Employment legislation affects businesses from all sectors and has an even greater impact on medium, small and micro businesses who due to their limited administrative resources and their economic vulnerability are overstreched by the additional employment regulations.
The Government develops employment legislation on both a national and European level and BCI continues to monitor all legislative developments around employment law and responds to numerous Government consultations through out the year to ensure business voice is heard where it matters.
The National Minimum Wage (NMW) was introduced in April 1999. For those aged 22 and over the minimum wage was set at £3.60 per hour. For 18-21 year olds the figure was £3.00 per hour. The rate has increased rapidly in the past two years.
The Adult Rate (workers aged 22 and over) now stands at £5.73 ph, following the increase on 5 March and the Development Rate (those aged 18-21) increased to £4.77ph. The Low Pay Commission in April 2006 confirmed that future increases will be in line with wage inflation and the March 2008 increase was 21p an hour. This is a significant policy success for BCI which has lobbied consistently on the case to link increases to inflation.
BCI supports the minimum wage, as it believes that employers should fairly remunerate their employees. However, the NMW should be weighted to inflation and average wages growth. BCI is concerned the annual NMW rise is economically unsustainable as it continues to rise above the rate of inflation and average earnings growth. BCI research indicates that the NMW annual rise is having an increasingly adverse impact on business of all sectors and sizes in regards to disproportionate affects on pay, dropping profit margins and higher prices. In addition, the cost of implementing the NMW, administratively and financially, is also becoming a problem for all businesses, not just SMEs.
The Government must do more to ensure that businesses have the right management practices in place to minimise the detrimental impacts of the NMW on their workforce.
Annual Holiday Entitlement
In September 2006 the Government consulted on the DTI proposal to increase the annual holiday entitlement to include the 8 permanent bank and public holidays in Britain. This would take the statutory minimum up to 5.6 weeks from 4 weeks, an equivalent of an increase from 20 days to 28 days for someone working a five-day week.
BCI strongly opposed the Government’s proposal for several reasons. Firstly it is an unnecessary regulation, as the majority of companies already offer over 28 days holiday or more. Secondly for SMEs the impact of the Government’s proposal to increase holiday entitlement will have a major impact on their profit margins. Government must find a way to encourage and incentivise businesses voluntarily rather than forcing further regulations.
BCI urged the Government not to introduce the regulation as the present system is already working well with the majority of businesses already offering 28 or more days annual leave, without the need for regulatory enforcement. The majority of businesses will lead by example using holiday entitlement to attract high calibre staff.
The Government have decided to phase the implementation of the regulations. For businesses who do not offer their employees 28 days annual leave or more - this can include bank and public holidays - then as of October the 1st they will have to review the entitlement they offer to staff. Employees will be eligible for four extra days holiday as of the 1st October 2007 and a further four as of the 1st October 2008.
Working Time Directive
When the Working Time Directive was implemented into UK law in October 1998, the UK negotiated an ‘opt-out’ to the 48 hours maximum working week. Employers and employees could agree in writing to exclude the 48 hours from individual employment contracts.
During the UK’s presidency in 2005 the opt out was reviewed but in May 2006 the European Parliament voted to end the opt out. Following the vote, the Austrian presidency in the first half of 2006, proposed a compromise that retained the opt-out, with tightened conditions. Under these proposals businesses would be allowed to deviate from the 48-hour maximum working week, for the purposes of a special project or change in business conditions, subject to agreement between the employer and employee. However agreement could not be reached on either the opt out or whether to count working time per person or per contract.
The British Government has stated a strong commitment to retaining the opt-out. Following the vote in the European Parliament, the Prime Minister committed the Government to work to reverse the result, however no timetable for these discussions has yet been established.
The Chamber network has worked closely with the Government, European Commission and European Parliament to ensure that the Directive provides maximum flexibility.
BCI believes that the availability of an opt-out from the 48-hour maximum working week is beneficial to both employers and employees. Business needs a flexible economic environment to maximise productivity and profitability. A central ingredient to this environment is a flexible labour market.
BCI does not support a long hours working culture. However, employees should have the choice whether or not to work longer hours. The freedom for employees, with the agreement of their employer, to define their working hours is of benefit to both.
Removing the opt-out cannot be justified on health and safety grounds. The UK has one of the best records on health and safety in the EU and has also recently legislated to promote flexible working practices. As a result the number of hours worked in the UK is declining.
If the opt-out is being abused, this must be addressed. However, this should not be a justification for removing the opt-out but rather a justification for improving the implementation and operation of the opt-out.
Temporary and Agency Workers (Equal Treatment) Bill
EU Temporary Agency Workers Directive
On the 20th May 2008, it was announced that temporary and agency workers would be given the same employment rights as permanent staff after twelve weeks under proposals agreed by the British Government and Trade Unions. Under these proposals, agency workers would be given equal pay and holiday entitlements after 12 weeks in a job. The agreement does not cover sick pay or pension payments. It is estimated that there are 1.4 million temporary agency workers in the UK.
The Government is now looking to engage with its European partners to seek agreement on the terms of the Temporary Agency Workers Directive that will enable the British Government to put forward this legislation of its own. The Government hopes that EU agreement will be obtained in time for the necessary UK implementing legislation to be introduced in the next parliamentary session.
BCI believes that this announcement is likely to reduce the employment opportunities that agency work offers for both businesses and those individuals who choose to work through an agency. A flexible UK labour market is clearly of national importance as the economy faces difficult times ahead.
The draft EU Temporary Agency Workers Directive aims to create parity of working conditions and benefits between permanent and temporary workers in all member states. Temporary workers would be given comparable pay, leave entitlements and other benefits.
BCI along with the Government and other representative bodies, have consistently argued that the proposed Directive could backfire against those it is intended to help, by reducing flexibility less businesses are likely to employ staff. Currently the legislation includes a 6-week period before a temporary worker is entitled to the same benefits as a full time employee. To date there has been no agreement on the Directive. In September 2004 the Directive returned to the agenda during the Dutch presidency, however the UK, Ireland, Denmark and Germany maintained their blocking position, joined by Poland, Slovakia and Malta. Any decisions on the Directive were temporarily postponed until the Services Directive was resolved. The Finnish Minister of Labour stated, in the European Parliament’s Employment Committee in July 2006, that the presidency would work with the Commission on a new proposal. BCI continue to monitor developments.
Modernising Labour Law Green Paper
The EU Commission has launched a Green Paper on modernising labour laws for the 21st Century. The purpose of the Green Paper is to launch a public debate in the EU on how labour law can be updated to meet the key challenge of greater adaptability of workers and enterprises. This objective is in line with calls by the European Council for action in response to the challenges stemming from the combined impact of globalisation and of the ageing of European societies.
At present the Green Paper contains no concrete proposals but it does suggest the establishment of a 'floor of rights' for workers regardless of their contractual status, clarification around the status of temporary workers and clarity, also, around the definitions of employment and self-employment.
The European Parliament on 11 July adopted its own initiative report in response to the Green paper, taking on board several issues highlighted to MEPs by the Chamber network. It acknowledges the need for employment security, rather than job security in today’s labour market. It also recognised that excessive administrative burdens can deter employers from taking on new staff.
A follow-up communication, potentially containing legislative proposals is expected before the end of 2008.