and for Competitiveness

17. Recruitment service providers play a key role in helping companies to address resourcingchallenges—whether it be temping work or permanent postings and thereby enhance business performance.This is especially important in very tight labour markets such as the UK where the demand for staV iscontinuing to rise105.

18. Within this context, innovative recruitment solutions and the expertise provided by recruitmentservice providers are becoming increasingly important. In particular, the eVective provision of high calibretemporary workers is essential in order for organisations to react quickly to changing resourcing needs.

19. The main reason given for the use of temporary workers in UK businesses was the need to meet anincrease in demand106. This highlights the importance of temporary work for business performance and forglobal competitiveness at a time when it is crucial to react quickly to market opportunities. The other mainreasons given for the use of temporary workers was to cover for vacant positions and for staV absence.Another important reason for the use of temporary staV is budgetary restraints resulting in headcountfreezes. This has aVected both the public and private sector.

20. Companies in the UK and throughout the EU are competing in an increasingly competitive globaleconomy. Fast and flexible resourcing solutions are an absolute necessity.

The Recruitment Industry makes a Vital Contribution to the UK Economy

21. Labour market flexibility has enabled the recruitment industry to develop into an extremely vibrantand successful industry. The overall industry turnover of £24.5 billion107 is principally made up of turnovergenerated through temporary work placements. The latest survey shows that industry grew by 6.6% overthe last year. This trend is set to continue and 85% of respondents to another recent REC survey108 said thatthe demand for temporary work in the UK was constant or increasing.

22. For all the above reasons flexibility—especially as it relates to the provision of temporary work—isdesirable and necessary. The REC does not believe that there is any need for more regulation but we doadvocate a greater enforcement of current regulations.

Is the Current Degree of Flexibility Appropriate or Desireable?

23. The amount of flexibility surround the provision of recruitment services is often overstated and theamount of regulation already governing the provision of temporary work in particular is often generallyunderestimated. Any future legislation—in particular, the proposed EU Agency Workers Directive—mustbe developed and implemented in a way that does not aVect the viability of temporary work in the UK.

103 CBI Survey, June 2002 (65% of companies reported that assignments typically last longer than 6 weeks).104 Blue Arrow Research Survey, October 2002.105 The monthly REC Report on Jobs confirms that demand for staV in the UK has now risen for 12 successive months.106 CBI Survey, June 2002.107 REC/PWC Recruitment Industry Survey 2003–04.108 REC Member Survey (“Branjuicer”), December 2004.



24. The benefits of temporary work are also linked to the fact that—despite what is commonlyperceived—temporary workers do have rights and are already covered by a number of regulations undernational law.

The Provision of Temporary Work in the UK is already Highly Regulated

25. The new Employment Agency Act (EAA) Regulations have been in operation for less than a year.The new Regulations that came into force in April 2004 are an updated version of regulations covering theindustry which have been in operation since 1973. TheRECworked closely with theDTI to informmembersand has promoted the need for a common-sense approach to interpreting specific new regulations. Thereare, however, a number of areas which have caused real problems. The feedback from REC members onthe practical implications of the new Regulations was recently collated and sent to the DTI Minister,Gerry SutcliVe.

26. A good example of a specific problem area is Regulation 21 which requires written confirmation onall matters relating to the hirer and the work-seeker is sent to each party within three business days of thestart of a new assignment. For those members dealing in high volume, high turnover assignments such asnursing, social care, industrial, technical and hospitality, this Regulation has resulted in an unwieldy andunsustainable paper chase. As well as impacting on the work of agencies, the feedback from membersconfirms that that this deluge of extra information and paperwork is also seen by most employers andworkers as an inconvenience rather than a benefit. This is a good example of additional bureaucracy beingimposed without even the mitigating factor of real benefits being created for the intended stakeholders.

27. Based on the specific feedback from members, the overall cost of implementing the new Regulationsis between £3k and £20k per branch. There is obviously a substantial variation, depending on the size of theagency and the sector they operate in, but the overall cost to the industry is estimated at over £30 million.

28. REC members are fully committed to high standards within the industry and to compliance with thecurrent Regulations. However, the extra costs and administration that has been created must be recognised.The level of labour market flexibility—in so far is it applies to agencies supplying temporary workers—isoften overstated.

The Recruitment Industry also Plays a Key Role in Areas such as Immigration

29. When looking at the current levels of flexibility, it is important to look at other areas that have createdsubstantial additional bureaucracy for the industry. One such area is immigration policy and measures foraddressing illegal working.

30. Obligations on employers and agencies under Section 8 of the Asylum & Immigration Act werereviewed in 2004. The Section 8 changes have created substantial additional bureaucracy and uncertaintyfor agencies.

31. Overall, the industry has been extremely pro-active in seeking to comply with the Section 8 changes.A good illustration of this has been the unprecedented number of calls to the REC’s legal help-line onthis issue.

32. The recruitment industry is playing an increasingly important front-line role in the fight against illegalworking. This contribution is often overlooked. In addition, the practical diYculties associated withcarrying out the right checks and the need for a real support mechanism are clearly under-estimated. Thefact that immigration is such a topical political issue will throw more light on the crucial role that law-abiding agencies play in this area and the need for more support.

Temporary Workers already Benefit from a Range of Rights and Protective Measures

33. One of the reasons given for more legislation and for measures to limit what flexibility does exist isto need to ensure that temporary workers receive adequate rights and protection. The REC fully endorsesthe need to ensure that temporary workers are protected. However, regulations are already in place andrights already exist for all temporary workers in the UK. Rather than new regulation, the key is to ensurethat these existing regulations and rights are highlighted and enforced.

34. In the UK, agency workers are covered by working time, the national minimumwage and health andsafety regulations as well as provisions for statutory maternity pay. The new Employment Agency ActRegulations provides additional protection and research shows that most temps earn as much as or morethan their permanent equivalents.

35. Against accusations that the UK’s flexible employment model is exploitative, temporary workers inthe UK enter into the temporary worker arrangement in full knowledge of the status, rights, benefits andlimits that apply to that role. There are regulatory requirements in place to ensure that temporary workersengaged and supplied by employment businesses are given written terms and conditions prior to beingsupplied to a hirer, which in part set out the type of contract that is in place and the temporary worker’semployment status under it.



36. Temporary workers in the UK benefit from all statutory worker-based rights. The only protectionsthey do not benefit from are those that strictly attach to individuals employed under contracts ofemployment, such as the right to statutory notice, the right to claim unfair dismissal and redundancy andthe right to return to work after childbirth.

37. The UK temporary worker supplied through an employment business enjoys all worker-basedbenefits and entitlements plus a few more that arise under the Employment Agencies Act Regulations 2003.These are as follows:

— the right to be paid for all work done without any unlawful deductions;

— the right to benefit from employers’ national insurance contributions;

— the right to be paid at least at the national minimum wage;

— the right to written terms of engagement containing details of, inter alia, pay, payment intervals,notice, type of work, and paid holiday entitlements;

— the right to at least the statutory minimum of four weeks’ paid annual leave (pro rated to theamount of work done in any leave year) including public holidays unless otherwise agreed with theemployer/employment business;

— the right not to have to work more than 48 hours per week;

— the right to rest breaks;

— the right to properly regulated night work with the requisite rest breaks and health checks;

— the right, subject to qualification, to statutory maternity pay;

— the right subject to qualification, to statutory sick pay;

— the right not to be unlawfully discriminated against on the grounds of sex, sexual orientation, race,religion, belief, or disability; and

— the right to protection under the health and safety legislation.

38. In addition, a temporary worker seeking work through a UK employment business benefits from thefollowing regulatory protections:

— a worker may not be charged for receiving work finding services;

— any charges that an employment agency/business makes for any of its ancilliary services must beclearly identified and explained;

— a worker must be given full details of the hirer and the position to which s/he is being supplied;

— a worker may not be restricted from working for the hirer directly or for any other person by theemployment business supplying his/her services;

— an employment business must not make payment for work done conditional upon receiving asigned time sheet from the hirer;

— an employment business must not make payment to the worker conditional on receiving paymentfrom the hirer;

— a worker must receive written terms of engagement prior to being supplied or introduced to ahirer; and

— a worker must not be subjected to any detriment on the grounds that they go to work for a personother than the employment business or employment agency;

39. It is also important to remember that under UK law, a striking employee of a hiring enterprise maynot be substituted for a temporary worker supplied by an employment business.

The Recruitment Industry is Committed to High Standards

40. As well as seeking to comply with existing regulations, all REC members are committed to raisingstandards and have to adhere to a specific Code of Conduct. Compliance with the Code of Conduct ismonitored by the REC Standards Department. All breaches are referred to the Professional StandardsCommittee which is made up of industry peers as well as representatives from the CBI and the TUC. Severebreaches result in agencies being expelled from REC membership.

41. The genuine commitment to high standards is also highlighted by the huge response to the “RECAudited scheme”which uses external auditors to verify current procedures and compliancewith regulations.The aim is to encourage employers to use REC members and REC Audited agencies as a way of “freezing-out” unlawful agencies who deliberately flout all regulations.



The Current Level of Flexibility is Desirable and Necessary

42. As highlighted above, the level of flexibility covering temporary work is often overstated. What levelof flexibility there is both desirable and necessary. Day to day demands of business and the resulting changesin demand for labour could not be addressed with a less flexible employment model.

43. Unemployment figures in the UK are the lowest in Europe and UK business is faring better than itsEuropean counterparts. In part this is attributable to the flexible working model at play in the UK.

44. The use of temporary workers by UK companies to address surges in demand as well as temporarydips enables those companies to respond to market forces quickly and cost eVectively. This would not bepossible in an environment where any such demands could not be responded to immediately and anyresponse entailed to costly and time consuming exercise of hiring new staV or letting existing members ofstaV go. The flexibility of temporary work, therefore, to both workers and UK business is vital to the UKeconomy.

45. Clearly, there needs to be a balance between ensuring that temporary workers have rights andprotection and ensuring that business is able to operate eVectively. The cumulative impact of regulationsand red tape is a real threat to employment creation and to the continued provision of eVective recruitmentservices in the UK. Regulations and rights are already in place, any additional burdens would not only havea negative impact on business but would also limit employment opportunities for individuals.

What Must the UK Government Do?

46. The REC believes that greater enforcement of current regulations is essential. Looking ahead, anyfuture legislation must enhance rather than limit the viability temporary work.

Greater Enforcement of Current Regulations is Essential

47. RECmembers are fully committed to high standards and inmany respects the new regulations simplymirror existing obligations under REC Codes of Conduct. Where there have been new requirements toimplement, there has been a genuine commitment to doing so in amanner which is fully compliant. Evidencehas been themassive response to the RECAudited scheme which helps agencies tomonitor compliance withthe new regulations.

48. The Government must avoid new regulations and more bureaucracy and look at some of the areaswhich will really achieve high standards and protection for workers.

49. The most important area for the Government to focus on is the eVective enforcement of existingregulations. It is often said that a bad practitioners will just as happily flout three pieces of regulation as theywill ten pieces of regulation. Agencies who are complying fully with the new regulations and incurring theextra costs are increasingly aggrieved by rogue agencies who are not compliant and are, therefore, able toundercut them in the market place.

50. EVective enforcement is more important than ever, whether it be for the existing EAA Regulationsor other forthcoming legislation such as the Gangmaster Licensing Act. The present system for theenforcement of the EAARegulations is wholly inadequate with only eleven inspectors in an industry whichcounts well in excess of 10,000 businesses. It is interesting to note that the DEFRA Inspectorate for theGangmaster Licensing Regulations—which only focuses on the agricultural sector—comprises of at leastforty inspectors.

51. The other key factor is the need to focus on the end user and to ensure that employers use onlyreputable recruitment agencies and labour providers. In the absence of a licensing scheme for the UKRecruitment Industry as a whole, REC membership is increasingly seen as a key selection criteria andcertainly provides one means for reputable agencies to diVerentiate themselves from the outlaws. The earlysigns are that the REC Audited scheme will take this a stage further. We call upon the Government toendorse this new initiative and to continue working with the REC to promote high standards within theindustry. Clearly, one of the best ways of really promoting high standards within the industry is to ensurethat the rogue operators are “frozen out” by cutting the demand for their dubious services.

Any Future Legislation must Enhance rather than Limit Viability of Temporary Work

52. RECmembers are fully committed to high standards within the industry and to compliance with thecurrent Regulations. However, the extra costs and administration that has been created must be recognised.In the first instance, some of the unnecessary bureaucracy can be addressed by reviewing currentinterpretations of the EAA Regulations.

53. Looking ahead, it will be essential to take theses extra costs and red tape into account when lookingat possible new legislation such as the EUAgencyWorkers Directive. The cumulative impact of regulationsand red tape is a real threat to the continued provision of eVective recruitment services in the UK.



54. Limiting temporary work would not result in more permanent posts being available. Surveys indicatethat only 14% of companies would hire permanent workers to replace temporary workers109. In order toavoid limiting the potential benefits of temporary work in theUKand across in the EU, theAgencyWorkersDirective must include:

— A substantial derogation period before equal treatment provisions between temporary andpermanent employees can apply. The six week derogation period currently proposed is whollyinadequate and would have a substantial impact on temporary work opportunities for individualjob-seekers.

— A definition of what is meant by pay for the purposed of theDirective.Without this it is a logisticalimpossibility to determine pay comparisons and the fact that a substantial number of companiesdo not have formal pay scales further complicates matters.

— A clear list of the basic working conditions covered by the Directive. Basic working conditionsshould only includeworking time, health and safety and equal treatment betweenmen andwomen.

55. The benefits of flexible working and of temporary work in particular, should be one of the messagesof the UK’s forthcoming presidency of the EU.

56. Within the EU, it is estimated that over 7 million workers are employed by the agency work industry.The contribution of agency work to European job creation is increasing on a yearly basis and could lead toup to 4.3 million new jobs between now and 2010110 (10% of the growth targets of the Lisbon Strategy).

57. This contribution must be recognised and the Agency Workers Directive must be reviewed in suchas way as to enhance rather than impair the provision of temporary work.

January 2005

APPENDIX 16

Memorandum by the Small Business Council

I amwriting on behalf of the Regulatory Interest Group (RIG) of the Small Business Council (SBC). TheSBC was established in May 2000 as an independent Non-Departmental Public Body. It has 24 members,almost all of who are small business owner managers and these members are appointed by the Secretary ofState for Trade and Industry. The SBC reports to the Secretary of State on the needs of existing and potentialsmall businesses in order to increase their opportunities of success and growth; advises the Chief Executiveof the Small Business Service; and advises on the eVects of the activities of Government on small businesses.

In response to your press notice announcing the above inquiry, I would like to submit the enclosed report:Evaluation of Government Employment Regulations and Their Impact on Small Businesses. This wasproduced by the SBC in March this year and I believe would be of particular interest and relevance to theInquiry. The key messages from the research undertaken to produce this report are:

— Employment legislation makes no positive diVerence to small businesses.

— Furthermore, it may actually have a negative impact on employment practices.

— Small businesses have a low awareness of employment regulations and see complying with themas a very low priority.

Enclosed is the short version of the report that was published in hard copy111. The full version waspublished as an Internet only publication and can be accessed at this address: www.sbs.gov.uk/content/sbc/rigbigrep.pdf

17 June 2004

APPENDIX 17

Memorandum by the Trades Union Congress

I. Introduction

1. On 7 May the Trade and Industry Committee announced its intention to conduct an inquiry into UKEmployment Regulation that would cover the contribution labour market flexibility makes to the UKeconomy and consider whether the current degree of flexibility is appropriate or desirable, and, if not, whatmeasures the Government should take.

109 McKinsey report “Orchestrating the Evolution of Private Employment Agencies towards a Stronger Society” (2000).110 McKinsey report “Orchestrating the Evolution of Private Employment Agencies towards a Stronger Society” (2000).111 Not printed.



2. This memorandum presents the TUC submission to that inquiry, and argues:

— The debate about employment regulation should take into account the positive advantages ofemployment rights.

— DiVerent forms of labour market flexibility interact: any evaluation of measures to promotenumerical or wage flexibility must take into account their impact on functional flexibility.

— British debates about employment regulation over-state the importance of labour marketflexibility, and this is linked to a “low road” business approach, in which success is built on thefoundation of low prices and low input costs—including pay, training and capital investment.

— In an era of technological change and intense competition UK companies are less likely to succeedusing this approach. Instead a “high road” approach is advocated, based on innovation,investment and high-trust relationships. Unions have a great deal to oVer in an economy that istaking the high road.

— The best business environment for this approach is the European Social and Economic Model,providing social security through generous benefits, a firm foundation of fair employment laws,and social partner involvement at every stage, from the firm, through the regions, to thenational level.

— Specific reforms proposed in the submission include increases in the national minimum wage, anend to the opt-out from the Working Time Directive, the introduction of the Temporary AgencyWorker Directive and reform of the law on employment status, with the presumption that allworkers are covered by employment rights and any exclusions must be justified.

3. The TUC believes that the debate about employment regulation should take into account the positiveadvantages of employment rights. Employment rights help labour markets to operate more eVectively bycreating security, reducing poverty, inequality and social exclusion, and promoting the long-term trustrelationships that are essential if the UK is to succeed in internationally competitive markets.

4. DiVerent forms of labour market flexibility interact: any evaluation of measures to promote numericalor wage flexibility must take into account their impact on functional flexibility1 and vice versa. Some formsof flexibility beloved of classical economists—such as external numerical flexibility2—are much lessattractive when this feedback is taken into account.

5. Employment regulation is a matter of more than just laws. The institutional framework—benefits,active labour market policies, collective bargaining—is essential. The TUC has been arguing for some timethat the UK’s institutions and laws create a “low road” equilibrium, which constrains firms to adoptbusiness strategies that are unsuited for a future of heightened competition. The public policy dimensionof that equilibrium is the characteristic British habit of viewing employment rights only as a constraint onemployers. Industrial and social relations are seen as a zero-sum game, in which any advance for those atthe bottommust mean losses for those at the top. Shelteredmarkets have allowed firms constrained by theseattitudes to muddle through, but this option is disappearing.

6. This submission argues that the creation of a modern “flexicurity” labour market is the counterpartof the “high road” business environment we seek to create. This is not a Utopia—other low-unemploymentEuropean economies have achieved this, using generous but conditional labour market benefits; activelabour market policies; social partner regulation of, and participation in, the labour market and devolvedinstitutions and resources.

7. We conclude by arguing for a number of concrete reforms including further increases in the nationalminimum wage; further tax-benefit reforms to “make work pay”; increased education and trainingopportunities, especially for people from poorer families; an increase in the real value of out-of-workbenefits; increased spending on active labour market policies and (especially) childcare; further measures toimprove work-life balance (including an end to the UK opt-out from the Working Time Directive);continued strong support for regional development based on the RDAs; encouragement for the building ofHigh PerformanceWorkplaces; and the reform of the law on employment status. The keynote reformwouldbe for the Government to promote collective bargaining as a key element of flexicurity, using it to addressissues of low workplace productivity, training and inequality.

II. Employment Protection is a Good Thing

8. It is notable that the title of this inquiry is “employment regulation” but the terms of reference onlymention “labour market flexibility”. This reflects a tendency among some economists only to seeemployment regulation as a problem.

9. But, of course, the laws, institutions and practices that make up employment regulation do more thansimply aVect the degree of labourmarket flexibility in the economy. Theywere introduced to achieve positivesocial and economic objectives, which are valuable in themselves, and the extent to which these objectivesare achieved should be included in any assessment. As Robert Solow commented in his Keynes lecture:

“Every one of these regulations or restrictions was intended to promote a desirable social purpose.Some may do so ineVectively or ineYciently. That is worth knowing; but the fact remains thatwholesale elimination of these ‘rigidities’ is neither desirable nor feasible.”3



10. Since 1997 the Government has re-regulated the labour market. Some politicians and economistsbitterly opposed the national minimum wage, because it would reduce wage flexibility; it would, we weretold, increase unemployment and inflation. In fact, price rises in 1999 (the year the minimum wage wasintroduced) were lower than in the previous year. Employment rose by 250,000 in that year, and it hascontinued to rise alongside the minimum wage, so that there are now a million more jobs than there werefive years ago. 18% of firms aVected by the 2001 increase responded by increasing their use of newtechnology, and the minimum wage has also been responsible for modest increases in training andimprovements in retention and motivation in the low-paying sectors.4

11. The national minimum wage has made life better for many low paid workers. 1.2 million received apay increase, with black and minority ethnic workers and disabled people gaining disproportionately;5 andover a million people have gained from each subsequent increase.6 The national minimumwage has reducedthe gender pay gap by about 1.5%.

12. It is just as misleading to consider the rights introduced by theWorking Time Directive only in termsof reduced flexibility. These rights enhance the eYciency of firms and the country as a whole, throughimproved health and safety—excessive hours are linked to the likelihood of having a road or industrialaccident or of over-exposure to dangerous chemicals and to such conditions as cardiovascular disease,diabetes, stress and depression.7 There is also evidence that the long hours culture restricts women’s progressin the labour market, harms parenting and undermines family life and is linked to low productivity, highlabour turnover and failure to innovate.8 We know that, despite the severe limitations resulting from theopt-out, the Working Time Regulations 1998 led to 6 million people getting an increase in their holidayentitlement, including 2 million who had previously had no holidays at all. This is a large increase in thetotal of human happiness, and it is shocking that many politicians and commentators pay it no attentionat all.

13. We need these rights to have the force of law because there are far too many employers who will donothing, even when better conditions would be in their interests, helping them to maximise the contributiontheir workforce can make to the organisation. The Working in Britain Survey found that “managers arepragmatic enough to adapt to change in the way they treat their employees when it is required of them butfew seem willing to take any positive initiative to introduce workplace reform to meet worker demands oraspirations.”9 The survey was carried out when the Government was considering the right to work familyfriendly hours, a debate that took place after several years of exhortation and advice; the survey found“precious few signs that most employers in Britain are planning in the near future to improve benefits foremployees with specific family responsibilities beyond the bare legal requirement.”10

14. Getting rid of employment legislation would not make the problems it addresses go away. Removerights and workers will try to defend themselves through their unions, weaken the unions and they will turnto the courts. Businesses hate the “compensation culture” that has long been a feature of US employment,where unions have been weak and regulation set at a low level for many years. Its rise in this country hasprecisely mapped the move to deregulation and attacks on unions.

III. Complexities of Flexibility

15. The Committee’s inquiry focuses on labour market flexibility, and this memorandum therefore doesnot discuss product or capital markets in detail. But it does refer to them in places, because labour marketflexibility is undoubtedly influenced by changes in the product and capital markets. As the Treasury hasargued:

“The overall flexibility of the economy depends on the interaction of flexibility in the labour,product and capital markets . . . the overall flexibility of the economy depends on each marketworking as eVectively as possible.”11

16. Equally importantly, just as the labour, capital and product markets influence each other, so to dothe diVerent institutions of labour market flexibility. One of the key contentions of this submission is thatmeasures designed to promote numerical or wage flexibility will aVect functional flexibility, and vice versa.

17. The emergence of labour market flexibility as a common field of study is a comparatively recentdevelopment, and the term has been defined in many diVerent ways in the past three decades. As RobertReich commented when he was the US Secretary of Labor, it went “directly from obscurity tomeaninglessness without any intervening period of coherence.”12 In this memorandum we will use theTreasury’s categories:13

— Geographical flexibility or the ease with which workers can move across the country to anotherjob.

— Employment and numerical flexibility—flexible forms of employment that oVer variations inhours and tenure, and the regulation of hiring and firing.

— Functional flexibility—the ability of the workers to perform a range of tasks, and thereby allowingthem to adapt to diVerent skill requirements or work practices.

— Wage flexibility, real and money wages and relative wages.



IV. Non-wage Flexibility and the UK Economy

Geographical flexibility

18. The Treasury’s 2003 assessment of EMU and labour market flexibility noted that, job mobility is lowin the EU generally,14 but “need not necessarily undermine the flexibility of the labour market as a whole.However, this requires that other characteristics can compensate. That said, more geographic mobilitywould help adjustment where other labour market adjustment mechanisms are slow.”15 The follow-upreport published this Spring added that, with the exception of London, “the net flow between most regionsis generally very small over the year,” though net flows disguised the ease with which people can move—2%of the population moved from one region to another in 2002.16 The Treasury believes that geographicalmobility is, nonetheless, lower than in the USA, requiring special attention from the Government.17 TheGovernment is piloting reforms of Housing Benefit to make it easier for unemployed people to move to findwork, and commissioned the Barker report on housing.18

Employment flexibility

19. The Treasury has argued that a wide variety of employment forms means more people are able toenter and leave the labour market, and for hours to vary in response to changes in demand. There is a greatdeal of hype about new flexible working practices. There are changes, but they are long-term trends, suchas the growing proportion of women in the labour force. Sorting out the real changes from pundits’inventions, we can say:

— Temporary work surged in the mid 1990s, but has been shrinking as a share of employment eversince. Today about 1.5 million employees work in temporary jobs, just over 5% of the allemployees. The big change in the recent years has been within the temporary labour market, withfixed term jobs falling and the number and proportion of agency temps increasing. In 2002 the LFSshowed 290,000 people, or one temporary worker in 6, saying that they were temping for anagency, and the DTI has said that this is probably an under-estimate, estimating the true numberas probably nearer 700,000.

— Second jobs/portfolio working has been portrayed as the future of work, with descriptionsconcentrating on IT literate graduates with a “portfolio” of jobs, not just one. Second jobs areactually more common at the other end of the labour market, where low paid workers need tosupplement inadequate earnings in their first job. Although second job holding is more commonin the UK than the rest of Europe the number of people aVected is falling at the moment. Today,just over 1 million workers have second jobs.

— Homeworking is not going to be the typical pattern of the future. There has been no overall rise inthe total number of people working at home rather than in an oYce or factory, though occasionalworking at home—a day or two a week—is much more common nowadays if we include unpaidovertime by managers and professionals such as teachers.

— Teleworking is replacing more traditional forms of homeworking—so although the overallnumber of people working at home is static the share who say they telework is growing rapidly.But what they often mean is that they are doing some of their work on their own computer—oftenafter the children have gone to bed. People for whom teleworking is their modus operandi are stillrare—fewer than 1% of all in work, and most people statistically classified as “teleworkers” areself-employed or home-based workers such as salespeople or consultants.

— Specialisation and sub-contracting is becoming more widespread, and has helped drive a bigexpansion in areas such as business services. Between 2000 and 2003 recruitment services,computer services and marketing and consultancy services have recorded a 20% rise inemployment. We expect this trend to continue, with strong demand from both the public andprivate sectors for bought-in services.

— Self-employment is increasingly dominated by white-collar professional jobs in areas such asbusiness services. There are about 3.5 million self-employed people in the workforce today, or justover 12%.

— Part time work has grown by 2–3 percentage points in every decade since the start of the 1970s,and we expect this to continue. In recent years the rise in part time work has been related to theincreasing number of students, who more frequently combine work and study than in the past.There are several major employers who now depend on student labour.

20. The 2003 Treasury study gives the UK generally highmarks for labourmarket flexibility, second onlyto the USA. Actually, if the task is to Britain’s employment picture more like America’s we will need a lessdiverse labour market. Part-time work, temporary work and self-employment are more common in Europethan theUS, and the picture for theUK is very similar to that for Europe generally: the UKhas higher levelsof part-time work but less temporary work.19



21. In fact, British usage of alternative, ‘atypical’ forms of employment probably reflects weaknesses asmuch as strengths. As in Europe, about one worker in three on a fixed term contract would prefer apermanent job but was unable to get one.20 The UK has very high levels of ‘occasional’ working at home,but this is likely to be the long hours culture in another guise, rather than evidence of genuine flexibility.Similarly, the large number (by EU standards) of low-hours part-time jobs reflects factors which areunrelated to the flexibility story—lack of childcare, a penal tax-benefit system and the rising number ofstudents taking on jobs to finance their educations.

22. The Treasury assumes that the Working Time Directive’s lack of bite in the UK is a good thing, butthe two most common reasons for long hours have little to do with increased eYciency:

— low basic hourly rates for manual workers, who have to rely on overtime; and

— unpaid overtime by white collar workers—which grew rapidly in the 1990s, powered by theintensification of work.

Numerical flexibility

23. Numerical flexibility is usually taken to have two aspects: internal and external. Internal numericalflexibility is actually much more easily regulated by collective bargaining than by legislation. Unions havelong experience of negotiating on overtime, shift premia and annual hours contracts. Business people whoresent the intervention of outside regulators in these matters might care to consider the advantages ofworking with a union to agree mutual gains solutions.

24. External numerical flexibility—the extent to which employers are able to hire and fire workerswithout reference to standards of fairness imposed by the state—has become something of a totem for thefree-market right. Regulation in this area, they believe, hampers productivity, because firms are unable torespond to changes signalled by the market. Lower productivity eventually feeds through to lower totalemployment, which also results from employers’ reluctance to take on extra workers for fear that they willbe unable to dismiss them, should the need arise. Unemployment will therefore, it is argued, be higher ineconomies with tougher employment protection standards.

25. After the 1997 election Patrick Minford predicted that, together with the minimum wage, the newGovernment’s (verymoderate) plans for strengthened employment would cost more than half a million jobsin the first year, and a million by the end of the second. Recalling this prediction highlights the fact that thisis not the best time to argue that labour market eYciency depends on less secure employment.

26. Far from being a threat to jobs, re-regulation has been accompanied by a significant increase inemployment. Total employment has increased by about 1.5 million since 1997: as the Chancellor boastedin his Budget speech, we have the highest employment levels and lowest unemployment for a generation,with new records being set every month, and most of this growth has come from permanent employee jobs,not temporary work and self-employment.

27. Most anti-regulation arguments from international evidence rely on comparisons between the USAand the EU. This is interesting—between 1979 and 1997 the UKwent as far down the de-regulationist routeas the US, but is much less frequently quoted. There is a good reason for this:

Table 1

JOB CREATION RATES 1971–200421

Annual average employment change UK Eurozone

1971–80 !0.3% !0.3%1981–90 !0.5% !0.5%1991–2000 !0.2% !0.5%1991–95 "1.0% "0.2%1996–2000 !1.4% !1.4%2001–04 (part forecast) !0.7% !0.8%

Jobs growth in the UK has consistently been at around the same level as the rest of Western Europe orslightly worse. Our foray into de-regulation has had no eVect on this pattern.

28. It is a similar story when it comes to unemployment. In the 1960s and 1970s UK unemployment waslower than in the economies than went on to form the current Eurozone, but between 1980 and 1995 theaverage annual unemployment rate was higher in the UK than in the Eurozone. Only in the second half ofthe 1990s has the gap widened significantly between UK and average Eurozone unemployment rates, aperiod when labour market regulation in the UK was increasing.



Table 2

UNEMPLOYMENT PERFORMANCE 1971–200422

Annual averages UK Eurozone

1971–80 3.8% 4.2%1981–90 9.6% 8.9%1991–95 9.3% 9.4%1996–2000 6.5% 9.9%2001–04 (forecast) 4.9% 8.1%

29. And there is no clear relationship between a country’s productivity record and their level of labourmarket regulation. In the chart below, EU member states’ levels of regulation and productivity arecompared. The unbroken horizontal line divides the seven countries with the highest level of regulation withthe seven with the lowest levels. Similarly, the unbroken vertical line divides the higher productivitycountries from those with lower productivity. The chart below shows that there is no clear relationshipbetween regulation and productivity: EU member states are scattered equally across all four quarters. TheUK is outstanding for low regulation and productivity.

Sources: Eurostat and OECD

Figure 1: Productivity and labour market regulation in European countries

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Greece

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Italy

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Productivity (GDP per hour worked, 2002)relative to EU average

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30. All this is hard to explain if flexibility is the only route to labour market success. It probably isn’t:

— A British review of OECD research into the links between employment regulation and labourmarket performance summarised the results as showing that “employment protection legislationhas no significant associations with overall unemployment once other factors are taken intoaccount” and that “it appears more important that the range and type of legislation adopted in aparticular country is appropriate and works well with the other labour market institutions andculture in that country”.23

— A study for the OECD in 1996 by Jackman, Layard and Nickell concluded: “Lower employmentprotection. . .increases hiring and thus reduces long-term unemployment. But it also increasesfiring and thus increases short-term unemployment. The first good eVect is almost oVset by thesecond bad one. The gains from flexibility are small.”

— A similar study by Nickell published in 1997 looked at the underlying causes of diVerences inunemployment rates across Europe and concluded: “Labourmarket rigidities which do not appearto have serious implications for average levels of unemployment include. . .strict employmentprotection and general legislation on labour market standards.”

— A recent study by Nickell concluded: “There is no evidence that employment protection slowsproductivity growth. Indeed, the reverse is more likely.”24



Functional flexibility

31. Workers’ ability to take on diVerent tasks quickly and respond to changes has always been valuable,but this is more true than ever in an era characterised by intense international competition and the use ofinformation technology. Intense competition ensures the existence of a premium for firms that can quicklychange their products and the way they create them, and information technology speeds up the response,cutting the time lapse between strategic and operational decisions. But the ability to do this depends uponhaving workers who can rapidly change what they do and the way they do it, and on an organisation ofwork that allows, encourages and enables them to do this.

32. In the past, UK policy has concentrated on skills shortages (lack of people with the right skills in thelabour market generally) and skills gaps (lack of people with the right skills within firms). Skills shortageshave meant that the recovery phase of the economic cycle has always seen an increase in inflationary wagepressure, and the Treasury’s 2003 EMU assessment pays close attention to this issue. The paper notes thatthe Employer Skills Survey and the BCC and CBI surveys show that that shortages have at least stabilisedsince 1997; but skill gaps aremorewidespread.25Where skills shortages canmean higherwage pressure, skillsgaps are more likely to show up in poor productivity—and it is certainly true that the UK has made verylittle progress in closing the skills gap with the Eurozone economies:

Table 3

PRODUCTIVITY IN 1997 AND 200226

EU % 100 GDP per hour worked GDP per person employed1997 2002 1997 2002

France 110.8 113.7 107.5 108.8Germany 107.3 106.2 99.7 97.4Italy 111.9 113.8 112.6 113.1UK 88.2 88.1 94.0 96.1

This is not a new story. UK Governments have been trying to improve productivity for a long time, butwith very poor results:

Table 4

AVERAGE ANNUAL GROWTH IN GDP PER HOURWORKED, CYCLICALLY ADJUSTED27

1980–90 1990–2000 1996–2000

France 3.2% 2.0% 1.8%Germany 2.5% 1.9% 1.6%Italy 2.4% 2.0% 1.6%EU average 2.7% 1.9% 1.6%UK 2.3% 1.4% 1.5%

33. Skills gaps create a severe limitation in functional flexibility that is experienced at the level of theindividual firm, but which is the expression of a systems problem: the UK’s low skills equilibrium. Skillsgaps are as much a problem of demand as of supply, indeed, the two are roughly in balance. Employers donot recognise the need to increase skills, because theUK’s characteristic business strategy is to competemoreon the basis of low prices than of added value, and high level skills and empowered workers are more likelyto be a problem than an asset for a firm adopting this strategy. As long as firms can survive on this basisthere will be little incentive to change voluntarily. This problem, which is essential to understanding labourmarket flexibility in the UK is expanded on below.

34. In our view, the fundamental barriers to workforce reform include:

— a lack of the resources and/or money needed to implement change;

— excessive workloads, leading to insuYcient time for training and the absence of working timeflexibility;

— reform being focused on restructuring;

— targets and priorities making it diYcult for managers to focus on the ‘soft’ issues of work-lifebalance, skills training Employment Tax Credit; and

— the fact that a disproportionately large amount of the training budget—even in the public sector—goes to managers (80% of skills spending in local government, for instance, is devoted to 20% ofthe workforce).



35. None of these problems are functions of excessive employment regulation. Indeed, new regulationscould help overcome them:

— A right to paid time oV for training.

— Extension of the employer training pilots.

— Exploration of the possibility of a skills levy in certain sectors.

V. Wage Flexibility

36. There are three broad categories of wage flexibility:

— Relative wage flexibility: the ability of wages to adjust across diVerent jobs or regions as demandand supply change (for example, wages in occupations or regions in decline will fall relative towages in expanding occupations and regions).

— Real wage flexibility: the ability of wages in real terms (after adjusting for inflation) to respond tochanges in unemployment and labour demand.

— Nominal wage flexibility: the ability of wages in cash terms to respond, including overtime, andbonus payments).

37. The Treasury’s 2003 EMU assessment concluded that regional wages had become more responsiveto unemployment rates between the mid 1970s and the mid 1990s—in other words, wages grew more slowlyin high unemployment regions, making them more competitive in labour cost terms and helping reduceregional unemployment rate diVerentials.28 Our conclusion is that there is no convincing evidence thatrelative wage flexibility has significantly reduced diVerences in regional labour market performance:

— Regional labour markets are an artificial concept—with the partial exception of London and theSouth East, pay in the UK is set at the national and local level.

— The real economic diVerences within the UK are not between regions but at the sub-regional level.The UK has relatively small diVerences in economic prosperity measured at the regional level buthuge diVerences when measured at the sub-regional level.

— The Treasury’s own regional productivity report concluded that: “relative labour marketperformance has been remarkably stable since the interwar period”.

Wage flexibility across jobs

38. According to the Treasury study, in flexible labour markets wages will fall in jobs for which demandis falling, when compared with the wages of workers in jobs in demand. Earnings inequality is therefore asign of increased flexibility, which we should welcome, not worry about.29

39. It is no surprise that over the past twenty years the wages of, for example, a hotel porter have grownless strongly than aCity analyst; this reflects their respective bargaining strengths. But no one could seriouslythink that the former could move jobs in response to the higher wages oVered by the latter. The labourmarkets at the top and bottom occupy such diVerent worlds that changes in the wage gap between the twotell us nothing about relative wage flexibility.

40. The growth of wage inequality is far more likely to be the old story playing out of labour marketprivilege for those at the top and labour market exploitation at the bottom. The UK has experienced oneof the biggest increases in labour market inequality over the past twenty years, behind only the USA andNew Zealand. Institutional factors such as the decline of collective bargaining, weaker employmentprotection laws, and cut backs in the social welfare safety net have all had a major role to play in explainingthe rise in wage inequality in the UK.

41. Another argument says that demand for better qualified labour in the UK and other OECDeconomies hasmeant that the wages of those with education has gone up relative to thosewithout education.The growth in wage inequality is therefore primarily caused by “the returns to education” having risen.

42. Widening inequality in education opportunities—with chronic under-investment in state educationand a failure to develop a vocational system for those unable to access higher education—must have hadan important role to play in wage inequality. In addition, the explosive growth in child poverty in the 1980sand totally inadequate nursery school provision reinforced social divides in educational opportunitiesespecially in the early years. In 1979 only 13% of children lived in poverty, but by 1996 this had increasedto 33%.

43. A recent study concluded that people born into a poor household in 1970 and therefore entering thelabour market from themid 1980s onwards stood less chance of moving into higher income brackets in laterlife than someone born into a poor household in 1958 and entering the labour market from the mid 1970sonwards. The study concluded that this fall in social mobilitywas partly because “a greater share of the rapideducational upgrading of the British population has been focussed on people with richer parents”.30



44. Higher returns to education can only be part of the explanation. Many graduates are undertakingwork for which a degree is not necessary, suggesting that employers are using university education as a filterfor other desirable characteristics.

Real wage flexibility

45. In principle, labour markets can respond to a sudden economic shock—a sharp and sustained rise inthe oil price for example—by slower growth in real wages (wages after allowing for inflation) rather thanhigher unemployment. This is the logic behind many national agreements, social contracts and the likebetween governments, unions and employers across Europe and (historically) in the UK.

46. The Treasury summarises the results of 23 studies over the past 40 years looking at how real wagesrespond to changes in unemployment in theUKagainst otherOECD economies. But as they all use diVerentmethodologies, diVerent comparators, look at diVerent periods and generate diVerent results it is hard todraw any firm conclusions. The Treasury has developed a statistical measure for the UK that shows realwages have become more responsive to unemployment, but admit that “the change is not statisticallysignificant”.31

Nominal (money) wage flexibility

47. Real wages could come under pressure because inflation increases sharply or because of cuts inmoneywages. In practice workers have resisted cuts in money wages and some employers may be reluctant toimpose them. So wage flexibility is more likely to occur through changes in real wages rather than moneywages.

48. However, resistance is likely to be weaker when inflation is very low, so money wages can fall withoutpeople experiencing real terms loss of income. This may simply reflect the ability of some employers toexploit workers in weak bargaining positions rather than as an example of genuine negotiated wageflexibility. As recent exampleswithmigrantworkers show, those in veryweak bargaining positionsmay havelittle choice but to accept wage cuts.

49. The Treasury argue that the UK has money wage flexibility through the annual bargaining round,allowing pay to respond to changing labour market circumstances. Pay can also be adjusted on an annual,monthly or weekly basis through changes in overtime or bonus payments.

50. The Treasury oVers no international comparisons to suggest whether nominal wage flexibility isgreater in the UK than elsewhere. However, the evidence shows that wage flexibility appears to be as greatin Europe as in the UK or in the US.

— A recent report by the European Commission undermined claims for the significance of wageflexibility, finding that wage responses to inflationary shocks were “surprisingly similar” in theEurozone and the USA, that “nominal factors probably do not play a major role in changes inunemployment” and that “the finding of broadly similar degrees of nominal inertia makes itdiYcult to identify institutional labour market characteristics as the major determinants ofnominal rigidities.”32

— A recent study found that both France and the UK had annual contract durations, most otherEuropean economies between two to three years, but the economy with the longest contracts wasthe US with deals of between three to five years.

VI. Is the Current Degree of Flexibility Appropriate or Desirable?

51. To some business representatives the obvious answer to this question is no, the UK is losing itscompetitive edge as increased regulation creates a ‘red tape burden.’ This view has been repeatedlyarticulated by Digby Jones, Director General of the CBI:

“Our flexibility has been steadily eroded by ever increasing regulation and there is still more tocome onto the statute book.We now face a real danger of our advantage being destroyed and thereare clear signals that firms will go elsewhere if they are burdened with more legislation”.

“There is absolutely no room for complacency on this issue. The threat is not somuch that jobs willgo toFrance andGermany but to India, China andBrazil. The governmentmust resist pressures toregulate further, much of which is coming from Europe and from trade unions.”33

52. Mr Jones’ argument assumes that countries have no alternative to social dumping, to cutting taxesand reducing the level of regulation if they want to keep jobs. Indeed, his argument suggests that we mustbring our standards down till we can compete with India, China and Brazil; that is, that British prosperitydepends on lower wages and less secure jobs. This is nonsense; UK businesses will never be able to competeon labour costs with nations in the developing world, or with the EU accession countries. Nor should they:our continued prosperity depends not on low labour costs and deregulation but on innovation and addingvalue to products and services. The recipe for this future is improved management, sustained investment in



people and capital, a focus on best practice and a business environment that sustains long-term eVorts tomove up the value chain. The UK’s still modest level of regulation and low wages are not the obstacles tothis.

53. Last year theDepartment of Trade and Industry publishedUKCompetitiveness:Moving to theNextStage, a study commissioned from Prof Michael Porter. Prof Porter concluded that British businesses arenot being held back by a ‘red tape burden,’ high taxes or too many holidays and rights to time oV. In fact:

— “The UK has the lowest level of product and labour market regulations in the OECD.”34

— There is a “generally competitive system of business taxation with incentives for R&D investmentsand investments in economically distressed areas. The overall level of taxation is slightly lowerthan in many other advanced economies; this relative advantage of the UK has, however,decreased in recent years.”

— “The UK currently has one of the highest levels of labour force utilisation in the OECD,” (that ishours worked per employee, employment rate and labour force participation rate) “behind onlyJapan and the United States.”

54. Any impartial observer will find the facts persuasive:

— An OECD survey35 of business regulation in 1998 ranked the UK 21st out of 21 countries.

— And 20th on measures of the severity and costs of employment protection laws.

— An independent study36found that corporate tax rates in theUKwere lower than in theUS, Japan,Germany, France, Italy and Spain.

— A US Bureau of Labor Statistics comparison of labour taxes37 found the UK ranked 20th out of25 industrialised countries, well below the US.

— Comparisons byONS38showed average profitability in Britain in 1998–99was 12% comparedwith9% in the US and Spain, 8% in Canada, 5% in Japan and 4% in Germany and the Netherlands.

55. But the evidence that convinced a former adviser to Ronald Reagan has not yet persuaded everyonein Government. The DTI’s Regulatory Impact Assessments for employment legislation regularly overstatethe costs of such measures whilst making no estimation of the likely benefits. When dealing with theWorking Time Directive, for instance, the DTI’s methodology has been to estimate the total hours that arecurrently worked above the 48-hour limit and then suppose that new employees will have to be recruited towork all of them. Their Assessment does refer to the personnel and health and safety benefits, but these aregiven no money value and they are not oVset against the costs.

56. The Treasury appears to be an even bigger sceptic. Its 2003 assessment includes a new index of labourmarket flexibility,39which claims to measure how responsive to an economic shock a labour market wouldbe. This index awards the best scores to countries with low benefits, less employment protection legislation,low/no minimum wages, low labour taxes and weak unions.

57. This index prompts a question: if the Treasury really believes that the route to flexibility is via wageinequality, weak unions, low labour taxes and ineVectual employment regulation, what should we make ofa Government that has introduced the national minimum wage, reduced the qualifying period foremployment protection to one year and increased National Insurance Contributions? The Treasury’sapproach should lead them to expect a less eYcient labour market, yet their assessment is that flexibility hasimproved since 1997.

58. It is notable how little relationship there is between this supposed determinant of flexibility and thecountries’ actual labour market performance.40 What this suggests is that, far from there being a simpleblueprint for labour market success, countries have a choice,41 and it makes sense to aim for an approachthat combines high functional flexibility with high productivity and good social and employment outcomes.

59. Interestingly, this point is particularly well made by Jonathan Michie and Maura Sheehan, who arequoted in the Treasury’s 2004 assessment as supporters of flexibility.42 Their survey of hundreds of Britishfirms actually led to a much more nuanced conclusion that is worth quoting at length:

“Any simple-minded view of deregulated labour markets creating a flexible labour market andhence an innovative and dynamic economy is thus found to be dangerously simplistic. Creatingthe right sort of flexibility can indeed pay dividends. Allow the wrong sort of flexibility and firmsmay be tempted down a cul-de-sac which allows some short-term pay oV by shifting the bargainingpower in their favour vis-a-vis a more insecure workforce. But this is the wrong route to go downfor improved productivity and competitiveness based on quality and high value added. In short,the sort of labour flexibility that Government should be encouraging requires investment inpeople. The real danger that simple minded policies for labour market deregulation pose isundermining the confidence of firms to invest in their ownworkforce, for fear that increased labourturnover may lead to the returns on such investment being lost. Labour deregulation may thusinadvertently lead to a lower level of the sort of flexibility that is associated with innovation andgood corporate performance. A regulated labour market on the other hand can actually underpinthe sort of investment by firms in their own workforce that creates the ‘win win’ outcome ofpositive human resource management practices such as high levels of training and involvement,along with improved corporate outcomes in terms of motivation, productivity and profitability.”



VII. The Way Ahead

60. The TUC believes that a key strategic economic task facing the UK is how to achieve a systemicchange, moving out of the “low road” rut—competing on price not innovation, with low investment inphysical and human capital. As Michael Porter said, this means a transition from being:

“a location competing on relatively low costs of doing business to a location competing on uniquevalue and innovation. This transition requires investments in diVerent elements of the businessenvironment, upgrading of company strategies, and the creation or strengthening of new types ofinstitutions.”43

61. Crucially, this transition will depend upon creating high performance workplaces. In recent yearscommentators, academics and personnel professionals have come to recognise the importance of the wayin which an enterprise organises the work it does. In the UK, a CIPD study of manufacturing companies44has been influential: in the firms studied, HRM practices relating to employee skills and job designaccounted for:

— 19% of the variation between companies in change in profitability, and

— 18% of the variation in change in productivity.

62. In other words, how a company manages its staV directly aVects both firms’ profitability objectivesand the Government’s productivity agenda. The import-ant reforms have been those designed to get themost out of the organisation’s employees—by enhancing their capacities, removing barriers to utilising theseenhanced capacities and increasing employees’ motivation to do apply them.

63. Firms that succeed in doing this will become substantially more functionally flexible. A key highperformance reform is to enhance employee participation, bringing decision-making closer to theoperational level. More decision-making by front-line workers increases the pace of innovation, freeingmanagers to take amore strategic view and to plan further ahead. Even where decision-making has not beendelegated, an organisation that oVers more information to employees and is more willing to listen to themwill still achieve worthwhile results. Firstly, this is an excellent way to tap into the company’s best sourceof market intelligence—front-line staV are often the first to become aware of problems or opportunities.Secondly, a commitment to employee involvement is the first step on a ladder of business gains:

— Involving employees in decision-making and giving them a real influence over decisions leads tohigher morale and to staV being more likely to support workplace change.

— This in turn means that supervision can be less intensive.

— So managers spend less time fire-fighting minor or day-to-day problems.

— Freeing them to deal more expertly with serious and strategic issues.

64. Obviously, a high level of trust is the essential basis. Decision-making cannot be delegated to peoplewho think they are being exploited, and people who are scared to tell their managers the truth cannot berelied upon. Trust cannot be assumed or coerced, and workers will only trust employers who recognise theirright to disagree. Organisations that trust their employees and hope to be trusted in return will accept this,and welcome a genuinely independent voice for their workers:

— The more important a decision is, the greater the risk posed by issues where there are real conflictsof interest between employees and their employers.

— Representative participation can reassure workers that their interests have been fairly taken intoaccount—but only if they trust their representatives.

— Workers are more likely to give that trust to their representatives if they believe they areindependent.

— TUC research45 suggests that, when employees are confident about their representatives’independence, they will then be happy to see them working in partnership with the employer.

65. But the high road’s clear business advantage has a price: it reduces the profitability at the level of thefirm of crude exploitations of wage and numerical flexibility. Morale and the quality of relationships makemore diVerence to whether an organisation can achieve the high performance model than any set oftechniques or policies that can be ticked oV a list.

66. This conundrum may help to explain why the high performance model is (all commentators agree)comparatively rare. TheWorkplace Employee Relations Survey suggests that the proportion of companiesthat have adopted it is no higher than one in seven.46 The attitudes and assumptions that lead to workersbeing treated as mere factors of production may also hinder the adoption of the high performance model.This approach requires investment in training, and respect for the workforce.

67. The “low road” business model, by contrast, does not require managers to have any respect for theirstaV—indeed, it is a disadvantage. A study of firms in the pharmaceuticals and aerospace industriesdescribed managers failing to consult (or even inform) their staV about major work organisation changes,but still complaining that workers and the union would not get involved.47The author of another case studyreport remarked on how frequently the managers refused to accept the legitimacy of workers’ responses tochanges, and on how “employees were often seen as the problem rather than as the means through whichsolutions to problems could be found.”48



68. This is why the TUC has strongly welcomed the Information and Consultation Directive andRegulations. One of the advantages of the Directive may well be that when companies have to inform andconsult their workers it will encourage them to adopt reforms that will be in their own long-term interests.This enhancement of employees’ ability to articulate their interests will encourage the development of highperformance workplaces and help achieve a greater degree of fairness at work.

69. We want, however, to be clear in this submission that our aim is not to damn the managers of ‘lowroad’ companies. Like many British business people they are caught in what Finegold and Soskice in aninfluential 1988 article described as a “low-skills equilibrium, in which the majority of enterprises staVedby poorly trained managers and workers produce low-quality goods and services.”49 Firms caught in thisequilibrium would rarely have room to invest in work organisation or upskilling, and indeed such aninvestment might not be worthwhile for them. Firms producing low-quality goods usually have to competeon the basis of cost, and “Fordist” production remains ideally suited to them: minimally skilled workers,performing standardised tasks can produce cheap goods and services.

70. The TUC has elsewhere50 looked at the factors that produce this equilibrium, including the skills andqualifications ofmanagers, the viability of alternative business strategies, the rules relating to ownership andcorporate governance, union weakness, the attitudes of stakeholders and the legal environment. What isworth noting here is the connections between, on the one hand, the low road and the worship of labourmarket flexibility, and on the other hand, between the high performance model and a decided emphasis onfunctional flexibility.

71. The labour market model favoured by the TUC builds on high performance workplaces and theEuropean model of a generous welfare state and investment in active labour market policies. The high roadto success is built upon secure jobs with secure wages, and the new rights introduced over the past six yearsmust be the start of reform, not the terminus.

72. In today’s terms security doesn’t just mean freedom from unfair discrimination or dismissal, it alsomeans that every worker must be able to combine their job with their family life. This is not just a matterof “balancing work and family responsibilities”—family life is a right, guaranteed by the EuropeanConvention on Human Rights, and that right should be as secure from infringement at the workplace as itis from state restrictions. All this suggests an agenda for strengthening our employment rights:

— An adequate minimum wage, providing a foundation for greater equality in original incomes.

— A serious attack on the long hours culture.

— Substantial public investment in childcare, making it free or at least a great deal cheaper for manymore parents.

— Basic employment rights for all workers, whatever their status.

73. We argued above for the success of the national minimum wage and the Working Time Directive.The minimum wage has already been raised without an adverse impact on unemployment or inflation, andit can be raised again. The long hours culture is not conducive to the causes of health, higher productivityor attracting women into the workforce; the opt-out from the Working Time Directive should be ended asquickly as possible.

74. The TUC has welcomed the European Commission’s proposals for a Temporary Agency WorkerDirective that would give agency temps equal treatment with other workers in such areas as pay, workingtime and holidays. While significant numbers of people in all forms of temporary job move into permanentwork, agency temping can still be a very insecure form of employment. As the OECD warned in a recentsurvey:51 “persons spending an extended period of time in temporary jobs may be compromising their longrun career prospects, in addition to being subject to considerable employment insecurity”. Agencies areexpanding and doing well in other European labour markets where regulation is far more extensive andagency workers are often automatically covered by collective agreements. There are no convincing reasonwhy UK agencies and UK employers cannot operate just as eVectively with the Directive as Europeanagencies and European employers.

75. Finally, it is becoming a matter of urgency that the Government should reform the law onemployment status. DTI research says that the status of 30% of the workforce is unclear; they may qualifyfor employment rights, or they may not—only an Employment Tribunal can determine the issue. TheOECD has commented on the blurring of boundaries between diVerent categories, and it is clear that theuse of casualised labour is increasing:

— In the distribution, hotels and restaurant sector there have been large increases in agency andcasual workers. By 2002, 61% of staV working in hotels and restaurants were in “casual” work.

— In the banking, finance and insurance sector the use of casual workers hasmore than doubled since1992, while the number of agency workers has increased by 150%.

— In transport and communications, the numbers of agency workers in this sector have tripledsince 1992.

76. The Government’s intention when introducing the Working Time Regulations was to ensure that allbut the genuinely self-employed should benefit. However, union lawyers have reported a series of caseswhere individuals, mainly freelancers, who are economically dependent on one or a limited number of



employers, have been treated as self-employed as opposed to “workers” under these regulations. Apiecemeal approach, treating diVerent groups of workers diVerently, would only add to existing complexityand exacerbate the already unequal treatment of diVerent groups. The TUCbelieves that employment rightsshould be extended to a broad category of workers: the presumption should be that all workers are coveredby employment rights and any exclusions from the definition must be justified, and the burden of proofshould rest on the employer. All employment rights should be extended in this way, including health andsafety protections, trade union rights, the right to a written statement of terms and conditions ofemployment, the full panoply of family friendly rights and unfair dismissal and redundancy protections.

77. Above all, we need a new approach to labour market flexibility in the UK that recognises the centralimportance of collective bargaining and the development of labour market institutions that promote socialdialogue between employers and trade unions. High collective bargaining coverage and a strong andsystematic role for social partners in labour market institutions give other European economies an in-builtadvantage. When regulation is needed it can be introduced flexibly and quickly, but often it is the collectivebargaining and institutional framework that eVectively regulates the majority of the labour market.Moreover, such an approach means that the focus is firmly on how to improve functional flexibility andcreate high performance workplaces. This is a key reason why in terms of workplace productivity nine outof the world’s top 10 economies are European.

Notes

1. The ability of workers to undertake new tasks and of organisations to organise themselves in new ways.2. Numerical flexibility is usually taken to mean the organisation of the workforce in a way that makes itpossible for an organisation to cope with changes in demand. Internal numerical flexibility typically meansthe use of shift-working, overtime etc, whilst external numerical flexibility often means recruitment anddismissal.3. “What is Labour-Market Flexibility?What is it Good For?”, RobertM Solow, Proceedings of the BritishAcademy, Dec 1998, pp 189–211.4. The National Minimum Wage, Low Pay Commission, 4th report, 2003, pp 61, 231 & 236.5. Ibid, para 2.16.6. Ibid, para 2.20.7. The Use and Abuse of the “Opt-Out” in the UK, TUC, 2003, quoting: The use and necessity of Article18.1(b)(i) of the Working Time Directive in the United Kingdom, Barnard et al, EC, 2003; Working LongHours, HSE, 2002; “Married to the Job”,Occupational Health and Safety, July 2001;Working Long Hours:A review of the evidence, Kodz et al, DTI Employment Relations Research Series 16, 2003; Living to WorkSurvey, CIPD, 2003;Reducing at-work road traYc incidents,Work-Related Road Safety TaskGroup,HSE /DTLGR, 2001; “Working Long Hours and Health”, J M Harrington, BMJ Supplement, Vol 308, 1994.TUC analysis of the 2002 Labour Force Survey looking at hours of work and rate of industrial injuries,found a consistent gradient, with people working under 16 hours a week having an accident rate per hundredworkers of 1.5, while those who worked more than 60 had a rate of 4.9.8. Ibid, quoting: Barnard et al; Parenting in the 1990s, Ferri and Smith, JRF, 1996; Step-parenting in the1990s, Ferri and Smith, JRF, 1998;How do they find the time?; Dex et al, JRF, 2003; The Business Contextof Long hours Working, Hogarth et al, DTI Employment Relations Series 23, 2003.9. Taylor,Managing Workplace Change, ESRC, 2002.10. Op cit.11. Flexibility in the UK Economy, HMT, March 2004, para 3.1.12. Quoted in “Unemployment and External and Internal Labor Market Flexibility”, David Kucera,Center for Economic Policy Analysis, CEPA Working Paper 11, 1993, p 4.13. EMU and Labour Market Flexibility, HMT, 2003, para 2.59.14. Ibid, para 2.69.15. Ibid, para 2.84.16. Flexibility in the UK Economy, HMT, March 2004, para 4.15.17. Ibid, para 4.16.18. Ibid, paras 4.17–4.18.19. Why the French are Right: answering the flexibility myth, TUC, 1999, quoting data from EuropeanCommission, European Employment Observatory, US Bureau of Labor Statistics and UK Labour ForceSurvey.20. EMU and Labour Market Flexibility, HMT, 2003, para 2.96.21. European Economy 4, annex table 2 and 5, annex table 27, European Commission, 2002.

22. European Economy 4, annex table 3 and 5, annex table 28, European Commission, 2002.

23. “Some Labour Market Implications of Employment Legislation”, Labour Market Trends, September2001.



24. Job Tenure and Labour Reallocation, CEP, 1998.

25. Ibid, para 2.104.

26. Productivity, Partnership and Institution Building, TUC, 2003.

27. Ibid.28. Ibid, paras 2.15—16.

29. Ibid, chart 2.2.

30. Changes in IntergenerationalMobility in Britain, J Blunden, AGoodman, PGregg and SMachin, IPPR,2002, p 18.31. Op cit, para 2.31.

32. “Wage flexibility and wage interdependence in EMU: some lessons from the early years”, EuropeanEconomy, European Commission, June 2003.

33. CBI Press Notice 24/10/02. We should be careful about claims from business organisations, which mayover-state or distort employer concerns. In 1999 the Small Firms Research Trust surveyed firms to find outwhich regulations took up the most time: 72% said VAT, 57% PAYE, 48% self-assessment, 25% said healthand safety and just 5% said the working time directive, 3% the minimum wage and 123% all otheremployment related legislation. (Quarterly Survey of Small Business in Britain, SBRT, Dec 2000.) Researchfor the DTI by the Small Business Research Centre at Kingston University (Small Firms’ Awareness andKnowledge of Individual Employment Rights, 2002) asked people running small businesses to identify themost important factors aVecting performance. The authors concluded that “the impacts of individualemployment rights on small firms are not widespread.” Just one respondent in six cited any governmentlegislation or regulations (ie not only employment regulation), more popular contenders were competitionand financial considerations such as cash flow, debt, rents, interest rates. A substantial minority (about athird) said that employment rights had a positive impact—providing guidelines and clarification in settingterms and conditions for their employees and around 10 per cent said they “raised staV morale andengendered a feeling of security”. In other words, more employers saw regulation as good for business thanbelieved that regulation hampered entrepreneurship and business growth.34. Op cit, p 25.

35. Economics Working Paper 226, OECD, April 2000.

36. “The Case for International Tax Co-ordination Reconsidered,” Peter Sorenson, Economic Policy,CEPR October 2000. Tax rates on retained corporate income in 1999 were 30% in the UK, 35% in Spain,37% in Italy, 38% in the US, 40% in France, 48% in Japan and 52% in Germany.

37. Social insurance and other labour taxes as a percentage of hourly labour costs for production workers inmanufacturing,BoL, September 2000. In 1999 these were 13% in theUK, 21% in theUS, 24% average acrossthe EU.38. Economic Trends, December 2000.

39. EMU and Labour Market Flexibility, paras 4.73–4.78, created by pooling replacement ratios,unemployment benefit duration, spending on active labour market policies, employment protectionlegislation tax wedge and union density, coverage and co-ordination. Actually, the index measures labourmarket rigidity: the lower a country’s score the more flexible it is meant to be.The index shows the UK having the best score in Europe—only the USA does better among advancedindustrial nations—but it produces some idiosyncratic results: Italy and Spain, apparently, have moreflexible labour markets than the Netherlands, Sweden or Denmark (not a consensus view.)

40. Op cit, chart 4.12. If we rank the countries by their unemployment level, giving their flexibility rankingin the second column, we can see how little relationship there is between the two:Countries and their flexibility rankings, ranked by unemployment

Country Flexibility ranking

Switzerland 3Ireland 6Austria 7Netherlands 14Norway 15Denmark 19USA 1UK 2Japan 4New Zealand 9Australia 10Sweden 13Canada 5Germany 8Italy 11



Country Flexibility ranking

Spain 12Portugal 16Finland 17France 18Belgium 20

41. As Richard Freeman has observed: “Once a country has a strong tradition of basic market freedoms ithas considerable leeway in the precise way it structures its institutions. Advanced capitalism is a sturdyeconomic system that allows for a diversity in institutional arrangements.” (Institutional DiVerences andEconomic Performance Among OECD Countries, Richard B. Freeman, CEP discussion paper 557, 2002.)42. Op cit, box 3.2.43. UK Competitiveness: Moving to the Next Stage, M Porter, DTI, 2003, p 5.44. Impact of People Management Practices on Business Performance, Patterson et al, IPD, 2002.45. What Workers Want from Workplace Organisations, Diamond & Freeman, TUC, 2001.46. Britain at Work, Cully et al, HMSO, 1999, p 295.47. High Involvement Work Systems: The Only Option for UK High Skill Sectors?, C Lloyd, SKOPEresearch paper 11, 2001, pp 15–16.48. PeopleManagement in UKAerospace: Case Studies, MThompson, TempletonCollege for SBAC, 1999,p 67.49. “The Failure of Training in Britain: Analysis and Prescription”, D Finegold & D Soskice, OxfordReview of Economic Policy, vol 4, no 3, p 22.50. The Low Road, TUC, 2002.51. Quoted in Agency Work in Britain Today, TUC, 2003.

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uk employment regulation · mr michael clapham mp (labour, barnsley west and penistone) mr jonathan...

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