|Employment Bill - continued||House of Commons|
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Clause 48: Information Sharing
This clause introduces schedule 5.
Use of information for, or relating to, employment and training
123. Government policies in the area of employment and social security have focused on increasing the efforts to help people move away from welfare benefits and into work. However, once a client has left an employment or training programme or has come off benefit, they are under no obligation to inform the Department for Work and Pensions (DWP) of their activities. It is important that DWP know what happens to people afterwards. Many clients do provide DWP with this information. However, a significant minority do not. Attempts to establish the destinations of leavers are costly, time consuming and inconclusive. In addition, once a client has entered work, DWP has no way of assessing their progress in employment, unless they return to benefit. This creates two problems. The first is in evaluating the effectiveness of employment and training initiatives in moving people into sustainable work. The second is in paying and rewarding providers, who are increasingly paid on a performance-related basis. The provisions will also allow DWP to confirm which clients have moved into work and ensure the security of the funding arrangements.
124. Commentary on Schedule 5:
125. Where necessary, the Schedules are described at relevant points of the main commentary. The table below shows where each Schedule (or Part of a Schedule) is explained.
FINANCIAL EFFECTS OF THE BILL
126. Overview - The predicted impact of the provisions relating to each individual policy is dealt with separately below in terms of costs to the Exchequer:
127. Paid paternity leave - the costs to the Exchequer are estimated to be £63 million in the financial year 2003/4.
128. Paid adoption leave - the costs to the Exchequer are estimated to be £9 million in the financial year 2003/4
129. Increase in rate of statutory maternity pay and maternity allowance - the costs to the Exchequer are estimated to be £355 million in the financial year 2003/4. This cost assumes that 85% of eligible women take advantage of the extended period. Around 305,000 pregnant women receive SMP each year and around 51,000 receive MA each year. It is estimated that around 90% of SMP recipients will benefit in full from the new measures so that each woman in comparison with the level of SMP currently paid will be entitled to £1253.60 more in SMP payments.
130. Introduction of partner work-focused interviews - Initial estimates indicate that the costs to the Exchequer are likely to be around £35 million. The impact on benefit expenditure of increased numbers of partners of benefit claimants taking up work cannot be estimated at this stage. Such behavioural changes cannot be predicted with any certainty until the new system has been operated and evaluated.
131. Power to make wasted costs awards - it is estimated that this will lead to a reduction in caseload, leading to savings for the Exchequer of a little under £1 million.
132. Removing procedural traps - it is estimated that this change will lead to net costs to the Exchequer of £2 and £5 million.
133. Fixed period of conciliation - the savings to the Exchequer of introducing fixed periods of conciliation are estimated at between £2 and £3 million.
134. Three steps procedures (including mitigation of awards and removal of the small business exemption on written particulars) - savings for the Exchequer are estimated to be negligible in year one as the system settles in but growing to between £11 and £15 million from year two onwards.
135. Equal Pay questionnaire - the savings to the Exchequer in terms of reductions in tribunal cases is estimated at £0.1 million.
136. Measures with no significant financial effects
The following measures on the Bill are not expected to have any significant financial effect. Minor increases in operational expenditure, for example as a result of changes required to forms and process will be managed within existing allocations.
PUBLIC SERVICE STAFFING EFFECTS
137. The only measure in the Bill expected to have a significant effect on public-service staffing is work-focused interviews for partners. We estimate that up to 650 staff will be needed to deliver the work-focused interviews.
138. Introduction of partner work-focused interviews - Initial broad-brush estimates indicate that the costs to the Exchequer are likely to be around £35 million. The impact on benefit expenditure of increased numbers of partners of benefit claimants taking up work cannot be estimated at this stage. Such behavioural changes cannot be predicted with any certainty until the new system has been operated and evaluated.
139. In the longer term there are also likely to be effects from the projected reduction in volumes of applications to employment tribunals.
SUMMARY OF REGULATORY IMPACT ASSESSMENT
Overview of the impact of the Bill
140. The overall intention of the Bill is to support the development of more productive workplaces in the UK by encouraging participation in the labour market through the retention and development of skills, and by improving the way that disputes are managed, both at work and within the employment tribunals system. This impact assessment considers the individual proposals and their overall effect. Where they overlap or enhance each other this will be addressed. Self-standing impact assessments are attached for each element of the Bill expected to affect business.
141. All the provisions in the Bill will have some impact on the productivity and competitiveness of UK employers, and on the workforce as a whole. Those parts of the Bill which relate to dispute resolution are intended to bring benefits, both quantifiable and unquantifiable, to employers and employees through encouraging in-house resolution of disputes without recourse to Employment Tribunals. Unresolved conflict in the workplace can damage morale, increase stress, and may lead to employees quitting their jobs. Equally, disputes taken to Employment Tribunals reduce productivity because of the resources taken up in the legal process and because of their effects on the morale and motivation both of the individuals directly affected, and in the workplace more generally.
142. The parts of the Bill dealing with maternity, paternity and adoption pay and leave are intended to encourage greater participation in the labour market, and the retention of skills, for parents who might otherwise leave the labour market. In addition, there are motivational and productivity benefits through relieving the stress and strain felt by new parents. The provisions in the Bill which place union learning representatives on a statutory footing will also enhance productivity by encouraging workforce development. The proposal to extend the European Directive on fixed term work to include pay and pensions will ensure that fixed term contract employees are not discriminated against and will thereby increase employee security and remove a potential distortion in the labour market. The provisions that introduce work-focused interviews for partners of people receiving working-age benefits will also have a positive impact on participation in the labour market but are not included in the Impact Assessment as they do not impose any cost or burden on business.
143. Quantified costs and benefits are expressed in current (2000/01) prices with the exception of the provisions for maternity pay, paternity leave and pay and adoption leave and pay. For consistency with public expenditure plans, these are expressed in 2003/04 prices.
Better dispute management
144. The Bill provides for improved dispute resolution in the workplace and in the employment tribunal system. Existing problems in the current system of dispute resolution have contributed towards increasing numbers of Employment Tribunal applications. These are putting employers, employees and the tribunal system itself under strain. A dispute resolved in the workplace, especially one resolved early and informally, will reduce workplace tensions and increase retention of valuable staff. A dispute resolved in a Tribunal often leads to the end of the employment relationship. For the employee this means the loss of a job; for the employer it means unnecessary recruitment and lost skills.
145. The Bill contains several measures to address this. Not all of them have implications that need to be assessed in a regulatory impact assessment. Those included in the RIA are:
146. The individual paragraphs below contain costs and benefit estimates for these provisions. There are strong overlaps between most of these proposals. The total benefits and costs are less than the sum of the individual benefits and costs.
147. Proposals for (i) Implied term of contract to confer right/obligation to follow 'three steps' grievance and discipline procedures; (ii) All written statements of terms and conditions to include reference to workplace procedures (removal of small firms exemption); and (iii) Tribunals to mitigate awards to reflect whether three steps were followed and whether terms and conditions were provided
148. All employers will have to introduce a satisfactory (that is, according to minimum standards) 3-step dispute and grievance procedure to deal with employment issues arising in the workplace. Employees are also obliged to use this procedure. If either party does not fulfil their obligation, this will be reflected in the award.
149. This provides both employees and employers with an incentive to start a discussion about any problems, which may arise. This should in the medium to longer term improve employment relationships and open up the way both parties handle conflicts. Employers will feel the benefit of a clear transparent process that helps them to resolve problems. Employees who otherwise would have left because they felt they had been treated unfairly, or because the relationship had deteriorated over the months leading up to a Tribunal case, may now decide to stay.
150. The evidence suggests that most large employers have procedures that already meet the minimum standard. A disproportionate share of tribunal applications arise in workplaces where procedures are absent or have not been followed adequately. Greater use of procedures should therefore reduce significantly the volume of tribunal applications.
151. The estimated reduction in the number of applications is between 30,000 and 40,000 applications per year. Employers save time and money (£60-80 million), employees save their own time and reduce stress levels and there are savings to the taxpayer through fewer cases (£11-15 million). There will be a time lag between the more widespread introduction of procedures in firms and a reduction in Tribunal applications of perhaps one year.
152. There are costs to employers. There are one-off costs arising from the introduction or revision of disciplinary and grievance procedures where these do not already meet the minimum requirements, and from incorporating these into the written statement of employment (£46-86 million). There are also on-going costs arising from the management time involved in greater use of these procedures (£42-90 million per year).
Removing procedural traps in unfair dismissal cases
153. Some employers have lost faith in the Tribunal system because they believe they will lose an unfair dismissal case because of a small procedural mistake, even if following the correct procedure would have made no difference to the outcome. The new policy is that, in cases where it can be shown that the mistake would not have made a difference to whether a dismissal was fair or unfair, the Tribunal will have the opportunity of disregarding the procedural error. This will only apply for procedures that go over and above the 3-step procedures that will now be part of the contract of employment.
154. This change should discourage some Tribunal applications based mainly on procedural error. The benefits to employers are £6-9 million per year. Of these about £4-6 million are transfers from employees due to changes in the structure of tribunal outcomes. The benefits to the taxpayer are about £1 million.
155. The costs of the proposal are also related to the shift in outcomes. Individuals have reduced awards and settlement payments of about £1 million. Respondents lose £4-6 million. There are costs to the taxpayer of £2-5 million.
Fixed period of conciliation in all Tribunal cases
156. A large number of applications are settled with the help of ACAS conciliations (38%). This proportion differs between jurisdictions. In addition, withdrawn cases are sometimes influenced by ACAS conciliators. Some of the settlements or withdrawals occur just before the hearing. This can be costly for the taxpayer.
157. The provision to be introduced is to use a fixed period for conciliation during which the minds of both parties can focus on the conciliation process.
158. A fixed conciliation period of six weeks aims to increase the number of settlements and reduce the number settling close to a hearing date. The latter effect, in particular, will help the ETS to handle other applications more efficiently.
159. The number of hearings is expected to fall by between 1,700 and 3,400 each year. There are some transfers between respondents and applicants due to a change in the structure of outcomes. There are financial benefits to employers of £3-7 million and to the taxpayer of £2-3 million. Individuals also benefit by £1-2 million from more settled cases at the expense of employers.
160. The Bill includes provisions that provide stronger disincentives to unreasonable behaviour both up to and during the hearing process, through changes to the rules on award of costs. Cost awards will include the cost of time spent by parties where cases or defences are weak, or where the other party has behaved unreasonably. Awards will be possible against paid representatives where it is their behaviour that has triggered the cost award.
161. The proposals should discourage a small number of weak Tribunal applications (100-500 per year) and will also encourage more settlements and fewer hearings. In addition, more cost awards will be made, providing more compensation to those at the receiving end of unreasonable behaviour.
162. It is estimated that savings to the taxpayer will amount to a little under £1 million per year, together with benefits to employers from less applications of £0.2-1 million. There will also be increased flows of payment between employers and applicants arising from the increased use of cost awards. Applicants are expected to benefit by £0.4-0.5 million whereas respondents are expected to benefit by £0.7-1.1 million (respondents benefit more because they are likely to incur more management time and legal representation in dealing with a Tribunal application).
Equal Pay questionnaire
163. The Bill introduces a formal questionnaire procedure for use in equal pay tribunal cases, with time limits for an employer response. The purpose of the procedure is to help the potential applicant decide whether to institute proceedings and to help them to formulate and present their case. This enables the key facts to be settled quickly and can encourage not only the swift establishment of evidence but also the settlement of cases.
164. Introduction of the questionnaire procedure is expected to lead to a 10% reduction in the number of equal pay Tribunal applications. Benefits to the taxpayer are estimated to be £0.1 million. Employer benefits are estimated at £0.5 million.
165. Total costs to employers of completing the questionnaire procedure are estimated to be between £ 0.2 and £ 0.4 million.
Overall effect of dispute resolution procedures
166. The overall effect of the proposals above is not the sum of each individual proposal. Several proposals address the same or closely related issues. Their effects therefore overlap.
167. The tables on pages 46 and 47, on the overarching effects of the dispute resolution proposals, set out the assumptions made in calculating the overall impact of these proposals.
168. The most significant proposal in terms of impact is the introduction of grievance and disciplinary procedures as a contractual right. If this is implemented, fewer disputes will go to Tribunals - thus reducing the costs and benefits of almost all of the above proposals that address cases that do reach Tribunals.
169. The total effect of the proposals is estimated to be a reduction in the number of applications of 23-31% or by between 30,000 and 40,000 applications (using current application volumes as a starting point) 3. The related benefits to employers are estimated to be £65-90 million once the proposals have fed through into reduced Tribunal applications. The taxpayer will benefit by £14-19 million and individuals by £2-3 million. There are some costs to employers especially due to the introduction of procedures. One off costs are £46-86 million. The use of procedures leads to ongoing costs of £42-90 million. Employers who already have and use procedures will not face additional costs. The other proposals add a further £2-4 million. Costs to the taxpayer are mostly related to changes in the outcome of applications and are therefore policy costs not implementation costs. These are £1-3 million.
2 ETS has only been able to deal with 70% of application in 2000/01. The benefits to ETS are therefore built on 70% of the estimated reduction in the number of cases.
Participation in the labour market and retention, and development of skills
Paternity leave and pay
170. The law will provide fathers with an entitlement of 2 weeks paid leave (at £100 per week) to be taken during the first 8 weeks of the child's life. The intended effect is to give fathers a chance to support the mother during this crucial period and to assist them in building a relationship with the new child.
171. The main benefits arise for fathers and their families. In total they will receive £63 million in form of the statutory payments. They also have more time off during a crucial period in their family life.
172. There are costs for business. Many firms already offer some form of paternity leave, either paid or unpaid. The additional burdens on business are therefore expected to be small. Costs arise from the provision of coverage for absent fathers of £25-42 million. These are recurring costs. Introducing the system costs business about £10 million (one-off) and running the system costs £21-32 million (recurring costs). There are costs to the Government because of the payments made to fathers of £63 million.
|© Parliamentary copyright 2001||Prepared: 8 November 2001|