APPENDIX 15
Memorandum by The Recruitment and Employment
Confederation
1. The following evidence provides the perspective
of the UK recruitment industry on the Trade and Industry Committee's
inquiry into UK employment regulation, in particular, with regard
to the contribution labour market flexibility makes to the UK
economy and to the question of whether the current degree of flexibility
is appropriate or desirable.
BACKGROUND
2. The Recruitment and Employment Confederation
(REC) is the trade association for the recruitment and staffing
industry in the UK. We have 5,000 individual members and 6,000
corporate members, representing over 50% of the recruitment and
staffing industry in the UK.
3. Our members provide both temporary and
permanent recruitment services to public and private sector employers
in all sectors of the economy. Our 6,000 corporate members range
from small independent businesses to multi-national organisations.
4. Employment agencies and recruitment businesses
are employers in their own right. Within this context the REC
fully endorses the evidence given within the context of the current
enquiry by business organisations such as the CBI and the British
Chambers of Commerce.
5. The following evidence focuses primarily
on the effective provision of temporary work in the UK, which
is one of the key corner stones of a successful labour market.
As well as providing a vital service for businesses, temporary
work is increasingly recognised as a way of enhancing labour market
inclusion and employment opportunities for individual workers.
The amount of regulation already governing this sector is often
underestimated and any future legislation must be developed and
implemented in a way that does not affect the viability of temporary
work in the UK.
6. As the representative body for the UK
industry, the REC is able to provide detailed information on this
area which is why this paper focuses primarily on this area.
THE CONTRIBUTION
LABOUR MARKET
FLEXIBILITY MAKES
TO THE
UK ECONOMY
7. Labour market flexibility has enabled
the recruitment industry in general, and the temporary work market
in particular, to develop at an unprecedented rate. This has produced
substantial benefits for individual job-seekers as well as for
employers. It has also enhanced the direct contribution that the
industry makes to the UK economy. The latest REC industry survey[103]
shows that industry turnover has now reached £24.5 billion,
an increase of 6.6% on the previous year.
8. Labour market flexibility favours the
provision of effective recruitment services to business and job-seekers
and has led to the development of an increasingly vibrant and
successful industry. The contribution to the UK economy is substantial.
TEMPORARY WORK
ENHANCES LABOUR
MARKET INCLUSION
AND PROVIDES
OPPORTUNITIES FOR
INDIVIDUALS
9. The following overview of recent research
and data provides real evidence that temporary work is increasingly
seen as a viable alternative to permanent employment and is a
key means of enhancing labour market inclusion. The importance
of temporary work from the perspective of individual job-seekers
further highlights the contribution that labour market flexibility
makes to the UK economy.
10. For individual job-seekers, temporary
work provides a way into the labour market and a crucial stepping
stone into full employment. There are a number of reasons for
the increasing popularity of temporary work from the perspective
of individual workers. Flexibility is one of the key factors as
the temporary worker can chose when to work and can accommodate
other activities such as caring responsibilities, travelling or
studying. Temporary work is increasingly seen as a means of developing
skills and overall employability as experience can be gained and
new skills developed by working in different roles for a variety
of organisations.
11. As well as developing overall employability,
temporary work provides a way back into the labour market for
individuals who have been excluded for a substantial period. The
reality is that employers are more likely to "take a chance"
when taking on temporary rather than permanent staff.
12. As a result, the role of flexible and
temporary work in enhancing diversity in the work place is increasingly
recognised. For example, a number of agencies are focusing on
encouraging older workers back into the labour market—one
of the specific objectives identified under EU targets for the
Lisbon Agenda. Temporary work—with the flexibility it affords
the individual and the employer—is a means of achieving
this goal. For all individuals who have been out of the labour
market for some time, the first step back is the hardest to achieve.
Temporary work provides a means of achieving this first step,
especially where the employers are able to offer long-term assignments
which provide a substantial work-based experience.
13. Recent data conforms the benefits of
temporary work from the job-seeker's perspective. For example:
— 70% of temporary workers responding
to an REC survey believed that temping improves employability[104].
— Another REC survey showed that nearly
50% of temporary workers actually moved to a permanent job within
the organisation which they had been assigned to as a temp[105].
14. But, temporary work does not simply
provide short-term and intermediary solutions. The trend is towards
longer temporary assignments which provide greater value for both
the company and the temporary worker. In the UK, for example,
a majority of temporary work assignments last over six weeks[106]
and an increasing number of individuals actually prefer the temporary
work option because of the flexibility it affords.
15. Further evidence of changing attitudes
towards temporary work was generated through the REC survey of
temporary workers in July 2004. Flexible working is increasingly
seen as a choice rather than a necessity. Of all the temporary
workers surveyed:
— only 25% had not worked as a temp
before;
— only 18% said that they would not
work at temporary work in the future; and
— only 46% of the temporary workers
interviewed said that they would actually prefer to be working
in a permanent position.
16. The idea that temporary work is necessarily
second rate, and that temporary workers are somehow disadvantaged
and exploited is being dispelled once and for all. The REC's recent
survey confirms the evidence from previous research. For example,
a CIPD study of employee attitude surveys showed that employees
on fixed term or temporary contracts were actually more highly
motivated, and more satisfied with their jobs, than employees
on permanent contracts. A survey by Blue Arrow Research of over
600 agency workers showed that nine out of 10 individuals enjoyed
temporary working[107].
TEMPORARY WORK
IS VITAL
FOR BUSINESS
AND FOR
COMPETITIVENESS
17. Recruitment service providers play a
key role in helping companies to address resourcing challenges—whether
it be temping work or permanent postings and thereby enhance business
performance. This is especially important in very tight labour
markets such as the UK where the demand for staff is continuing
to rise[108].
18. Within this context, innovative recruitment
solutions and the expertise provided by recruitment service providers
are becoming increasingly important. In particular, the effective
provision of high calibre temporary workers is essential in order
for organisations to react quickly to changing resourcing needs.
19. The main reason given for the use of
temporary workers in UK businesses was the need to meet an increase
in demand[109].
This highlights the importance of temporary work for business
performance and for global competitiveness at a time when it is
crucial to react quickly to market opportunities. The other main
reasons given for the use of temporary workers was to cover for
vacant positions and for staff absence. Another important reason
for the use of temporary staff is budgetary restraints resulting
in headcount freezes. This has affected both the public and private
sector.
20. Companies in the UK and throughout the
EU are competing in an increasingly competitive global economy.
Fast and flexible resourcing solutions are an absolute necessity.
THE RECRUITMENT
INDUSTRY MAKES
A VITAL
CONTRIBUTION TO
THE UK ECONOMY
21. Labour market flexibility has enabled
the recruitment industry to develop into an extremely vibrant
and successful industry. The overall industry turnover of £24.5
billion[110]
is principally made up of turnover generated through temporary
work placements. The latest survey shows that industry grew by
6.6% over the last year. This trend is set to continue and 85%
of respondents to another recent REC survey[111]
said that the demand for temporary work in the UK was constant
or increasing.
22. For all the above reasons flexibility—especially
as it relates to the provision of temporary work—is desirable
and necessary. The REC does not believe that there is any need
for more regulation but we do advocate a greater enforcement of
current regulations.
IS THE
CURRENT DEGREE
OF FLEXIBILITY
APPROPRIATE OR
DESIREABLE?
23. The amount of flexibility surround the
provision of recruitment services is often overstated and the
amount of regulation already governing the provision of temporary
work in particular is often generally underestimated. Any future
legislation—in particular, the proposed EU Agency Workers
Directive—must be developed and implemented in a way that
does not affect the viability of temporary work in the UK.
24. The benefits of temporary work are also
linked to the fact that—despite what is commonly perceived—temporary
workers do have rights and are already covered by a number of
regulations under national law.
THE PROVISION
OF TEMPORARY
WORK IN
THE UK IS
ALREADY HIGHLY
REGULATED
25. The new Employment Agency Act (EAA)
Regulations have been in operation for less than a year. The new
Regulations that came into force in April 2004 are an updated
version of regulations covering the industry which have been in
operation since 1973. The REC worked closely with the DTI to inform
members and has promoted the need for a common-sense approach
to interpreting specific new regulations. There are, however,
a number of areas which have caused real problems. The feedback
from REC members on the practical implications of the new Regulations
was recently collated and sent to the DTI Minister, Gerry Sutcliffe.
26. A good example of a specific problem
area is Regulation 21 which requires written confirmation on all
matters relating to the hirer and the work-seeker is sent to each
party within three business days of the start of a new assignment.
For those members dealing in high volume, high turnover assignments
such as nursing, social care, industrial, technical and hospitality,
this Regulation has resulted in an unwieldy and unsustainable
paper chase. As well as impacting on the work of agencies, the
feedback from members confirms that that this deluge of extra
information and paperwork is also seen by most employers and workers
as an inconvenience rather than a benefit. This is a good example
of additional bureaucracy being imposed without even the mitigating
factor of real benefits being created for the intended stakeholders.
27. Based on the specific feedback from
members, the overall cost of implementing the new Regulations
is between £3k and £20k per branch. There is obviously
a substantial variation, depending on the size of the agency and
the sector they operate in, but the overall cost to the industry
is estimated at over £30 million.
28. REC members are fully committed to high
standards within the industry and to compliance with the current
Regulations. However, the extra costs and administration that
has been created must be recognised. The level of labour market
flexibility—in so far is it applies to agencies supplying
temporary workers—is often overstated.
THE RECRUITMENT
INDUSTRY ALSO
PLAYS A
KEY ROLE
IN AREAS
SUCH AS
IMMIGRATION
29. When looking at the current levels of
flexibility, it is important to look at other areas that have
created substantial additional bureaucracy for the industry. One
such area is immigration policy and measures for addressing illegal
working.
30. Obligations on employers and agencies
under Section 8 of the Asylum & Immigration Act were reviewed
in 2004. The Section 8 changes have created substantial additional
bureaucracy and uncertainty for agencies.
31. Overall, the industry has been extremely
pro-active in seeking to comply with the Section 8 changes. A
good illustration of this has been the unprecedented number of
calls to the REC's legal help-line on this issue.
32. The recruitment industry is playing
an increasingly important front-line role in the fight against
illegal working. This contribution is often overlooked. In addition,
the practical difficulties associated with carrying out the right
checks and the need for a real support mechanism are clearly under-estimated.
The fact that immigration is such a topical political issue will
throw more light on the crucial role that law-abiding agencies
play in this area and the need for more support.
TEMPORARY WORKERS
ALREADY BENEFIT
FROM A
RANGE OF
RIGHTS AND
PROTECTIVE MEASURES
33. One of the reasons given for more legislation
and for measures to limit what flexibility does exist is to need
to ensure that temporary workers receive adequate rights and protection.
The REC fully endorses the need to ensure that temporary workers
are protected. However, regulations are already in place and rights
already exist for all temporary workers in the UK. Rather than
new regulation, the key is to ensure that these existing regulations
and rights are highlighted and enforced.
34. In the UK, agency workers are covered
by working time, the national minimum wage and health and safety
regulations as well as provisions for statutory maternity pay.
The new Employment Agency Act Regulations provides additional
protection and research shows that most temps earn as much as
or more than their permanent equivalents.
35. Against accusations that the UK's flexible
employment model is exploitative, temporary workers in the UK
enter into the temporary worker arrangement in full knowledge
of the status, rights, benefits and limits that apply to that
role. There are regulatory requirements in place to ensure that
temporary workers engaged and supplied by employment businesses
are given written terms and conditions prior to being supplied
to a hirer, which in part set out the type of contract that is
in place and the temporary worker's employment status under it.
36. Temporary workers in the UK benefit
from all statutory worker-based rights. The only protections they
do not benefit from are those that strictly attach to individuals
employed under contracts of employment, such as the right to statutory
notice, the right to claim unfair dismissal and redundancy and
the right to return to work after childbirth.
37. The UK temporary worker supplied through
an employment business enjoys all worker-based benefits and entitlements
plus a few more that arise under the Employment Agencies Act Regulations
2003. These are as follows:
— the right to be paid for all work
done without any unlawful deductions;
— the right to benefit from employers'
national insurance contributions;
— the right to be paid at least at
the national minimum wage;
— the right to written terms of engagement
containing details of, inter alia, pay, payment intervals, notice,
type of work, and paid holiday entitlements;
— the right to at least the statutory
minimum of four weeks' paid annual leave (pro rated to the amount
of work done in any leave year) including public holidays unless
otherwise agreed with the employer/employment business;
— the right not to have to work more
than 48 hours per week;
— the right to rest breaks;
— the right to properly regulated night
work with the requisite rest breaks and health checks;
— the right, subject to qualification,
to statutory maternity pay;
— the right subject to qualification,
to statutory sick pay;
— the right not to be unlawfully discriminated
against on the grounds of sex, sexual orientation, race, religion,
belief, or disability; and
— the right to protection under the
health and safety legislation.
38. In addition, a temporary worker seeking
work through a UK employment business benefits from the following
regulatory protections:
— a worker may not be charged for receiving
work finding services;
— any charges that an employment agency/business
makes for any of its ancilliary services must be clearly identified
and explained;
— a worker must be given full details
of the hirer and the position to which s/he is being supplied;
— a worker may not be restricted from
working for the hirer directly or for any other person by the
employment business supplying his/her services;
— an employment business must not make
payment for work done conditional upon receiving a signed time
sheet from the hirer;
— an employment business must not make
payment to the worker conditional on receiving payment from the
hirer;
— a worker must receive written terms
of engagement prior to being supplied or introduced to a hirer;
and
— a worker must not be subjected to
any detriment on the grounds that they go to work for a person
other than the employment business or employment agency;
39. It is also important to remember that
under UK law, a striking employee of a hiring enterprise may not
be substituted for a temporary worker supplied by an employment
business.
THE RECRUITMENT
INDUSTRY IS
COMMITTED TO
HIGH STANDARDS
40. As well as seeking to comply with existing
regulations, all REC members are committed to raising standards
and have to adhere to a specific Code of Conduct. Compliance with
the Code of Conduct is monitored by the REC Standards Department.
All breaches are referred to the Professional Standards Committee
which is made up of industry peers as well as representatives
from the CBI and the TUC. Severe breaches result in agencies being
expelled from REC membership.
41. The genuine commitment to high standards
is also highlighted by the huge response to the "REC Audited
scheme" which uses external auditors to verify current procedures
and compliance with regulations. The aim is to encourage employers
to use REC members and REC Audited agencies as a way of "freezing-out"
unlawful agencies who deliberately flout all regulations.
THE CURRENT
LEVEL OF
FLEXIBILITY IS
DESIRABLE AND
NECESSARY
42. As highlighted above, the level of flexibility
covering temporary work is often overstated. What level of flexibility
there is both desirable and necessary. Day to day demands of business
and the resulting changes in demand for labour could not be addressed
with a less flexible employment model.
43. Unemployment figures in the UK are the
lowest in Europe and UK business is faring better than its European
counterparts. In part this is attributable to the flexible working
model at play in the UK.
44. The use of temporary workers by UK companies
to address surges in demand as well as temporary dips enables
those companies to respond to market forces quickly and cost effectively.
This would not be possible in an environment where any such demands
could not be responded to immediately and any response entailed
to costly and time consuming exercise of hiring new staff or letting
existing members of staff go. The flexibility of temporary work,
therefore, to both workers and UK business is vital to the UK
economy.
45. Clearly, there needs to be a balance
between ensuring that temporary workers have rights and protection
and ensuring that business is able to operate effectively. The
cumulative impact of regulations and red tape is a real threat
to employment creation and to the continued provision of effective
recruitment services in the UK. Regulations and rights are already
in place, any additional burdens would not only have a negative
impact on business but would also limit employment opportunities
for individuals.
WHAT MUST
THE UK GOVERNMENT
DO?
46. The REC believes that greater enforcement
of current regulations is essential. Looking ahead, any future
legislation must enhance rather than limit the viability temporary
work.
GREATER ENFORCEMENT
OF CURRENT
REGULATIONS IS
ESSENTIAL
47. REC members are fully committed to high
standards and in many respects the new regulations simply mirror
existing obligations under REC Codes of Conduct. Where there have
been new requirements to implement, there has been a genuine commitment
to doing so in a manner which is fully compliant. Evidence has
been the massive response to the REC Audited scheme which helps
agencies to monitor compliance with the new regulations.
48. The Government must avoid new regulations
and more bureaucracy and look at some of the areas which will
really achieve high standards and protection for workers.
49. The most important area for the Government
to focus on is the effective enforcement of existing regulations.
It is often said that a bad practitioners will just as happily
flout three pieces of regulation as they will ten pieces of regulation.
Agencies who are complying fully with the new regulations and
incurring the extra costs are increasingly aggrieved by rogue
agencies who are not compliant and are, therefore, able to undercut
them in the market place.
50. Effective enforcement is more important
than ever, whether it be for the existing EAA Regulations or other
forthcoming legislation such as the Gangmaster Licensing Act.
The present system for the enforcement of the EAA Regulations
is wholly inadequate with only eleven inspectors in an industry
which counts well in excess of 10,000 businesses. It is interesting
to note that the DEFRA Inspectorate for the Gangmaster Licensing
Regulations—which only focuses on the agricultural sector—comprises
of at least forty inspectors.
51. The other key factor is the need to
focus on the end user and to ensure that employers use only reputable
recruitment agencies and labour providers. In the absence of a
licensing scheme for the UK Recruitment Industry as a whole, REC
membership is increasingly seen as a key selection criteria and
certainly provides one means for reputable agencies to differentiate
themselves from the outlaws. The early signs are that the REC
Audited scheme will take this a stage further. We call upon the
Government to endorse this new initiative and to continue working
with the REC to promote high standards within the industry. Clearly,
one of the best ways of really promoting high standards within
the industry is to ensure that the rogue operators are "frozen
out" by cutting the demand for their dubious services.
ANY FUTURE
LEGISLATION MUST
ENHANCE RATHER
THAN LIMIT
VIABILITY OF
TEMPORARY WORK
52. REC members are fully committed to high
standards within the industry and to compliance with the current
Regulations. However, the extra costs and administration that
has been created must be recognised. In the first instance, some
of the unnecessary bureaucracy can be addressed by reviewing current
interpretations of the EAA Regulations.
53. Looking ahead, it will be essential
to take theses extra costs and red tape into account when looking
at possible new legislation such as the EU Agency Workers Directive.
The cumulative impact of regulations and red tape is a real threat
to the continued provision of effective recruitment services in
the UK.
54. Limiting temporary work would not result
in more permanent posts being available. Surveys indicate that
only 14% of companies would hire permanent workers to replace
temporary workers[112].
In order to avoid limiting the potential benefits of temporary
work in the UK and across in the EU, the Agency Workers Directive
must include:
— A substantial derogation period before
equal treatment provisions between temporary and permanent employees
can apply. The six week derogation period currently proposed is
wholly inadequate and would have a substantial impact on temporary
work opportunities for individual job-seekers.
— A definition of what is meant by
pay for the purposed of the Directive. Without this it is a logistical
impossibility to determine pay comparisons and the fact that a
substantial number of companies do not have formal pay scales
further complicates matters.
— A clear list of the basic working
conditions covered by the Directive. Basic working conditions
should only include working time, health and safety and equal
treatment between men and women.
55. The benefits of flexible working and
of temporary work in particular, should be one of the messages
of the UK's forthcoming presidency of the EU.
56. Within the EU, it is estimated that
over 7 million workers are employed by the agency work industry.
The contribution of agency work to European job creation is increasing
on a yearly basis and could lead to up to 4.3 million new jobs
between now and 2010[113]
(10% of the growth targets of the Lisbon Strategy).
57. This contribution must be recognised
and the Agency Workers Directive must be reviewed in such as way
as to enhance rather than impair the provision of temporary work.
January 2005
103 REC/PWC Recruitment Industry Survey 2003-04. Back
104
REC Survey, July 2002. Back
105
REC Survey, May 2002. Back
106
CBI Survey, June 2002 (65% of companies reported that assignments
typically last longer than 6 weeks). Back
107
Blue Arrow Research Survey, October 2002. Back
108
The monthly REC Report on Jobs confirms that demand for staff
in the UK has now risen for 12 successive months. Back
109
CBI Survey, June 2002. Back
110
REC/PWC Recruitment Industry Survey 2003-04. Back
111
REC Member Survey ("Branjuicer"), December 2004. Back
112
McKinsey report "Orchestrating the Evolution of Private Employment
Agencies towards a Stronger Society" (2000). Back
113
McKinsey report "Orchestrating the Evolution of Private Employment
Agencies towards a Stronger Society" (2000). Back
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