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Employment rights are what the Government are about. Although we would not go down the regulatory route, we understand that they have a mandate to deliver that. Let us imagine the situation. Someone starts off at a temp bureau and undertakes a series of temporary assignments for one employer. After three months, he or she would receive all the usual employment rights--one qualifies for some after one month and for others after six. If individuals decided to swap and change, rather than stay with the one contractor--if they worked for one company for one week, under contract to the agency, were directly employed by the company for three weeks and then returned to the agency for another one week contract or whatever--that would break up the continuity of employment and deprive them of the employment rights that the Government have been struggling to give them. It would ruin their holiday pay, sick pay, maternity pay

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and all the other benefits that the Government say that they want. Those would be the unintended consequences of this measure.

I will not speak at great length about what one hon. Member has tried to tell people about the £1 an hour penalty clause. As I said, the employment agency industry works through its reputation for being fair to the employers to whom it is providing staff and to its employees.

I started off with three employment agencies in one town and I ended up with one. Unfortunately, my agencies were so successful that another five started up. We paid our temps more money and we gave employers a better service. That is how one succeeds. I had a temp controller who insisted that we should constantly try to get higher rates for our people and better people because that was the way forward. Employers wanted really good temps--well paid and well motivated--and that was the right way forward.

It is no business of the Government or of Parliament to decide how much people should be charged. In general, minimum wages do not affect employment agencies that much, but the minimum wage regulations have already been introduced. There is no requirement in this legislation or in the regulations to suggest that the Government are trying to decide that. They say that they are simply going down this route to stop restraint of trade when people who are taken on on a temporary contract do not convert to permanent employment because the company has to pay a fee. Clearly, that is not correct, because employment agencies make about 20 per cent. of their permanent placements directly through that route. I assure the Minister that it is a great deal more profitable to give a permanent job to temps, in particular outside London where plenty are available, than to take on a permanent employee directly.

It is suggested that some agencies, instead of charging a direct, normal, permanent recruitment fee, charge more to stop temps moving across. It would not upset employment agencies if the Government introduced regulations to stop that practice and to prevent employment businesses from charging more for a temp to go permanent than for someone who had been sent for an interview for a permanent post. Indeed, the businesses might suggest that people who temp for longer periods could go to the employer at a reduced rate--many companies already do so.

We thought that the Government were working on measures to deal with contract workers--people who work in an employment business, but are really being supervised to do a particular job of work. I am minded of organisations that provide telephonists. In this place, the telephonists are employed not by the House of Commons, but by a company that provides a service to the House. That also happens at Buckingham palace, the Treasury and--dare I say it--No. 10 Downing street. Recently, the company that everyone wants all employment agencies to resemble lost the contract at No. 10. Surprisingly, the Government seem to be almost recommending a number of the measures that we thought they were worried about, for example, zero-hours contracts. When someone works for Manpower--let us use that example, to avoid

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confusion--he or she is taken on on a zero-hours contract to be a permanent employee, but only when he or she works. That is one way around the regulations.

I thought that the House was upset about the fact that burger bars and suchlike use zero-hours contracts. Certainly, we think that a temp should know that he or she is being hired for so many hours, give or take a few. The arrangement should be fairly flexible and the temp should know that the contract might end early--someone who thought that he or she might be off ill for a fortnight could come back early, so the contract would end. Generally, temps who are sent in to do a week's work end up doing two, three or four weeks. It is the job of the temp controller and the employment business--the agency--to keep people working as much as possible, which is surely what the Government want.

The draft regulations would have another unintended consequence for people on a contract for services. The Government have noticed that, where carers go to individual homes, the little old lady who is receiving the care becomes the employer and is not charged the whole fee as though the entire contract is for services. The wages and national insurance are in effect paid by the little old lady and are shown separately on the invoice, while the margin that the company charges is put on the invoice and value added tax is charged only on that margin. That is a way to ensure that value added tax is not charged on top of the hourly rate paid to people who work for someone who cannot claim back VAT. No one goes through that convoluted rigmarole when putting temps into a company that is VAT registered and can claim the VAT back. The Government may want to ensure that the employment relationship is clear. Employment agencies are not in the business of attempting to get out of their responsibilities for employees. I urge the Minister to consider carefully before collecting VAT from old ladies who are buying care in their own homes because they have been given money by the Government to do so. No one intended them to pay VAT.

Perhaps supplying labour should be zero-rated. After all, when someone works for wages, he or she does not charge the employer VAT for having done so. There have been cases that prove that employment agencies can work around that anomaly--sometimes the Revenue wins, sometimes it loses--and ensure that individuals do not have to pay VAT that cannot be claimed back because they are not a business.

References are another issue. I do not think that employment agencies are too worried about a sensible regime on references. However, we get into all sorts of problems when tight regulations are involved. Let megive some suggestions. When someone comes to an employment agency, it is not certain that that person will be employed by it. People have interviews and the agency tries to place them. It is often not convenient, particularly if someone wants a permanent position, to seek references for that person at that point. The best method must be to telephone the company that the person is supposed to be working for and asking, when that person has supposedly given notice, for a reference over the phone or in writing. If people are lying about who they work for, that is when one usually finds that they are wrong 'uns. One cannot take the reference until the contract has been signed. People who were not wrong 'uns would lose their jobs if one rang up their employers for references before they had

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given in their notice. That would destroy the employer's confidence in them. It is important that the regulations deal with real, sensible things.

It is not necessary to go to the nth degree and check whether secretaries have the Royal Society of Arts qualifications that they say they have. After all, if one places a temp who claims to have shorthand, RSA stage III and all the rest of it, but clearly does not know one end of a typewriter from the other, that person's contract will cease, and the employment agency will not get paid for putting the person in. Under the minimum wage regulations, the agency will still have to pay such temps, despite their having lied through their teeth about their qualifications. The practical aspects are probably more important.

Of course, if one sends someone out as a heavy goods vehicle driver, one wants to see the HGV licence--indeed, to see the real licence, photocopy it and get the guy to sign that for the record. That is good, common-sense practice. If employment agencies send people out without the appropriate licence, the legal document necessary, under common law, they could be liable for what happens. We must be careful not to have too much bureaucracy.

There is something amazing about the regulations. As one reads them to try to find what the Government are up to, one finds that, right at the end, they want to repeal the regulation that stops an employment agency that has placed someone permanently in a company ringing that person up a month later to say "You've done your month. We do not have to give any money back. Do you fancy another job?" That is very bad practice. Employment agencies do not think that that should happen. The regulation stops that, but the Government want to repeal it. That is extraordinary. It is there to stop the cowboys and is in the interests of employment agencies that do the job properly, but it is being removed.

Mr. Hayes: I am interested by my hon. Friend's last point, because that happened to me in my commercial experience. This reinforces his argument that employers soon get to recognise the agencies that behave like that and do not use them. Firms set up relationships with agencies for particular sorts of employees--indeed, we frequently used agencies when we needed a receptionist or telephonist. Companies will stick with agencies that conduct themselves professionally. Repealing this regulation will only foster the cowboys whom we would rather avoid.

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