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Lord Rotherwick: My Lords, like the Institute of Directors, we broadly welcome the Government's proposed regulations which we hope will give greater transparency on directors' pay. We are not certain how much difference it will make in practice; only time will tell. I, too, agree with the noble Lord, Lord McIntosh, that it is not unusual for directors to have been paid excessive amounts which are difficult to justify when their companies are performing badly. That should not detract from justified high remunerations when directors are seen to have performed well and have benefited the company, shareholders and employees.

It is important that shareholders are able to hold directors accountable. I hope that the regulations will increase the transparency and accountability and enable shareholders to link pay to the performance of directors as the Greenbury report seeks to do.

Lord Roper: My Lords, from these Benches we, too, welcome the proposals. There has been a series of parliamentary Questions in recent months on these issues. The proposals seem a rather good balance in order to ensure that there is transparency to an appropriate extent and to deal with some of the somewhat excessive remarks which have been made—sometimes informed and sometimes ill-informed—in the past.

Having information available to shareholders, making a responsibility for shareholders to come to a conclusion on these reports seems a sensible solution. We welcome them.

Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords. I commend the regulations.

On Question, Motion agreed to.

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Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002

11.34 p.m.

Lord McIntosh of Haringey rose to move, That the draft regulations laid before the House on 9th July be approved [35th Report from the Joint Committee].

The noble Lord said: My Lords, in moving that the draft regulations be approved, I speak also to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002.

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 will transpose the Fixed-Term Work Directive and prevent fixed-term employees from being less favourably treated than comparable permanent employees in terms of pay and pensions. The regulations will protect Britain's 1.2 million fixed-term employees. They will help us to create high performance workplaces where all employees are valued. They will also promote diversity by making fixed-term work pay, encouraging those who cannot or do not wish to take permanent work to participate in the labour market.

The Government consulted extensively on the regulations. We held a consultation on the implementation of the fixed-term directive in spring 2001 and a further consultation on the draft fixed-term employees regulations earlier this year. We published a response to the first consultation this January and to this year's consultation yesterday. Guidance on the draft regulations is also available on the Department of Trade and Industry website. The regulations provide that fixed-term employees shall not be treated less favourably than similar permanent employees, unless the treatment is objectively justified. That requirement applies to all employment conditions, including pay and pensions. The 2001 consultation revealed evidence of pay disparities between fixed-term and permanent employees that the regulations will address.

When assessing whether equal treatment has occurred, the regulations allow employers to compare a fixed term employee's overall package of conditions with that of a permanent employee. That will allow employers to provide higher up-front rewards in return for reduced benefits elsewhere. The regulations also allow employers to compare the conditions of their fixed-term and permanent employees term by term. If employers give certain benefits to their employees after a certain period of service, they should give those benefits to their fixed-term employees after the same qualifying period, unless a different period is objectively justified.

The regulations limit the use of successive fixed-term contracts to four years, unless the use of further fixed-term contracts is justified on objective grounds. That will prevent people from being employed on a string of fixed-term contracts in what is really a permanent job. Where a fixed-term contract is renewed beyond the four-year limit and the renewal is not objectively justified, it will be treated as a contract

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for an indefinite period. We believe that that measure will have a positive impact in some sectors, including higher education, where the use of fixed-term contracts has increased.

The regulations allow employees or their representatives and employers to adapt the mechanism limiting the use of successive fixed-term contracts according to accepted practices in different sectors. Employers and employees can increase or decrease the four-year limit or agree a different way to prevent the abuse of successive fixed-term contracts via collective or workforce agreements.

We believe that the law, as well as employers, should not treat fixed-term employees less favourably than similar permanent employees without good reason. The regulations amend provisions that we believe provide for less favourable treatment. For example, the Employment Rights Act 1996 allows fixed-term employees to waive their rights to redundancy payments. Permanent employees cannot do that. The fixed-term regulations will remove that redundancy waiver. They will also make sure that all fixed-term employees have the right to statutory sick pay, guarantee payments and payments on medical suspension after the same qualifying period as permanent employees. Fixed-term employees on contracts for a task will also be given the same statutory rights as permanent employees with the same period of service.

I turn to the two amendments to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. Those regulations make it unlawful for employers to treat part-timers less favourably than comparable full-timers in their terms and conditions of employment, unless different treatment can be objectively justified.

The first of those amendments is a consequential amendment required by the fixed-term regulations that I have described. It will allow part-timers on fixed term contracts to compare themselves with full-timers on permanent or fixed-term contracts. Currently, fixed-term part-timers can make a comparison only with fixed-term full-timers, while permanent part-timers can compare themselves with permanent full-timers. Permanent part-timers are much more likely to find a comparator, because of the comparatively small number of fixed-term employees.

The second amendment to the part-time workers regulations is a result of the House of Lords judgment in Preston v Wolverhampton Healthcare Trust. Regulation 8(8) of the current part-time workers regulations provides that the remedies that a tribunal orders, where it has upheld a complaint from a part-timer for equal access to an occupational pension scheme, can go back no further than two years. The two-year time limit was included to ensure consistency with the limit in equal pay and pensions legislation that the Preston judgment overturned. In the light of that judgment, it is being removed. Its removal also makes the part-time workers regulations consistent with the fixed-term employees regulations, which have no such time limit.

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We intend that both sets of regulations will come into force on 1st October. I commend the regulations to the House. I beg to move.

Moved, That the draft regulations laid before the House on 9th July be approved [35th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

11.45 p.m.

Lord Willoughby de Broke: My Lords, I am sorry for intervening, but I believe that the regulations are slightly more problematic than those we discussed earlier. I was under the impression that the Government were not entirely happy with the regulations, which, after all, will cost British business a so far unquantified amount of money. We do not have an exact figure, but it is certain that they will cost more. I declare my interest as director of a small publishing company that uses part-time workers.

I cannot see that loading extra costs onto employers of part-time workers will add anything to the competitiveness of British industry. After all, there already seems to be a good balance between part-time workers and full-time workers. People work part-time because they want to. They have reasons of their own for doing so; it may be for family reasons or because they have a business of their own. That works well, and I am not sure that this is the right way to approach the matter.

Did the Government approve this in the Council of Ministers or did they oppose it? I do not believe that the move is fully backed by the Government. Was it imposed by qualified majority voting? It will add to the costs of British business, particularly small businesses, even though we hear at every Budget and spending review that the Government are in favour of small businesses. It will add to the cost, without adding any benefit to British industry or to the people who will be affected by it—the companies or the part-time workers. As I said, most part-time workers choose to be part-time workers.

The imposition of all these regulations on British business has reduced our competitiveness. Five years ago, we were the fourth most competitive economy; the most recent figures show that we have slipped down to the relegation zone and are now the 12th most competitive economy. We are down among our European competitors, around the Sheffield Wednesday mark. Is that what the Government want? Do they want British industry and business to become less competitive? That is what is happening.

I am not convinced that this is the right way to go. Will the Minister say whether the Government are in favour? Was the change imposed on them? What will be the cost to industry?

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