A framework for modern employment Contents

3Improvements in secondary legislation

Entitlement to a written statement of employment particulars

37.Awareness of employment statuses and associated rights, among both workers and employers, is an integral part of ensuring compliance with the law. Sir David Metcalf told us that, in his role as Director of Labour Market Enforcement, he had found a lack of awareness is a “major issue”: both firms and workers were “very patchily aware of what their rights are”.81 This state of affairs can help unscrupulous organisations exploit their employees, as many workers do not realise they are being exploited. It can also lead to unintentional noncompliance due to a lack of understanding.82

38.Currently, employees are entitled to a written statement of terms and conditions within two months of starting a new job—although this is poorly enforced—but workers are not.83 The Taylor Review suggested that one way of improving awareness would be for both employees and workers to receive a written statement of status and entitlements on day one of a new job.84 This would be provided in plain English (perhaps based on a standard format), and would list, at minimum, the employer’s name, the place of work, hours of work, and arrangements for pay including holiday pay, sick pay and pension.85 Matthew Taylor suggested this would help to expose from the beginning companies who are “playing fast and loose” with employment law.86 More broadly, it would provide workers with clear information about the type of contract they are on and their entitlements. This could also help prompt employers to consider whether they are categorising their workers appropriately.87

39.Both Matthew Taylor and Sir David Metcalf told us that introducing the right to a statement of written particulars on day one of a new job, for both employees and workers, should be an immediate priority for Government. Matthew Taylor felt this measure could be “easily” enacted and would “make a material difference” to workers.88 It could potentially allow discussions over rights and entitlements to take place much earlier, with less eventual reliance on the courts.89 Sir David emphasised that although such a measure “sounds quite modest”, it would “have a very important effect”—so important he identified it as the single step that could “make the most difference” in protecting workers’ rights.90

40.Workers should be better equipped with the knowledge to identify if they are being treated unfairly at work, and to challenge poor practice with confidence. A requirement to set out rights and entitlements will be beneficial to good businesses, helping to root out noncompliant organisations and create a more level playing field. We recommend that the Government extends the duty of employers to provide a clearly written statement of employment conditions to cover workers, as well as employees. We further recommend that this right apply from day one of a new job, with the statement to be provided within seven days. This change should be made by secondary legislation under s23 (4)-(5) of the Employment Relations Act 1999.

Lowering the Information and Consultation of Employees (ICE) threshold

41.The Taylor Review found that an employee voice in corporate decision-making is important to good workforce relations. This view was reflected in the package of corporate governance reforms announced by the Government in August 2017.91 Well-run companies take the views of their workers into account.

42.The Information and Consultation of Employees (ICE) Regulations 2004 offer, in workplaces without trade union representation, a framework for consultation with employees on business decisions that affect them. The regulations are subject to a number of conditions. Eligible organisations must have 50 or more employees—those on worker contracts do not count—and at least 10% of those employees, and a minimum of 15 people, must support the implementation. Largely due to these restrictions, only 14% of eligible organisations had established consultative arrangements in 2011.92

43.The Taylor Review argued that while the ICE regulations are helpful in supporting consultation between companies and workers, the restrictive eligibility conditions are hampering their widespread application. Accordingly, it recommended that alongside examining the effectiveness of the regulations more widely, Government should commit to reducing the threshold for implementation from 10% to 2% of the workforce.93

44.When asked what measures from his Review he would prioritise for implementation, Matthew Taylor told us that the “single recommendation, more than any other, that I think is most important” would be lowering the ICE threshold, and extending it to include workers as well as employees. He explained:94

It was very clear to us as we went around the country that one of the biggest problems for casual workers is the sense that were they ever to stand up to management, were they ever to raise concerns, legitimate concerns, concerns that actually might improve the productivity of the company if only they were heard, their feeling is, “If I say anything, I will lose my hours”, and those people should have somewhere they can legitimately take concerns to and they can be raised.

Matthew Taylor argued this easily enacted measure would “provide a better framework of rights and opportunities for people to be heard at work”, improving “the quality of employment relations and ultimately productivity”.95

45.Making it easier for employees and workers to have their voices heard at work would send an important message about the significance the Government ascribes to good corporate governance. Currently, some workers most at risk of exploitation—those on worker contracts—are not covered by regulations intended to promote an employee voice. Even employees in organisations that are eligible may be prevented from exercising this right by the prohibitively high threshold for application of the regulations. We recommend that people on worker contracts, as well as employees, be counted towards the 50 workers needed before a company is covered by the ICE regulations. We also recommend the threshold for implementation of the regulations be reduced from 10% to 2% of the workforce. This would require amending secondary legislation under s42 of the Employment Relations Act 2004.

Ending the Swedish Derogation

46.The Agency Worker Regulations 2010,96 which came into force on 1 October 2011, implemented EU Directive 2008/104/EC on temporary agency work.97 The regulations are intended to ensure temporary agency workers receive equal treatment to permanent employees of the same organisation, subject to a qualification period of 12 weeks’ work. Temporary agency workers should, after that qualification period and for the duration of their assignment at a hirer, receive pay and other basic working and employment conditions (duration of working time, overtime, breaks, rest periods, night work, holidays, and public holidays) at least as good as those that would apply if they had been recruited directly to occupy the same job.98

47.The Directive provided an opt-out from this equal treatment in relation to pay, known as the “Swedish Derogation”. This covered workers permanently contracted as an employee of an agency and in receipt of pay from that agency between assignments. In the UK, agencies must be actively seeking and offering legitimate work to that employee and pay them at least 50% of the hourly rate received in their last assignment (subject to the NMW/NLW) for a period of no less than four weeks.

48.The Taylor Review drew attention to the Swedish Derogation as a means by which companies avoid paying agency workers what they are entitled. In his evidence to us, Matthew Taylor explained how the “quite widespread abuse” of the system could work:99

Somebody could basically be working for 11 weeks, be pulled back into the agency for a couple of hours where they just sit and have a sandwich, they get paid for those two hours, that is paid between assignments, and then the clock starts again.

Many reputable agencies do not abuse this opt out. Others, Matthew Taylor told us, are reluctantly “complicit due to pressure from companies they supply” and had urged him to recommend its abolition.100

49.Structuring contracts to avoid equal pay is an explicit breach of the regulations. However, as Sir David Metcalf explained, the regulations cannot currently be enforced by the Employment Agency Standards (EAS) Inspectorate.101 Instead, agency workers rely on the employment tribunal system. This is clearly unsatisfactory. Sir David said the choice for Government on the Swedish Derogation was stark: “either we enforce it or we abolish it”.102

50.Sir David told us that the EAS Inspectorate was not currently resourced to carry out such enforcement.103 The Taylor Review found that legitimate uses of the Swedish Derogation were not beneficial enough to justify the continued use of contracts which rely on it. It dismissed arguments that its removal would limit the options for agency workers, or add administrative costs for law-abiding businesses.104 The Taylor Review therefore recommended the Government should repeal the legislation enabling opt-out from equal pay entitlements, and extend the responsibilities of the EAS Inspectorate to monitoring the remainder of the Agency Worker Regulations.105

51.All agency workers should be entitled, without exception, to the same treatment as permanent employees once they have completed 12 weeks’ service. The Swedish Derogation loophole is subject to widespread illegal abuse to the detriment of both agency workers and legitimate agency employers. The Taylor Review was right to call for its abolition. We recommend the Government amends the Agency Worker Regulations 2010 to remove the opt-out for equal pay. We further recommend that the Employment Agency Standards Inspectorate be given the powers and resources it needs to enforce the remainder of those regulations.

81 Q269 [David Metcalf]

82 Director of Labour Market Enforcement, Labour market enforcement strategy: introductory report, July 2017, p11; p49

86 Q217 [Matthew Taylor]

88 Q217 [Matthew Taylor]

89 Q221 [Matthew Taylor]

90 Q264, Q273 [David Metcalf]

93 Taylor Review, pp52–53

94 Q229 [Matthew Taylor]

95 Q229 [Matthew Taylor]

96 The Agency Workers Regulations 2010 (SI 2010/93)

97 Council Directive 2008/104/EC

99 Q243 [David Metcalf]

100 Q243 [David Metcalf]

101 Q288 [David Metcalf]

102 Q288 [David Metcalf]

103 Q288 [David Metcalf]

17 November 2017