House of Commons
|Session 2006 - 07|
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Public Bill Committee Debates
Draft Working Time (Amendment) Regulations 2007
The Committee consisted of the following Members:
Susan Griffiths, Committee Clerk
attended the Committee
Second Delegated Legislation Committee
Monday 25 June 2007
[Mr. Martin Caton in the Chair]
Draft Working Time (Amendment) Regulations 2007
That the Committee has considered the draft Working Time (Amendment) Regulations 2007.
It is a pleasure to see you in the Chair, Mr. Caton.
Increasing the entitlement to paid leave, making time off for bank holidays additional to the four weeks holiday entitlement, was a key pledge in Labours 2005 manifesto. The regulations will deliver on that commitment.
Fairness at work has been at the centre of the Governments agenda for economic competitiveness. We have introduced an impressive list of measures that have made British workplaces fairer, while ensuring that we remain ahead of our economic competitors. Partnership with employers has played a crucial role in delivering that. Enterprise and entrepreneurship are the engine of our economy, and only by recognising the importance of a growing economy and successful businesses has it been possible to deliver the higher standards that we now enjoy.
An important lesson of the past nine years is that there is no contradiction between higher standards in the workplace and economic productivity. Happier workers are more productive, have a greater sense of loyalty to their employers, take less sick leave and are more focused on their jobs. Since the introduction of four weeks statutory paid leave in 1998, productivity has gone up, not down.
We have consulted extensively in developing the proposals, discussing them with unions and employers organisations, particularly in the sectors most likely to be affected. We have held two public consultations, first on the broad framework of the proposals and then on the detail of the draft regulations. We are aware that those most likely to be affected by the proposals might be smaller businesses, which are not part of an employer organisation, or individual, non-unionised workers. We have therefore made every effort to consult as widely as possible to reach out to those who otherwise might not respond to a Government consultation. The information that we have gathered through the consultation process has helped to shape the proposals.
Increasing the minimum holiday entitlement by eight days pro rata is the right thing to do. Time away from the workplace is a basic right that is already recognised by most employers, who offer paid time off on bank holidays, over and above the existing minimum entitlement. However, the amount of holidays is not distributed equitably. Our research shows that about 6 million workers will benefit from the proposals. The low paid
The increase will protect vulnerable workers and enable reputable companies that already offer 28 days, or the equivalent, to compete on a more level playing field. Many companies that compete in tough international markets have already taken that step without any detriment to their competitiveness. The increase will bring us into line with the rest of Europe, where holiday allowance is typically more generous.
The regulations draw on powers under the Work and Families Act 2006 and will increase the statutory holiday entitlement from the current four weeks to 5.6 weeks. The statutory holiday entitlement is expressed in weeks to ensure that those working part-time receive a pro rata entitlement. Someone working five days a week will see their statutory entitlement increase from 20 days to 28 days. The maximum statutory holiday entitlement is capped at 28 days, otherwise those working six days a week would receive a 32-day entitlement.
During the debates on what became the 2006 Act, we agreed that the increase in holiday entitlement would be phased in to give employers time to adjust. Our preferred approach was to introduce half of the additional holiday entitlement from October 2007 and the remaining half from October 2008. However, following further consideration of the cost pressures identified during the consultation programmein particular for the health and social care sectorwe will delay the second increase in the holiday entitlement from 1 October 2008 until 1 April 2009. The holiday entitlement for someone working five days a week will increase to 24 days from 1 October, rising to 28 days from 1 April 2009.
Many employers enable their staff to carry some of their unused holiday over to the following leave year. That flexibility is much used and is appreciated by staff as it enables them to save up longer holidays to see friends and family overseas, for example. The regulations will permit such carry-over of leave to continue where agreed by the employer and worker, as long as four weeks holiday is taken in the year.
Some employers also provide payment in lieu of taking holiday for additional contractual holidays over the four-week entitlement. Although that gives additional flexibility in managing staff holidays, we are concerned that there is scope for abuse of such payment in lieu. That runs contrary to our overall intention, which is to enable staff to take more holidays. We therefore do not intend to allow payment in lieu of the additional holiday entitlement after 1 April 2009. The intervening transitional period will give employers an opportunity to recruit and train any additional staff who may be required to cover the additional holiday periods.
During the consultation process, employers that already give at least 28 days holiday expressed concern that they might have to amend their systems and procedures as an inadvertent consequence of the regulations. We are clear that we want to support good employers, while protecting vulnerable workers. We therefore propose an exclusion to the regulations: employers who already give all their staff at least 28 days holidaypro rata for part-timerswill be excluded from the regulations. That incentive for early compliance will remove from good employers any administrative burden caused by the regulations, while
It is inevitable that proposals benefiting about 6 million people will bring associated business costs. As a result of our close working with business, we have included a number of measures to offset those costs. We have ensured that the proposals offer considerable flexibility to employersfor example, by enabling carry-over of the extra days, and by ensuring that those days will not be excluded from the calculation of average weekly working hours under the working time regulations.
Our evidence on the impact of our proposals was also made available to the Low Pay Commission, and was taken into account during its recent considerations on the level of the national minimum wage. The commissions recent report suggests that the majority of employers will be unaffected, and that the overall impact on the economy will be small. It also stated, however, that for some employers the impact of the increase in holiday could be significant, and that a disproportionate number of those affected are likely to be in low-paying sectors.
I conclude by saying that the reform marks a further step in achieving fairness at work, while advancing our economic competitiveness. That has not happened by chance. It has happened because, in preparing for planned changes, we have maintained the dialogue with employers and workers alike, discussing concerns openlynot just any possible economic impact, but the most practical way of implementing the changes.
A modern economy can prosper only by embracing practices that recognise the vital role that individual workers play in the success of a business, and rewarding that effort in a way that shows they are valued and respected. Building such recognition into the system itself can only help to increase the mutual respect between employers and employees. That is something that we in the Government believe can only be of benefit to bosses and workers, and thus, ultimately, to the British economy as a whole. I commend the regulations to the Committee.
Mr. Mark Prisk (Hertford and Stortford) (Con): I, like the Minister, welcome you, Mr. Caton, and your chairmanship of the discussions. I welcome the Minister and thank him for that remarkable presentation. If I ever need to learn how to speed read, I now know who to come to.
The proposals provide for all workers to take more paid holiday by making the existing holiday entitlement of four weeks additional to time off for bank and public holidays. The net result, judging by the comments made by the Minister and indeed from the regulation itself, equates, for those affected, to eight more paid holidays, phased in over two years.
Striking the right balance between family and working life is vital to the interests of the employer, and of course those of the employee. In families, often where partners are both working, holiday time is essential for people not only to recharge their batteries but to have quality time with their children. For employers, staff are often the most important asset.
Happily, that fact is recognised by most employers: 81 per cent. of all employeesperhaps I should say all workers, as that is a broader definitionalready receive at least the 5.6 weeks of paid leave envisaged by the regulations. Indeed, 70 per cent. receive more than the statutory minimum that is being discussed.
I talked, as I have always tried to, with a number of business organisations. Both the Federation of Small Businesses and the Institute of Directors told me that most of their members will not be affected by the regulations because they already more than fulfil the 5.6 weeks minimum standard. However, those who do not get that minimum are, as the Minister mentioned, steadily falling behind. Women and minority ethnic workers form a particularly high proportion of that group. That is partly because of their high proportion of part-time work, but that is important and we should not overlook it.
Encouraging good practice in the workplace is something that we strongly welcome. As the director general of the British Chambers of Commerce, Mr. David Frost, said:
The Government is right to tackle the counting of bank holidays as annual leave. It is counter productive of businesses to deprive their workers of holidays that others who are employed get as a right.
During the consultation, the Government have adjusted their original plans. I am pleased that, for example, there will not be a crude imposition of a new statutory right, with the one-size-fits-all approach that such legislation often has. I am also pleased that, as the Minister mentioned, there is a specific exclusion from the regulations for that majority of employers who already meet the standard. However, I have concerns about the proposals and how they will work in practice.
In the consultationthere were two sets of consultationsit was clear that there are specific concerns. For example, the residential care sector was concerned about the prohibition on payment in lieu of leave that the Minister mentioned. That particular industry made it clear that the combination of the prohibition with existing retention and recruitment issues could have a significant impact on its ability to operate. By way of comparison, the Department of Health has said that for the health sector alone the measure will cost £480 million; it is a major issue. What assurance can the Minister provide that the regulations will not undermine that important sector? If problems arise, will he agree to meet industry representatives to help those vital enterprises?
Will the Minister explain the wider principle behind the prohibition of pay in lieu of leave? He mentioned that from his point of view it was crucial that holiday was the central issue. I understand that that was the manifesto commitment made by the Labour party, but many employees might actually prefer the choice of the extra money. Why, after the transition period, should they be prevented from agreeing to a payment in lieu? I
The regulations are due to come in force on 1 October, which would give employers roughly 12 weeks, assuming that the House passes the legislation within the next seven days. I wonder whether that is sufficient time. Administratively, it is clear that there are transition costs in time and money. The Government have reckoned that there will be an administrative transition cost of about £140 million, of which the vast majority will fall on the smallest of enterprises. I doubt whether the figure in the regulatory impact assessment can accurately record the actual costs lost, for example, in trying to adjust PAYE and national insurance records, let alone assist in the working out of the step-by-step procedures that the new legislation will mean for an employer.
For employers, knowing exactly what is required of them is critical. The point is highlighted not only in the general representations, but in the Governments regulatory impact assessment:
Several small company respondents identified the need for good quality guidance for both employers and employees well in advance of any increasea point also highlighted during consultation meetings. One small employer explained that many staff (particularly part-time) were unclear of their existing rights on annual leave.
Given that, what guidance will be made available to employers, and on what date? To whom will it be sent, and how? What guidance will be available to employees, and from whom? Will it come from a trade union if one operates in the workplace? Do the Government intend to promote that? Will the Department of Trade and Industry, or whatever it may be called by that point, seek to promote that in a different way? Can the Minister guarantee, from the employers and the employees points of view, that that information will be both published and distributed no less than 10 weeks before implementation, the date of which has been set by the Government? It is important that the guidance that was clearly sought through the regulatory impact assessment is made available.
Secondly, and with regard to the time frame available, given the Governments stated aim of encouraging employers to adopt that practice before the regulations come into force, might it not have made more sense to delay implementation, perhaps to April 2008, to give most employers the best chance of adopting the eight days voluntarily? If the Governments purpose was to encourage as many employers to try to do that on a voluntary basis, and thereby be rewarded by being excluded from the paperwork that relates to the regulations, as the Minister has said, is it reasonable that there is, in effect, a period of only 12 weeksindeed, maybe lessfor them to do that?
On all those issues it is clear that getting the balance right, for both employee and employer, is critical. However, it is just as important that we get the details of implementation right, as it is that the principles are
Six million employees in the UK19 per cent. of the work forcewill be covered by the new regulations because they receive fewer than 28 days holiday annuallyor pro rata if they are part-time. I welcome the measure because it will create a fair playing field for employers. Some employers do not offer 28 days annual leave, and for them the issue can be turned the other way round and one can say, They enjoy additional hours work, which more responsible employers pay for.
The number of bank holidays in the UK is hardly generous, compared with some of our European neighbours. While we have eight bank holidays, Italy has 12, Austria has 13, and Spain and Portugal have 14. Therefore, we are not being overly ambitious in the number of bank holidays that will be covered, compared with our European neighboursI hasten to add that I am not insinuating that we should have more bank holidays, before my Conservative colleagues stand up. In addition to that, British employees still work longer hours than employees of almost any other European country. We have, very much, a long-hours, hard-work ethos in this country and option 3, which will ensure that the 28 days become an overall entitlement, will go a long way to redress some of the least favourable working conditions experienced by many people in this country.
Obviously, we felt that doing nothing was a non-starter. With regard to option 2, the costs of which were £138 million in transitional costs and £83 million ongoing, we felt that the statutory right to take leave on the bank holiday itself would hamper employees and make things very difficult for them when they wanted to provide services on bank holidays.
We certainly agree that option 3 is the right way to go. That is also reflected in the ongoing costs: although the transitional costs are slightly more, at £140 million, the ongoing costs are £43 million, whereas with option 2 the figure is £83 million. It is clear that, ongoing and in respect of employers, it is cheaper to carry on with option 3.
The number of statutory holidays may increase or possibly even decrease in future years, so I would like to ask the Minister whether the Government will make provision so that we do not have to go through the statutory instrument process every time the number of holidays changes. Also, will he confirm that there is no presumption that time and a half or double time is in any way implied or expected in the Governments regulations for people who take time off not on the bank holiday itself? That should be a matter of negotiation between the employee and the employer.
I will say a couple of things about the impact on small businesses. It will be disproportionately high purely because they have fewer individuals to rely on when an extra days holiday is required for a bank
One would hope that small businesses will not be too disproportionately affected, but I ask that the Government ensure that there is good quality guidance and lots of notice of exactly when the requirements are coming in and how to implement them, as it is clear that small businesses will have the greatest difficulty.
The hon. Member for Hertford and Stortford (Mr. Prisk) asked why it should not be possible to have pay in lieu, which is an interesting point to consider. He talked, quite rightly, about the benefits of leave in terms of family life, stress and sick leave, but if someone is under a great deal of financial pressure they still suffer stress and sickness and have the same pressure on their families, so I would tend to favour the Governments suggestion that it is important that we get our rest and recuperation. We support their stance on that.
The benefits are clear, as the hon. Gentleman has shown. In addition, there are benefits to industry itselfin the retail, tourism and hospitality sectors. We have talked about the work-life balance aspects and family cohesion. Those also apply for employers who take into account the needs of employeesemployees benefit from the additional morale and performance in the workplace, and the reduction of stress and sick leave. No less important are equality issues, as there tends to be a greater preponderance of women in part-time work, which will be the most affected. Ethnic minorities, too, will be disproportionately affected. British employees still work longer hours than almost all their European counterparts. They enjoy the fewest public holidays and the new requirements will redress the balance not only in the United Kingdom but in the EU.
Dr. Brian Iddon (Bolton, South-East) (Lab): I welcome the regulations, as do other Members on both sides. Better conditions can lead to better productivity, rather than the converse. Workers have a right to share in the increased and improved productivity from which industry and commerce have benefited in this country in past decades. The measure will in a small way probably help us further to reduce unemployment.
I want to focus my remarks mainly on agency workers, and to ask my hon. Friend the Minister a question on the subject. I have close knowledge of agency working at the moment, because one of my stepsons is an agency worker. It seems to me that as we better the conditions of employment for the majority of the countrys work force, we are increasing the agency work force across the sectors. In what way will the regulations affect agency workers? They seem to me to lose out on sick pay, holiday rights and many employment rights and conditions.
I know that there is a continuing Government consultation exercise on agency workers at the moment, but if my hon. Friend can make a statement about the
Jim Fitzpatrick: I think that the comments by the hon. Member for Hertford and Stortford about my speed-reading were made in anticipation of my familiarity with his more deliberate style. There has been a balance across the Committee in the amount of time spent on clearly very welcome regulations.
The general welcome for the regulations from those on the Conservative and Liberal Benches, as well as from my hon. Friend the Member for Bolton, South-East, is worth noting. Given that they will benefit 6 million of the lowest paid and most vulnerable workers, it is perhaps no surprise, from an electoral point of view if from no other, that they are being welcomed. That is a measure of the new Conservative party. The national minimum wage benefited millions of workers, but the old Conservative party managed to oppose it; the fact that workers rights are moving up the Conservative agenda is to be welcomed.
I will try to respond to the questions of the hon. Members for Hertford and Stortford and for Solihull. I think it is generally accepted that, when in 1998 we legislated for four weeks paid holiday, no one expected that a number of employers would count bank holidays among the 20 days. I think that we all thought, Okay, that is four weeks paid holiday, with bank holidays on top. The regulations are pretty much about rectifying that anomaly, and that is why they have not caused much surprise.
The hon. Member for Hertford and Stortford raised concerns about the social care sector. We have spent a lot of time in talks with that sector, because we were aware that it is a part of the UK economy that might be affected more than others by the regulations. We think that we have gone a long way towards accommodating it with the transitional arrangements, phasing in and the delay of the second implementation date by a further six months. The hon. Gentleman asked whether I would be prepared to meet sector representatives in the event of any difficulties, and I am happy to give that assurance. There is no question of our not meeting business when it flags up potential difficulties.
The hon. Gentlemans question about removing the payment in lieu was pretty much answered by the hon. Member for Solihull. This is a decision involving a judgment. We acknowledge that there are abuses in the systemfor example, people being encouraged to take payment in lieu rather than taking time off. Sometimes, to their own detriment, workers demand money from employers rather than taking time off. We are legislating for people to have adequate time off from the work place, which is why this measure has been introduced, with the reassurance that there will be a transitional period until April 2009. The promise was flagged up in our manifesto in 2005, and we have had two extensive consultations. We have allowed businesses, in whatever sector or industry they operate, to prepare for the measure.
Mr. David S. Borrow (South Ribble) (Lab): My hon. Friend will be aware, as I am, of number of occasions on which the business community has criticised the Government for increasing the burden of business regulations. Given the support for these regulations across business and across party, does he, like me, hope that in the future business will not put these regulations on the pile that they criticise and to which they are opposed?
Jim Fitzpatrick: My hon. Friend makes an important point. I am the Minister with responsibility for better regulation at the DTI, so I have to deal with businesses and their views on regulations. We have gone a long way to addressing the regulatory burden on business; the DTI, with other Departments, published our simplification plan and we have a target to reduce business regulation by 25 per cent. by 2010.
Having two dates, April and October, for the introduction of new regulations is another way of bringing certainty to business and reducing any complications that may arise. We have undertaken extensive arrangements to accommodate businesses and to help them to come to terms with the new regulations, and I cannot see business in general being critical of them. Indeed, the British Chambers of Commerce, the CBI and the Engineering Employers Federation have welcomed the regulations. I think that that addresses my hon. Friends point.
Mr. Prisk: On the specific matter of payment in lieu, I completely understand the Ministers point about abuse, and I do not want to the widen the issue, but I am concerned about what happens when an employee has expressly wished to earn a little more money and the employer has agreed to it. That may happen at Christmas time, for example, when many employees may want to earn a little more. They may have gone a little too far with their credit cards and wish to take four days payment in lieu of time off. It seems peculiar that there is no permissible allowance within these regulations to enable people to take payment in lieu when there is a clear and open agreement to do so between employer and employee. Why must the Government stop that? What is their rationale for doing so?
Jim Fitzpatrick: It is very straightforward. As I explained to the hon. Member for Solihull, it was a judgmental decision made when we were considering whether to allow the continuance of purchases and buy-outs. We are trying to alter the culture in the British work place and trying to ensure that there is greater fairness and awareness of the work-life balance and its importance to peoples health and to the welfare of families and individuals. We spent a considerable time in the Department discussing the options and, at the end of the day, concluded that these regulations were the best way to proceed.
We decided that the extension of the buy-out transitional period should be 18 rather than 12 months, because some people will opt to buy out and think we are depriving them of something, which would be an electoral liability for us. They may think we are stopping them from having four days payment in lieu rather than a holiday. On balance, taking into account
The hon. Gentleman and the hon. Member for Solihull both asked about the help that businesses will receive. As well as the phased introduction and the traditional period for buy-out, we will offer a tailored guidance package. It will include material targeted at employers, employees and intermediaries, and there will be an online calculator. Everything will be available online through Business Link and Directgov as soon as possible after the parliamentary process is completed. Work on that package has been under way for some time, and I assure the hon. Gentleman that guidance and advice and the online tools will be available to businesses as soon as possible.
Mr. Prisk: I am sure that the website is welcome; the internet is clearly the best forum. However, despite the fact that most people are aware of it, I suspect that many will not use it to seek such information. What steps is the Department taking specifically to promote that information, and the requirements on employees and employers? Both parties are involved; the Minister has mentioned one but not the other.
Jim Fitzpatrick: I assure the hon. Gentleman that, as a direct result of the two major consultation exercises that we have undertaken, the extensive representations made to us by industry groups and sectors, by individual trade unions and by the TUC, and the extra efforts that I referred to in my opening remarks of reaching out, particularly to small businesses that are not necessarily part of a trade sector, we have raised awareness of the changes considerably. The level of response and the number of representations made give me great assurance that the world out there knows what is happening. We will ensure that we feed out the information to those concerned as best we can. The guidance and the online tools are available, and we are also working with employers groups to ensure that the information is disseminated as widely as possible.
Mr. Prisk: May I ask the Minister to assure us, and therefore those affected, that during the 18-month transition period, when employers will have to go from the current situation to the interim and then the final situation, the inspectionsparticularly those connected with the enforcement of PAYE and national insurance rules, on which some employers will get caught out through no fault of their ownis balanced and fair, and not unreasonable? It would be wholly wrong if well-meaning small businesses that make small errors should find themselves attacked when only a tiny proportion of the smallest employers are involved. Will he give us that assurance today?
Jim Fitzpatrick: What I can do is assure the hon. Gentleman about the entitlement being available to other people, particularly agency workers; the point was raised also by my hon. Friend the Member for Bolton, South-East. We have introduced a regime, through the DTI and other Departments, to try to ensure that the enforcement arrangements for the national minimum wage and health and safety, and also for employment agencies, is targeted and focused
Individuals obviously have the right to take any problems to an employment tribunal. However, in Success at Work, the policy document that we published 18 months ago, we said that we would attempt to support good employers, encourage those who may need assistance, guidance or information with online tools, and crack down on rogue employers. It is unfortunate that a small minority do not pay the national minimum wage and do not give four weeks paid holiday, and I suspect that some will be guilty of not giving time in lieu or not giving the appropriate time off. The hon. Gentleman is right that there is a balance to be struck. We will do everything we can to ensure that the balance is applied as sensitively as possible.
Mr. Prisk: I am very grateful for that helpful assertion. I agree with what the Minister said about risk-based regulation. Perhaps I missed the date: when will the information be available to employees and employers?
Jim Fitzpatrick: As soon as the parliamentary process is concluded. Until then, we will not be able to move to the next phase. The sooner we finish our business, the sooner officials can start working to ensure that it goes through the appropriate hoops.
The hon. Member for Solihull asked about statutory holidays and additional bank holidays. The Government have no plans to change bank holidays at present. I have written to colleagues on that subject, so the question should not arise.
My hon. Friend the Member for Bolton, South-East raised the question of agency staff. They will be included in the additional holiday entitlement. Indeed, they will be among the largest groups of beneficiaries of the changes. He may be aware that the Secretary of State has asked me to chair an enforcement forum in respect of vulnerable workersbringing together the enforcement agencies for the national minimum wage and for health and safety, and the Employment Agency Standards Inspectorate among othersto consider some of the abuses that we have recently read about and seen on television. Parliament has spent 10 years putting better protections in place, with floors for wages and so on, but sadly some employers are still not doing the right thing by their staff. We want to shut those loopholes so that people can get the benefit of all that we have done. Agency workers are beneficiaries of the four-week holiday and sick pay.
I am encouraged that our extensive consultation on the proposals over the past year have borne fruit and that such a wide range of organisations, including the CBI, the TUC and the British Chambers of Commerce, support our proposals. I believe that we have brought forward balanced proposals that reflect not only the importance of protecting vulnerable workers but the need to support good employers who do right by their staff.
Six million workers will benefit from the regulations. Good employers will not face a further administrative burden. Part-time staff will be treated equitably when it comes to paid holiday. I believe that the regulations are an important extension of the rights of hard-working people, and I commend them to the Committee.
Question put and agreed to.
That the Committee has considered the draft Working Time (Amendment) Regulations 2007.
Committee rose at twelve minutes past Five o'clock.
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