Draft Flexible Working (Procedural Requirements) Regulations 2002

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Alan Johnson: Compensation can be up to eight weeks' pay. The spread of opinion stretched from the CBI, or at least business representatives, saying that it should be four weeks, to the Trades Union Congress saying that it should be 52 weeks. We plumped for eight weeks, which must be seen—[Interruption.] I did not catch what my hon. Friend said.

Mr. Lloyd: I just asked whether we could split the difference.

Alan Johnson: If we could have, the result would not have been eight weeks.

We considered carefully the penalties imposed in similar circumstances: for example, failure to provide a written statement of reasons for dismissal attracts a penalty of two weeks' pay, and failure to allow the right to be accompanied during a disciplinary hearing attracts a maximum award of two weeks' pay, so eight weeks rather than 52 weeks' pay fits into the right category.

We have plenty of evidence about the benefits, and I mentioned some. Others include reduced recruitment costs, increased staff retention and return on training investment, and increased ability to cope with changing market conditions. The taskforce designed the right specifically with small businesses in mind, and we followed that closely in drafting the legislation. In response to the laying of the regulations last month, the Small Business Council said:

    ''This legislation recognises that each business and each request will differ. This is not a 'one size fits all' solution and therefore should encourage employers and employees to work together to develop solutions that can meet both their needs. Whilst small firms support the work-life balance ideal, the government has realised that this balance needs to be manageable to be viable.''

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To help employers and parents to understand the process fully, we plan to introduce the new law with a package of support. Key to that will be guidance containing a wide variety of examples of how the right will apply. That will help parents to make requests and employers to consider them.

The new right for parents with children under six and disabled children under 18 to request flexible working arrangements, and the duty on employers to consider such requests seriously, are not stand-alone measures. In November, Parliament approved regulations on the extension and enhancement of maternity pay and leave, and the introduction of paid paternity leave and paid adoption leave. The regulations build on existing rights to maternity leave, parental leave and time off for dependants. When the regulations have been approved, two more sets of regulations will be laid subject to the negative procedure. They deal with eligibility criteria, complaints and remedies for flexible working, and the extension of the ACAS scheme to cover flexible working.

Those measures will not transform the workplace overnight but they will create a framework in which change can happen more quickly and effectively. We are providing an unprecedented level of support for working parents and offering genuine choices to employees with child care responsibilities. Businesses will benefit from the resulting increase in commitment and morale of the work force.

The regulations implement policies that have received broad support from everyone we have consulted. We have designed the right in the closest possible collaboration with interested parties and we have kept as close as possible to the taskforce's recommendations when translating them into legislation. I look forward to hearing from hon. Members, and I commend the regulations to the Committee.

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Mr. Henry Bellingham (North-West Norfolk): I thank the Minister for that clear explanation. We support giving firms the opportunity to have flexible working arrangements and we support much of what has been said about the work-life balance, which is dear to the hearts of the Minister and the Secretary of State for Trade and Industry. However, we are concerned—the Minister knows why—about the growing burden on businesses, especially small businesses.

I am glad that the Minister mentioned small businesses in his speech. I tabled a question the other day about the number of directives that are flowing from the social chapter. So far, there have been five—the parental leave directive, the European works council directive, the part-time work directive, the burden of proof directive in sex discrimination cases, and the fixed-term employees directive. In addition, the agency workers directive is coming down the track fast.

The draft regulations fall into the category of home-grown burdens on business. The Minister will agree that we have to be careful not to load burdens of red

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tape and administration on to small firms. I am glad that he acknowledged that point in his speech, but anyone who studied this statutory instrument would conclude that it is prescriptive and bureaucratic. That is inevitable if the Government are to go down this route.

Let me put some specific points to the Minister. Regulation 10(b)(ii) says that notice shall:

    ''where the employer upholds the appeal, state the grounds for the decision and contain a sufficient explanation as to why those grounds apply''.

A preceding regulation states that the employer has to lay down, in accordance with section 80G(1)(b) of the Employment Rights Act 1996, exactly what the grounds for an initial refusal are. I am not clear whether that provision also applies if the employer dismisses the appeal. Will the employer be guided by any specific recommendations on what grounds he can use, or will it simply be a question of using common sense?

I am a little confused about the level of compensation that can be paid. The Minister said that the amount was not to exceed a maximum of eight weeks' pay. However, regulation 15(3) talks about

    ''an amount not exceeding two weeks' pay.''

That is the only mention in the statutory instrument of the level of compensation to be paid. I note that an article in the Financial Times mentions eight weeks and adds that eight weeks was a compromise that was brokered and that, in the main, the Confederation of British Industry and other organisations such as chambers of commerce felt that it was a fair compromise. However, the article also suggested that the people lobbying from the other side of the fence would probably think that it was too short. Will the Minister tell us the length of time being considered? If it were eight weeks, why is that not mentioned in the order?

Regulation 13 refers to the individual who considers the application and what happens if that person is sick, indisposed or off work for some reason. What would happen if the firm were very small and the only person capable of dealing with the matter were the manager or proprietor of that small business or microbusiness? What would happen if that person were off sick for a long time? Should anything more be done to ensure that the application is dealt with speedily in such an event, or would one simply have to wait until the individual in question returned to work?

The Minister mentioned the role of ACAS. Obviously, we support ACAS: it does an excellent job and we feel that the Government have been a bit slow in using it recently, especially in the fire workers dispute. However, there is nothing about ACAS in the order. He mentioned that ACAS would be involved in dispute resolution, but how? I know that ACAS was mentioned in the Bain report.

The Minister believes that only a small number of cases would go to tribunal and quoted a figure of 1 per cent. I am interested to know how he arrived at that figure. He will be aware that the whole tribunal system is under a huge amount of pressure—some 135,000 tribunal cases were considered in the last calendar

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year. That figure will now increase, not least because of the maternity, paternity and adoption provisions that we debated recently.

The system is becoming increasingly overloaded. If only 1 per cent. of cases go to tribunal, the total number could approach a few thousand and the whole tribunal system will be put under greater pressure. Has the Minister taken that into consideration? Has he considered ways of speeding up the tribunal resolution process?

As I said, the burden will fall disproportionately on small businesses. A figure of £296 million a year was mentioned, and the Minister said that start-up costs would be approximately £30 million. He mentioned that there was broad consensus among the different small firms' organisations. I have spoken to several and, they recognise that there is some good in the regulations and that the Government committed themselves to them in their manifesto.

None the less, those organisations are concerned about the extra time that small business proprietors and managers will have to spend filling in forms and dealing with complex paperwork and bureaucracy. For example, the Federation of Small Businesses believes that the manager of a business employing fewer than 20 people spends on average a whole day per fortnight dealing with paperwork, bureaucracy and other red tape. The regulations will be one more burden putting pressure on the very people whose help the Government often say they want in the process of creating jobs and wealth.

We are also concerned that, although the regulations are obviously well intended, the people whom the Minister wants to help might end up being hindered. For example, if a small firm interviews five people for a job and one is a young mother with a child of four, another is a parent with an autistic or disabled child and all five applicants are equally impressive at interview stage, which applicant will the small firm employ?

That is a problem with many regulations of this type, despite the good intentions behind them. Anyone in their right mind would hope that any good business would employing the right practices anyway, but we feel that the draft regulations impose one more burden. Individual burdens will not be deal breakers or show stoppers for small businesses, but their combined impact is bearing down on small firms.

Will the Minister elaborate on how the regulatory impact assessment has developed and what conclusions were drawn to about small to medium-sized enterprises and microbusinesses? Will he tell us whether the new regulations will be reviewed in two, three, or four years? It might be a good idea to specify exactly when a review should take place. Will it be possible to review the grounds for the rejection of an employee's initial request that are listed in section 128 of the primary legislation?

The Government are right not to allow tribunals to overturn management decisions, and they are right to go for a lower and more acceptable level of compensation. Bearing that in mind, and despite the concerns that we have voiced clearly, which were also

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expressed by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) when the Employment Act was being debated, it would be churlish of us to vote against the statutory instrument. That would not be in the spirit of co-operation with small businesses and with business generally that we are trying to build. The Minister pointed out that the Government sat down with businesses and discussed many of their concerns. We hope that the Government will keep the instrument under review, and that a proper mechanism for doing so will be established.

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Prepared 5 December 2002