Small Business, Enterprise and Employment Bill

Written evidence submitted by the Chartered Institute of Personnel and Development (CIPD) (SB 29)

Background

1. The CIPD is the professional body for HR and people development. We are the voice of a worldwide community of more than 135,000 members – working in HR, learning and development, people management and consulting across private businesses and organisations in the public and voluntary sectors. As an independent and not-for-profit organisation, the CIPD is committed to championing better work and working lives for the benefit of individuals, businesses, economies and society.

2. Public policy at the CIPD exists to inform and shape debate, government policy and legislation for the benefit of employees and employers, to improve best practice in the workplace, to promote high standards of work and to represent the interests of our members at the highest level.

3. Our membership base is wide, with 60% of our members working in private sector services and manufacturing, 33% working in the public sector and 7% in the not-for-profit sector. In addition, 76% of the FTSE 100 companies have CIPD members at director level. We draw on our extensive research and thought leadership, practical advice and guidance, along with the experience and expertise of our diverse membership base to champion better work and working lives.

General Position

4. The Employment Section (section 11) of the Bill is where the CIPD’s area of expertise lies. On behalf of our members we want to see a regulatory environment that makes it straightforward for employers to recruit, retain and reward employees, whilst providing the protection for workers on which high trust working environments and rewarding working lives our built. We believe section 11 of this Bill is a positive move towards this and we welcome its contents. However, there are areas where we believe the legislation could be improved, particularly regarding zero hours contracts.

Whistleblowing

5. The CIPD supports the whistleblowing provisions (clause 135) contained in the Bill, which would require ‘a prescribed person to produce an annual report on disclosures of information made to the person by workers’.  This will help to raise public awareness of the importance of whistle-blowing and give employers and workers more confidence that issues raised will be adequately considered. 

6. It must be recognised however that legislation can go only so far in supporting whistleblowing. Organisational culture is critical to the extent people feel that they have a voice and can raise concerns without risk of being penalised in any way. Leaders of organisations need to understand what type of organisational culture supports whistle-blowing and what type of leadership and organisational development activities can create environments where there is mutual trust and confidence. We are currently conducting research in this area.

7. The CIPD plans to undertake case studies of management practice in responding to whistleblowing complaints that have had positive outcomes, in the sense that the whistleblower has been protected from harm and the wrongdoing has been successfully addressed.   Most media reporting has focused (understandably) on the experience of the whistleblower.  We believe the employer perspective needs to be more fully explored and understood, with positive outcomes and good practice championed and replicated across organisations where possible.  We anticipate that the CIPD case studies will focus on outlining the facts from an HR perspective, including how the case was brought to management’s attention, how it was managed by the various players (line, senior managers, HR, audit/compliance), communications and outcomes.   Issues we intend to address include the role of HR, encouraging whistleblowing (including ethics policies), choice of mechanisms for people to speak up, distinguishing between whistleblowing and grievances (and dealing with each), supporting line managers, protecting the individual, the role of trade unions, and circumstances in which it may be appropriate to offer compensation terms. 

Employment Tribunals

Failure to Pay Sums (clause 136)

8. The CIPD supports the provisions of the Bill that impose financial penalties on employers that fail to pay employment tribunal awards. It is right that employees should have access to tribunals as an impartial way of resolving disputes that cannot be solved by other means. It is therefore important that the tribunal system works well and that there are penalties for those employers who do not abide by the rules. It should be noted however, that whilst we believe the objective of the clause is sound and we believe penalties will mitigate the problem, they will not remedy the problem of unpaid awards.

9. In general, the CIPD takes the view that conciliation and mediation can provide a better way for both parties of resolving disputes than tribunals. Early conciliation is helping to resolve workplace disputes without the need for claimants to go to an employment tribunal. From talking to our members they often say that ACAS having the resource to tackle issues before positions have hardened is an effective, positive and satisfactory way of resolving workplace issues for all concerned (ACAS is now receiving requests for early conciliation at a rate of over 1500 a week).

Postponements (clause 137)

10. The CIPD has no research about the extent to which postponements are sought as a tactic by one party or the other.  However we recognise the importance of ensuring that the tribunal process is efficient and does not lead to wasted time and cost.  It is for the Employment Judge to decide in a particular case whether or not to grant a request for postponement. 

National Minimum Wage Enforcement (NMW)

11. CIPD supports the provisions in clause 138 as penalties are a necessary deterrent to deal with rogue businesses who are intentionally not paying staff the NMW. We believe however that legislation of needs to be coupled with effective enforcement. It is important HMRC is rightly resourced in terms of manpower and correct processes to ensure enforcement happens.

12. From talking to our members we believe employers who are not paying the correct NMW fall into two categories. The first is rogue businesses who seek to avoid paying the correct wage rate and the second is some small and micro employers who may not understand who are eligible for what rates and when, and what factors can be taken into account (such as the offset rate for accommodation or the various current apprentice rates).

13. We would like to see additional focussed support to give smaller businesses clearer information to ensure that they do not fall foul of the rules. This is particularly important during the start-up and expansion phases of business.

Exclusivity in Zero Hours Contracts

14. Zero hours contracts, when used for the right reasons and managed effectively, are a legitimate part of the U.K.’s flexible labour market. Our research shows that people employed on this type of contract have at least comparable job satisfaction and are more satisfied with their work life balance. It is not contract type that determines how satisfied and engaged people are with their work, it is how people are managed. What is important is ensuring there are appropriate measures to combat examples of poor management that can occur in any part of the workplace.

15. The CIPD report Zero Hours Contracts; Myth and Reality finds the most common reason cited by employers for using zero hours contracts is that the arrangements provide them with the flexibility to manage fluctuations in demand, with two thirds or respondent organisations citing this. However, employers also regard zero-hours contracts as means of providing flexibility for staff. Almost half of employers also say they use them to provide flexibility to individuals.

16. The CIPD’s research into zero hours contracts, cited above, found that overall, zero hours contract workers have comparable job satisfaction, are more satisfied with their work-life balance and are under less pressure at work compared to the rest of the workforce. They are also less likely to report being treated unfairly at work compared to workers on more traditional employment contracts.

17. We welcome clause 139 to outlaw the use of exclusivity clauses in zero hours contracts [1] . Although our research shows that only 9% of people employed on zero hours contracts are never allowed to work for another employer, it is unfair for the employment relationship to swing so squarely in favour of the employer in this instance by restricting an individual’s ability to find work elsewhere.

18. However, our research also shows that there is a considerable lack of awareness among employers and those employed on zero hours contracts regarding which employment rights, such as maternity, paternity or adoption or redundancy pay, zero hours contracts staff are eligible for; this is particularly prominent in the public sector, with 20% of respondent organisations reporting that they ‘don’t know’ whether they classify zero hours staff as ‘employees’, ‘workers’ or as self-employed – a key determinant of eligibility for certain employment rights. We believe the Small Business Bill can take a large step towards ensuring that individuals on zero hours contracts are more aware of their employment rights through a relatively simple amendment to the Bill. We recommend the following addition to the legislation:

a. Including a clause in the Bill (that amends the Employment Rights Act 1996) that entitles all workers to a written copy of their terms and conditions no later than eight weeks into employment so that zero hour workers are aware of their rights (currently only employees are entitled to this)

19. Our research also found that 40% of workers say that they receive no notice at all when work is cancelled or (6%) find out that work is not available at the start of a shift. This can have considerable impact on personal expenditure (due to travel and childcare costs in particular), and on an individual’s ability to find employment elsewhere on the day a shift is cancelled. As a result, we recommend:

a. The development of a new Code of Practice on zero hours contract working, incorporating a recommendation that zero hours contract workers be compensated, with at least an hour’s pay and any expenses incurred, by employers who cancel prearranged work with very little or no notice.

Public Sector Exit Payments

20. It is important for the public sector to be able to recruit the best talent; competing against the private sector and therefore job security and rewards are an important part of the equation as these roles may involve relocation or other changes to the individual’s life. Exit payments are therefore appropriate and justified in many circumstances, such as restructuring. However there is also a public interest question that inevitably arises out of exit payments that needs to be addressed where taxpayer’s money is being spent.

21. The CIPD therefore welcomes clauses 140-142 to require certain public sector workers to repay specified exit payments if employed again in the public sector within a prescribed period. However we do believe there will be issues if the exit payment has been made in a single lump sum because it will be very hard to recover the payment once paid.

22. CIPD policy experts recommend a way forward whereby redundancy could be paid through a capped lumped sum and the rest monthly. This would enable monthly payments to be stopped if employment is obtained within the prescribed period.

October 2014


[1] The CIPD is currently surveying members to explore how avoidance of a ban on zero hours contracts can be tackled. Survey results will be published in November 2014.

Prepared 15th October 2014