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Delegated Legislation Committee Debates

Draft Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 and Draft Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002

Second Standing Committee on Delegated Legislation

Monday 15 July 2002

[Mr. David Chidgey in the Chair]

Draft Fixed-term Employee
(Prevention of Less Favourable Treatment)
Regulations 2002

4.30 pm

The Chairman: Is it the wish of the Committee that the draft Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002 be debated with these regulations?

Hon. Members: No!

The Minister for Employment Relations, Industry and the Regions (Alan Johnson): I beg to move,

    That the Committee has considered the draft Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002.

May I say, Mr. Chidgey, what a pleasure it is serve under your chairmanship for the first time?

The regulations, which are the first to be made under the Employment Act 2002, will transpose the European Community fixed-term work directive and prevent fixed-term employees from being treated less favourably than comparable permanent employees in their pay and pensions.

Fixed-term employees are protected by most statutory employment rights. Part-time workers, however, are protected by legislation that prevents them from being less favourably treated than comparable full-time workers. The regulations will give similar rights to fixed-term employees by ensuring that they are not treated less favourably than comparable permanent employees because they are on fixed-term contracts. That will protect about 1.2 million fixed-term employees in Britain. It will also encourage people to participate in that flexible form of work.

Fixed-term work can contribute to diversity in the labour market, as it allows people with family or other responsibilities and interests to participate without having to accept permanent jobs. The regulations will also help us to create high performance workplaces and increase productivity by increasing fixed-term employees' access to training.

In our view, the fixed-term directive does not require us to prevent pay and pensions discrimination against fixed-term employees. However, evidence of pay disparities between fixed-term and permanent employees justifies our doing that. Equal treatment regulations that specifically exclude pay and pensions might give employers who do not discriminate an excuse to do so. Other EC member states have already stopped or are expected soon to stop pay discrimination against fixed-term employees. We do not see why British fixed-term employees should be treated as second class. Many

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employers do not discriminate against their fixed-term employees, and requiring equal treatment will help to prevent employers from being undercut by unscrupulous competitors.

The fixed-term regulations apply to employees on contracts that last for a specified period, or contracts that end when a specified task has been completed or a specified event does or does not happen. Employees who will be covered include those covering for maternity leave and peaks in demand, and those on contracts to carry out tasks such as setting up databases.

The regulations will give fixed-term employees the right not to be treated less favourably than comparable permanent employees on the ground that they are fixed-term employees, unless that treatment can be objectively justified. Fixed-term employees will be able to compare their conditions with employees who are not on fixed-term contracts but who are employed by the same employer to do the same or broadly similar work. Those of the comparator's skills and qualifications that are relevant to the job should be similar to those of the fixed-term employee. If there is no comparator in the establishment, fixed-term employees can compare conditions with a similar permanent employee working for the same employer in a different establishment.

We realise that there may be occasions on which employers may have objective reasons for treating a fixed-term employee less favourably than a similar permanent employee, and the regulations provide for that. In particular, the regulations state that different treatment is objectively justified, provided that a fixed-term employee's overall package of conditions is not less favourable than that of a comparable permanent employee.

Employers will not therefore be prevented from giving a fixed-term employee a higher salary to make up for not having some other benefit, such as access to a pension scheme. Of course, the regulations will also allow employers to compare the conditions of their fixed-term and permanent employees term by term, and to justify giving different terms to fixed-term employees on that basis—for example, by showing that it is impracticable to give them a particular benefit.

Mr. Philip Hammond (Runnymede and Weybridge): To pick up on the point that it will be possible for individual terms to be different so long as the overall package is of equal worth, there will be great difficulties in valuing pension contributions and access-to-pension schemes. Does the Minister intend to issue guidance to employers so that they can be sure that they will not inadvertently fall foul of the regulations?

Alan Johnson: Yes, we intend to give clear and comprehensive guidance, which is one reason for our pushing back the implementation date to 1 October.

The regulations will also provide that period-of-service qualifications relating to particular conditions of employment must be the same for fixed-term employees and permanent employees, except when different periods are justified on objective grounds.

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One of the core aims of the EC fixed-term work directive is that member states take measures to prevent abuse of successive fixed-term contracts. The regulations aim to achieve that by limiting the use of successive fixed-term contracts to four years, unless the use of further fixed-term contracts is justified on objective grounds. For the purposes of this part of the regulations, service accumulated from 10 July will count towards the four-year limit. There is no limit on the duration of the first fixed-term contract, but when a fixed-term contract is renewed beyond the four-year limit and the renewal is not objectively justified, it will be treated as a contract for an indefinite period.

We realise that fixed-term contracts are used in a variety of different sectors, from higher education to hotels, and we understand that, in some instances, sectors or organisations may wish to tailor the mechanism limiting the use of successive fixed-term contracts better to suit their needs. The regulations therefore provide for employers and employees to increase or decrease the four-year limit or to agree a different way to prevent the abuse of successive fixed-term contracts via collective or work force agreements. The agreements could, for example, specify allowable reasons for renewing fixed-term contracts beyond the statutory limit.

The provisions preventing the abuse of successive fixed-term contracts depend on there being a succession of fixed-term contracts or renewals of them that do not break an employee's continuity of employment as defined in the Employment Rights Act 1996. Continuity of employment is a concept familiar to employers and employees; using it avoids introducing new definitions and complicating the regulations.

A fixed-term employee has a right to ask their employer for a written statement confirming that their contract is to be treated as one of indefinite duration or setting out objective reasons for using a fixed-term contract beyond the four-year limit. Fixed-term employees will also have the right to ask their employer for a written statement of the reasons for less favourable treatment if they believe that that may have occurred. Employers must provide the statement within 21 days.

It is important that the law does not treat fixed-term employees less favourably than permanent ones. The regulations will also amend provisions in certain parts of specified Acts of Parliament that we believe provide for or allow some or all fixed-term employees to be treated less favourably than permanent employees. For example, the 1996 Act permits fixed-term employees to waive their rights to redundancy payments, even though they may have been employed on successive fixed-term contracts by the same employer for several years. Permanent employees cannot do that, and the fixed-term regulations will remove that redundancy waiver. They will also ensure that all fixed-term employees have the right to guarantee payments and payments on medical suspension after the same qualifying period as permanent employees. They also provide for the Social Security Contributions and Benefits Act 1992 to be amended so that all fixed-term employees have a

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right to statutory sick pay after the same qualifying period as permanent employees.

The regulations will amend sections 92, 95, 97, 105, 136 and 145 of the 1996 Act so that where a contract of employment terminates automatically on completion of a particular task, or on the occurrence or non-occurrence of a particular event, the termination will be classified in law as a dismissal. That will give several statutory rights to employees on such task contracts, on the same basis as employees working under permanent contracts or other types of fixed-term contract. Those rights include the right not to be unfairly dismissed, the right to a written statement of reasons for dismissal and the right to a statutory redundancy payment.

The fixed-term directive specifically requires that fixed-term employees should be informed of permanent vacancies in their organisations, to help them find permanent jobs if they want them. Most employers inform their fixed-term employees of permanent vacancies as a matter of best practice. To ensure that such best practice spreads, the regulations will require all employers to inform fixed-term employees of permanent vacancies in their establishments. The regulations will also require that such employees have the same opportunities as regards access to training.

We estimate that 25,000 to 53,000 fixed-term employees will benefit by between £75 million and £172 million from the proposals to end discrimination. Improved access to training will benefit such employees by between £39 million and £73 million, and it could have benefits to business of between £23 million and £146 million as a result of increased productivity. Other considerable benefits to fixed-term employees will be the removal of the redundancy waiver and the measures to prevent the abuse of successive fixed-term contracts. There may be other benefits, such as increased job security or the greater willingness of employees to work on fixed-term contracts, but it is not possible to quantify them. The compliance costs are largely the converse of the benefits, plus some employer national insurance contributions.

I was going to discuss the part-time workers regulations now, but having noted your clear body language, Mr. Chidgey, I shall do so when we debate them separately. I urge the Committee to accept the regulations, which are due to come into force on 1 October. I look forward to hearing from hon. Members.

4.43 pm


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Prepared 15 July 2002