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Session 2003 - 04
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Delegated Legislation Committee Debates

Draft Conduct of Employment Agencies and Employment Businesses Regulations 2003

Second Standing Committee on Delegated Legislation

Monday 15 December 2003

[Miss Anne Begg in the Chair]

Draft Conduct of Employment Agencies and Employment Businesses Regulations 2003

4.30 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I beg to move,

    That the Committee has considered the draft Conduct of Employment Agencies and Employment Businesses Regulations 2003.

I am pleased that you are in the Chair, Miss Begg. I look forward to a useful and constructive debate under your chairmanship.

We aim to achieve several objectives with the regulations. Our primary consideration throughout has been to safeguard the rights of work seekers, the interests of hirers and employers, and the needs of the private recruitment industry. The regulations will help to ensure that agency workers receive the rights to which they are entitled, stamp down on abuses, lift outdated bureaucratic burdens from agencies, improve the reputation of reputable firms that operate in the private recruitment industry, and protect the interests of hirers and, in turn, third parties to whom hirers may owe a duty of care. They will also reduce recruitment costs for employers throughout the economy.

The Employment Agencies Act 1973 and associated regulations that govern the conduct of the private recruitment sector differentiate between employment agencies, which find work for work seekers with employers, and employment businesses, which employ workers themselves and hire them out to act for and under the control of others. For simplicity's sake, when possible I shall refer to both as employment agencies.

The Government fully recognise the central role that the private recruitment industry has to play in the modern flexible labour market. Although the industry has operated within the United Kingdom for more than 100 years, its recent growth has been almost meteoric. The industry estimates that total annual turnover in 1992 was about £3.5 billion, which by 2002 had grown to some £23 million. That is probably the best illustration of the extent to which every part of the economy now relies on the range of services that the industry can provide.

Legislation to regulate the industry was introduced more than 100 years ago. The current legislation is not that old, but it has been some time since the regulations made under the 1973 Act were overhauled. The Conduct of Employment Agencies and Employment Businesses Regulations 1976 are the main regulations that give effect to the 1973 Act. Clearly, the industry

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that that legislation was introduced to regulate almost 30 years ago has changed immeasurably since then. Under the proposed regulations, we aim to clarify agencies' responsibilities.

Mr. Jonathan Djanogly (Huntingdon) (Con): Will the Minister explain why the industry has expanded so rapidly in recent years? Perhaps it is due to the massive regulatory burden that the Government have placed on business.

Mr. Sutcliffe: I shall return to that point in my summing-up speech after I have heard what members of the Committee have to say about the regulations.

We want to remove outdated bureaucracy from the regulations and stop abuses by setting a framework of minimum standards. The proposed regulations result from the commitment the Government made in the May 1998 ''Fairness at Work'' White Paper to review legislation governing the private recruitment industry. We have recognised for some time that the conduct regulations covering the private recruitment industry needed to be revised.

The Government's objective in introducing the draft conduct regulations remains to achieve regulations that are relevant to the labour market today and in the future. We are repealing requirements that now seem out of date and unnecessary, while introducing new provisions that deal with practices that were not foreseen or adequately dealt with when the existing legislation was introduced. In short, we want to promote a flexible labour market that is underpinned by a framework of employment rights.

I shall explain the specific benefits for workers that we are introducing. Under the regulations, entertainment agencies will no longer be allowed to charge up-front fees before they find work for actors, models and extras. That will stop the practice of agencies in the entertainment and modelling sectors charging the work seeker a fee, but providing little or no work-finding services. That is particularly heartless abuse whereby unscrupulous agencies prey on individuals who dream of working in those glamorous industries. The new starting point will mean that any fee will be chargeable only out of the earnings that the work seekers receive for the work that the agency finds for them.

The regulations will also tighten controls on client accounts, so that workers in the entertainment and modelling sectors whose earnings are paid to their agencies are properly protected. It will be compulsory for agents who handle workers' earnings to operate proper client accounts. That will provide better protection for workers who may find that their earnings have gone astray or been misappropriated.

Employment businesses will no longer be able to withhold workers' pay just because they cannot produce an authenticated timesheet. It was unsatisfactory that workers' earnings could be withheld from them merely because they were unable to produce a timesheet signed by the hirer. The payment of earnings to other groups in the labour market is not conditional on their producing such a document. However, the regulations allow an

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employment business to make the necessary inquiries to satisfy itself that the worker worked for the period covered by the timesheet.

Agencies will have to obtain information on any health and safety risks that are known to the hirer and the steps taken to prevent or control those risks. It is generally acknowledged that agencies have a duty of care for their work seekers. The regulations place on the agency a clear responsibility for the health and safety of its work seekers.

Realistic limitations will be placed on provisions in contracts between employment businesses and hirers that prevent temporary workers from taking up permanent jobs with hiring companies unless a transfer fee—known as a temp-to-perm fee—is first paid to the employment business. Any charge that discourages hirers from employing the temporary worker limits labour market flexibility and disadvantages work seekers and hirers. Similar restrictions will be placed on terms in contracts that prevent temporary workers from being employed by persons to whom the hirer has introduced them, and on terms preventing those workers being supplied to the hirer by a different employment business. Temp-to-temp fees discourage the hirer from approaching a different employment business to supply the work seeker, even though that business many offer more favourable terms to both the hirer and the work seeker. That practice hampers competitiveness between employment businesses and labour market flexibility, and impedes the supply of work seekers to a hirer by a different business where the original one loses the contract.

For the first time, we are extending the coverage of the regulations to limited company contractors. Many LCCs are highly paid and highly skilled and do not want to be covered by the regulations: in their view they operate under a business-to-business contract and do not need protections that are designed to safeguard the interests of workers. Workers in that sector will be able to opt out of coverage, but the regulations will introduce protections for more vulnerable workers against those who might try to force them to opt out.

The main benefit that hirers will get from the introduction of the regulations relates to the agencies' responsibility to ensure that work seekers are suitable for the vacancy that the hirer is seeking to fill. The proposals will result in a reduction in recruitment costs—indeed, the net effect of the new regulations should be to reduce recruitment costs across the economy and make the labour market more efficient. Barriers to employing temporary workers on a permanent basis will be reduced, thus enabling the hirers to employ suitable workers whom they have previously engaged as temps. Hirers will also be given the opportunity to have a temporary worker supplied by another employment business that may offer a better service at more competitive rates.

Agencies that supply individuals to work with vulnerable people—for example, children, the sick, or the elderly—will be required to carry out additional checks to ensure that they are not unsuitable. If new

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information comes to light showing that the worker is unsuitable, the agencies will be required to withdraw the worker, or inform the employer.

The package is designed to establish a modern, forward-looking regulatory framework to ensure that the private recruitment industry has the opportunity to continue to grow and expand its role in the labour market of the future. Outdated bureaucratic provisions will be repealed: for example, there will no longer be a requirement for agencies to provide the Department of Trade and Industry with copies of their current terms of business, or for them to ascertain whether young persons have received vocational guidance before they introduce them to employers. Certain practices of rogue agencies, which allow them to undercut legitimate agencies and subject them to unfair competition, will be outlawed. All agencies will be required to check the identity of work seekers to ensure that they have the necessary qualifications and take all reasonable steps to ensure that the work seeker and the hirer are aware of any legal requirements to be satisfied to enable the work seeker to work for a hirer.

Temporary work will become more attractive to prospective agency workers. The various additional safeguards for temporary workers and the removal of barriers to temps moving into permanent employment will encourage more individuals to seek temporary work placements. That will increase the number of people available for temporary work, which will enable agencies to give a better service by offering wider choice and better-qualified persons to hirers.

In reviewing the regulatory standards governing the private recruitment industry—and in accordance with the principles outlined by the Better Regulation Task Force—our overarching objective has been to promote a more competitive industry and to ensure the creation of a skilled and flexible labour market built upon social partnership and responsibility. A key element has been to prepare a package of measures that remove unnecessary and outdated constraints on the industry while ensuring that work seekers, hirers and employers are treated with fairness and receive the minimum standards that all have the right to expect.

The regulations cover a complex set of relationships, and it has taken time to get them right. We have taken considerable care to ensure that we introduce the appropriate legislative measures for agencies, for work seekers and for hiring companies that use their services. Since 1999, my Department has undertaken three comprehensive consultation exercises inviting comments on the regulations. Many written representations have been received. We received more than 450 responses to the last consultation, together with a large number of additional responses from LCCs who wrote to express their preference to be excluded from coverage by the regulations. In addition, to obtain more detailed information on the views expressed in those consultations, Ministers and officials undertook a series of meetings with representative organisations for agencies and workers and with agencies and workers themselves.

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We have taken on board many of the concerns expressed by the industry in those consultation exercises. That is reflected in the extent to which the draft regulations have evolved since the first consultation began in 1999. When the original draft was issued, the industry's general impression was that its provisions were inappropriate to the needs of the industry. The draft regulations are now much changed to reflect the views that have been received, and there is recognition that the Department has, in the main, struck an appropriate balance between the sometimes conflicting interests of all parties. That is clear from the comments of interested parties that have been published since the regulations were laid last month.

Ian McGarry, the general secretary of Equity stated:

    ''Equity welcomes the new employment agency regulations, which will provide long over-due protections for our members working in the entertainment industry. These regulations address many of the concerns of Equity members. In particular the provisions outlawing up-front fees will be welcomed by many performers, especially those working in walk-on and supporting work, and Equity is looking forward to working with the DTI on publicising these regulations and encouraging their swift implementation.''

Keith Faulkner, the chair of the Recruitment and Employment Confederation, which is the main industry trade association stated:

    ''The laying of these regulations will end the legislative uncertainty that has hung over the industry for the last four years.''

Sarah Anderson, the chief executive of the Mayday Group stated:

    ''It is a sign of a mature industry that we have been able to negotiate a set of regulations that ensures workers are properly protected while still ensuring industry can find people work, particularly for those who use temping as a first sep onto the job market.''

I recommend the regulations to the Committee.

4.42 pm


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