APPENDIX 7
Memorandum submitted by the Engineering
Employers' Federation
INTRODUCTION
1. EEF has a membership of 6,000 manufacturing,
engineering and technology-based businesses and represents the
interests of manufacturing at all levels of government. Comprising
12 regional Associations, the Engineering Construction Industries
Association (ECIA) and UK Steel, EEF is one of the UK's leading
providers of business services in health, safety and environment,
employment relations and employment law, manufacturing performance,
education, training and skills.
UK EMPLOYMENT LEGISLATION
2. As the table in the attached Appendix
shows, UK business has had to cope with managing the implementation
of a considerable number of employment legislative measures in
a relatively short period since the Labour Government came to
power in May 1997. This table also shows that a further series
of employment legislative measures are scheduled to be introduced
over the next 12 months.
3. These are a combination of measures that
have been driven by the Government's own domestic agenda, such
as the introduction of the National Minimum Wage and statutory
trade union recognition, and the implementation of a series of
European Directives covering working time, part-time and fixed
term workers, European Works Councils and, very shortly, information
and consultation of employees and age discrimination. In addition,
we know that new European legislation on temporary agency workers
and corporate restructuring, as well as reviews of the existing
Directives on working time and European Works Councils, are high
on the European Commission's agenda with the European social partners
(UNICE and the ETUC) currently being consulted by the Commission
on possible changes to these Directives.
4. Unlike most of the previous Conservative
administration's employment legislative measures that largely
sought to reduce the influence of the trade union movement in
the workplace and did not directly affect individual employers,
many of the measures that have been introduced since May 1997
impact directly on the contractual employment relationship between
employers and their employees. In particular, the introduction
of a series of minimum employee rights on pay rates, hours of
work, annual holidays, disciplinary and grievance procedures as
well as various family friendly policies go to the very heart
of this contractual employment relationship.
5. As a result, the introduction of these
employment legislative measures has inevitably involved a considerable
amount of management time in ensuring that their company's human
resources policies, procedures and practices comply with this
new legislative environment. In addition, it has been necessary
to ensure that all managers and supervisors are aware of these
new employee rights so that the company is not exposed to potentially
expensive and time-consuming Employment Tribunal claims.
6. This need to give increased management
attention to the practical aspects of the implementation of employment
legislation has therefore inevitably meant that less management
time has been able to be spent on their other equally important
responsibilities. These include improving the productivity performance
of the business and developing new products, processes and markets.
LABOUR MARKET
FLEXIBILITY
7. EEF acknowledges that the introduction
of many of these employment legislative measures has not, in themselves,
had a directly adverse impact on the flexibility of the UK labour
market. It also considers that, if legislative measures on informing
and consulting employees are implemented by the Government in
a flexible manner, they have the potential to assist companies
to improve their productivity performance. However, the need to
implement such a large number of employment legislative measures
over a relatively short period has inevitably had an impact on
EEF members' perception of the business environment in which they
are now having to operate.
8. An illustration of the perceived impact
of the `adjustment' costs of these employment legislation measures
is shown in the chart below that is taken from a recent EEF survey
of 600 companies. It shows that, despite the higher levels of
employment regulation in Germany and France, companies in these
countries see employment regulation as being marginally positive
for investment. By contrast, UK firms see employment regulation
as having a negative impact on their investment plans. This suggests
that the adjustment to higher levels of employment regulation
is one factor that is deterring UK companies from increasing investment.
Chart 1
FACTORS AFFECTING INVESTMENT PLANS
Mean score where 5=significant positive impact and
1=significant negative impact on level of investment planned for
next 12 months
9. There is little doubt from the comments
that are frequently made by EEF members that it is their perception
that, since May 1997, they have had to operate in an increasingly
more tightly regulated labour market which they regard, using
somewhat loose terminology, as an indication of reduced labour
market flexibility. This view is now being reinforced by their
concerns that possible changes to the Working Time Directive,
particularly the removal of the individual opt out from the average
48 hour working week, and the possible introduction of expensive
and restrictive European legislation on temporary agency workers
could have an adverse impact on the current flexibility of the
UK labour market.
10. Labour market flexibility has a number
of aspects and, as far as numerical flexibility is concerned,
it is felt that the UK still remains in a relatively strong position
in relation to many of its international competitors. However,
EEF members are concerned that there is now an increasing danger
that, unfortunately, this competitive advantage could gradually
be being eroded due to a combination of the increasing trend for
an element of labour market deregulation in some EU Member States
and the possibility of additional European employment legislation.
SURVEY EVIDENCE
ON LABOUR
MARKET FLEXIBILITY
11. Hard data on labour market regulation
is in short supply and the available data lacks the precision
required to draw firm conclusions. That being said, two sets of
data were analysed in EEF's Report "Bridging the continental
divide". Firstly, data from the World Economic Forum (WEF)
that is based on executive opinions shows that, on their measure
of overall flexibility, the UK has improved between 1997 and 2001.
This is largely due to a more positive assessment in the areas
of unemployment insurance, wage setting and pay-productivity links.
However, the WEF measure does show a worsening in the UK's score
in two areas—minimum wage regulation and `hiring and firing'
legislation. EEF does not oppose minimum wage regulations in general
but does have some concerns about changes that will shortly be
introduced by the Government in the second of these areas.
12. Secondly, OECD data on Employment Protection
Legislation (EPL) shows that, between 1990 and 1998, the UK saw
its advantage start to erode. However, this was due to reductions
in EPL scores in 10 of the EU countries rather than an increase
in the UK whose rating remained constant.
13. The DTI's "UK Productivity and
Competitiveness Indicators 2003" uses more recent data from
the International Institute for Management Development (IMD) survey
evidence on business executive perceptions of labour market regulation.
It shows that the UK has fallen from first place amongst the G7
in the 1996-97 survey to third place behind the US and Canada
in 2002-03. Although the UK is not alone is seeing a worsening
of its position over this period, the perceived deterioration
was substantially greater than that in Japan, France and Germany.
In addition, the ratings of the US and Italy have improved. As
a consequence, it can be seen that the UK's advantage has therefore
been partially eroded since 1996-97.
SOME CONCLUDING
REMARKS
14. EEF recognises that some of the employment
measures that have recently been introduced have had some benefits
for business with, for example, family friendly legislation helping
to encourage more women with young children to remain in the labour
market. They have therefore helped employers to avoid losing the
skills and experience that these employees have previously gained.
15. However, the implementation of these
employment legislative measures has not been without cost to business
as the various Regulatory Impact Assessments that have been undertaken
by the Government clearly demonstrate. Moreover, the costs of
implementing these legislative measures are much more apparent
and transparent to individual companies than the rather more intangible
benefits that may sometimes occur.
17 June 2004
Annex
UK EMPLOYMENT LEGISLATION INTRODUCED SINCE
MAY 1997
| Legislation |
Date in Force | Main Components
| EU Legislation |
| Public Interest Disclosure Act 1998 | The Act received Royal Assent in July 1998 with the substantive
provisions coming into effect from July 1999.
| Introduction of protection against dismissal or discrimination for individuals who disclose information about certain kinds of wrongdoing.
| No |
| Data Protection Act 1998 | The Act received Royal Assent in July 1998. The main provisions were phased in with many of the significant provisions coming into force in October 2001.
| The Act gives effect to the EU Data Protection Directive and brought most manual records within the data protection rules.
| Yes |
| National Minimum Wage Act 1998 | The Act received Royal Assent in July 1998 and the associated Regulations came
into effect in April 1999.
| Establishing a National Minimum Wage. |
No |
| Working Time Regulations 1998 | The Regulations were issued in July 1998 and came into effect in October 1998.
| Regulations providing for maximum average weekly working of 48 hours, minimum rest periods and four weeks' paid holiday each year.
| Yes |
| Human Rights Act 1998 | The Act received Royal Assent in November 1998 but did not come into effect until October 2000.
| The Act gives the statutory rights and freedoms guaranteed under the European Convention on Human Rights.
| No |
| Employment Relations Act 1999 | The Act received Royal Assent in July 1999 with the provisions phased in during 1999 and 2000.
| Increased the limit for compensation for unfair dismissal from £12,000 to £50,000 (now £55,000) and introduced the statutory procedure for recognition of trade unions and the right for employees to be accompanied at disciplinary and grievance hearings.
| No |
| Maternity and Parental Leave Regulations 1999.
| The Regulations came into force in December 1999.
| Changes to the maternity regime together with the provision of 13 weeks' unpaid parental leave for employees with at least one year's service who have parental responsibility for a child.
| Yes |
| Transnational Information and Consultation of Employees Regulations 1999
| The Regulations on the introduction of European Works Councils came into effect in January 2000.
| The Regulations require certain transnational companies to establish mechanisms for informing and consulting employees at the European level.
| Yes |
| Regulation of Investigatory Powers Act 2000
| The Act came into force in October 2000. |
Creates the offence of unlawful interception of a telecommunication (subject to the Lawful Business Practice Regulations 2000).
| No |
| Part-time Workers (Prevention of Less Favourable Treatment Regulations) 2000
| The Regulations came into effect in July 2000.
| Part-time workers have the right to pro-rata treatment with a comparable full-time worker, unless the employer can objectively justify the less favourable treatment.
| Yes |
| Sex Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001
| The Regulations came into force in October 2001.
| Allows applicants to pursue indirect discrimination claims by identifying a "provision, criterion or practice," rather than a requirement or condition. Burden of proof is on the employer to prove it did not commit the act complained of, once an applicant establishes a prima facie case of discrimination.
| Yes |
| Maternity and Parental Leave (Amendment) Regulations 2001
| The Regulations came into force in January 2002.
| The Regulations amend the provisions relating to parental leave in the Maternity and Parental Leave Regulations 1999.
| Yes |
| Employment Act 2002 | The Act received Royal Assent in July 2002 although its provisions are being being phased in during 2003 and 2004. The family friendly rights, including the right to request flexible working, came into force on 6 April 2003. The provisions dealing with dispute resolution will come into force in October 2004.
| The Act covers the following main areas: (1) family friendly issues—which include changes to maternity and parental leave, the introduction of paternity and adoption leave and the right to request flexible working; (2) dispute resolution via statutory disciplinary and grievance procedures; (3) employment
tribunal reform (4) new rights for union learning representatives; and (5) introducing equal pay questionnaires.
| Yes |
| | |
|
| Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002
| The Regulations came into force in October 2002.
| The Regulations aim to ensure that those on fixed-term contracts receive employment conditions that are no less favourable than those of a comparable permanent employee.
| Yes |
| Working Time (Amendment) Regulations 2002 |
The Regulations came into force in April 2003. |
The Regulations restrict the working hours of young workers, those over the minimumschool leaving age but under 18, to 8 hours a day and 40 hours a week.
| Yes |
| Maternity and Parental Leave (Amendment) Regulations 2002
| The Regulations came into force in November 2002 but generally have effect only in relation to employeeswhose expected week of childbirth began on or after 6 April 2003.
| The most significant changes are the extension of ordinary maternity leave from 18 to 26 weeks and the extension of additional maternity leave to end 26 weeks from the end of ordinary maternity leave. The qualifying period for additional maternity leave is reduced to 26 weeks at the beginning of the 14th week before the expected week of childbirth.
| No |
| Flexible Working (Eligibility, Complaints and Remedies) Regulations 2002
| The Regulations came into force in April 2003.
| The Regulations deal with the eligibility requirements of the statutory right to request a contract variation to change the terms and conditions of an employee's contract of employment to allow for flexible working.
| No |
| Flexible Working (Procedural Requirements) Regulations 2002
| The Regulations came into force in April 2003.
| The Regulations deal with the procedural requirements of the statutory right to request a contract variation to change the terms and conditions of an employee's contract of employment to allow for flexible working.
| No |
| Paternity and Adoption Leave Regulations 2002
| The Regulations came into force in December 2002 but generally have effect only in relation to childrenborn or adopted on or after
6 April 2003.
| The Regulations relate to the new rights to paternity and adoption leave provided for in the Employment Act 2002.
| No |
| Employment Equality (Religion or Belief) Regulations 2003
| These Regulations came into force on
2 December 2003.
| The Regulations make unlawful direct and indirect discrimination, harassment and victimisation on the grounds of religion and belief, which includes religious beliefs and similar philosophical beliefs.
| Yes |
| Employment Equality (Sexual Orientation) Regulations 2003
| The Regulations came into force on
1 December 2003.
| The Regulations make unlawful direct and indirect discrimination, harassment and victimisation on the grounds of sexual orientation.
| Yes |
| Working Time (Amendment) Regulations 2003 |
The Regulations came into force on 1 August 2003.
| The main working time provisions are the average 48-hour working week; four weeks' paid annual holiday; rest breaks; health assessments for night workers; and an 8-hour limit on night working. In short, the Regulations extend the main working time provisions to most workers in the previously excluded sectors.
| Yes |
| Race Relations Act 1976 (Amendment) Regulations 2003
| The Regulations came into force on 19 July 2003.
| They amend the Race Relations Act 1976 (RRA), in accordance with the EC Directive. In particular, they contain a revised definition of indirect discrimination and introduce a new definition of harassment.
| Yes |
| Equal Pay Act 1970 (Amendment) Regulations 2003
| The Regulations came into force on 19 July 2003.
| They amend the Equal Pay Act 1970 by providing for back pay to be awarded for the period of six years before the day the proceedings were instituted.
| No |
| Sex Discrimination Act 1975 (Amendment) Regulations 2003
| The Regulations came into force on 19 July 2003.
| They make it unlawful to discriminate after the end of the employment relationship by subjecting an employee to a detriment.
| No |
| Conduct of Employment Agencies and Employment Businesses Regulations 2003
| The Regulations will come into force on
6 April 2004.
| The Regulations govern the conduct of employment agencies and employment businesses.
| No |
| Employment Act 2002 (Dispute Resolution) Regulations 2004
| The Regulations will come into force on
1 October 2004.
| The Regulations bring into effect the provisions of the Employment Act 2002 which provide for dispute resolution via statutory disciplinary and grievance procedures.
| No |
| Disability Discrimination Act 1995 (Amendment) Regulations 2003
| The Regulations will come into force on
1 October 2004.
| The Regulations amend the Disability Discrimination Act 1995, in particular, by extending it to small businesses, expressly prohibiting harassment on he ground of disability and amending the rules on justification.
| No |
| National Minimum Wage (Amendment) Regulations
| The Regulations will come into force on 1 October 2004.
| The Regulations will introduce a system of fair piece rates for output workers.
| No |
| Transfer of Undertakings (Protection of Employment) Amendment Regulations
| These Regulations are expected during late 2004 or 2005.
| The Regulations will amend the TUPE Regulations and implement the EU Acquired Rights Directive.
| Yes |
| Age Discrimination Regulations | These Regulations are expected to be finalised during late 2004 or 2005 and will be implemented from October 2006.
| The Regulations will implement the age discrimination aspects of the EU Employment Directive.
| Yes |
| Information and Consultation of Employees Regulations 2004
| These Regulations will come into force on a phased basis between March 2005 and March 2008.
| These Regulations implement the EU Directive on "Establishing a General Framework for Informing and Consulting Employees in the European Community".
| Yes |
| | |
|
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