Memorandum by Confederation of British
Industries (CBI)
1. The CBI believes that it is essential
for the competitiveness of the UK economy that employers retain
the right to ask their employees if they want to opt-out of the
48-hour maximum working week requirement of the Working Time regulations.
The threatened loss of the individual opt-out risks damaging the
UK's flexible labour market which has created jobs and prosperity.
Flexibility means that companies can manage their people and resources
efficiently to improve productivity and competitiveness. It also
allows firms to create jobs—the UK has an overall labour
participation rate of 74 per cent and is one of only a few European
countries to have already met the Lisbon target of 70 per cent
employment by 2010. Flexibility also allows organisations to adapt
quickly to changing market conditions and fluctuating demand.
Such flexibility is particularly important in sectors where customer
demand fluctuates or is unpredictable.
2. The CBI's working time survey conducted
in 2003 revealed a significant number of companies who feared
that the loss of the individual opt-out would have an adverse
effect on their business. 80 per cent of respondents who use the
opt-out, reported that the absence of the opt-out would undermine
their business flexibility, of these:
— 46 per cent anticipated that it would
damage their ability to meet customer needs;
— 22 per cent predicted that it would
restrict their ability to respond to changing demands;
— 13 per cent forecast they would be
less able to respond to new commercial opportunities.
3. Employees value the opportunity to work
the hours that suit them and to have access to overtime earnings.
There are many flexible working patterns that suit employers and
employees—and new and innovative ways of working such as
teleworking have been growing. Other options include part-time
working and temporary agency work but offering existing employees
overtime is an important way of meeting fluctuating demand. However,
since the introduction of the 1997 working time regulations, companies
cannot demand that employees work more than an average 48-hour
week over a four-month period. This must be a matter of individual
choice and the UK regulations are clear on this point.
4. This paper explores the flexibility provided
by the opt-out and suggests that:
— overtime provides the flexibility
to meet demands from customers—and is sought by employees;
— the UK labour market is different
to that of other EU states and the opt-out provides flexibility
which other Member States obtain by different routes;
— when used properly the opt-out benefits
employees and the CBI is committed to tackling any abuse that
exists;
— UK employees have the flexibility
to reconcile work and family life . . .
. . . and claims that long hours always
damage employee health and safety are unproven;
— the continuing availability of the
opt-out will be essential in light of the recent Jaeger and SiMAP
cases.
OVERTIME PROVIDES
THE FLEXIBILITY
TO MEET
DEMANDS FROM
CUSTOMERS—AND
IS SOUGHT
BY EMPLOYEES
5. The difficulties for particular companies
in finding alternatives to overtime were demonstrated by the findings
of the CBI's 2003 publication: "Maintaining a dynamic labour
market—the working time Directive and the individual opt-out".
This report highlighted a number of company case studies, from
a variety of sectors, which currently rely upon the individual
opt-out to provide additional flexibility for their businesses.
The report illustrates a number of reasons why overtime had provided
the most economic and efficient means for tackling upturns in
labour demand in a number of companies. Such reasons included:
— jobs which required highly specialised
skills which may be in short supply, such jobs could not be easily
done by inexperienced temporary staff brought in at short notice;
— when it is anticipated that the increase
in demand will be relatively short term and does not warrant increased
recruitment costs and overheads, eg through providing extra equipment,
uniforms to temporary employees;
— to avoid employee relations difficulties
which result from denying overtime to current employees in favour
of newly hired casuals or from hiring staff for the peaks in demand
but then making them redundant during a downturn;
— labour shortages in certain sectors,
eg hospitality which has 12 per cent of all unfilled job vacancies
across the economy; in such cases there are simply not the temporary
staff available to do extra work;
— work processes where once started,
work has to be completed, for example on construction sites (concrete
pouring) or safety maintenance (power supply);
— avoidance of disputes about working
time—while some workers are "working", they may
be waiting for a colleague to arrive to deliver a part or relieve
them.
6. In addition to the extra recruitment
and overhead costs associated with recruiting any extra temporary
employees, the removal of the working time opt-out would place
a significant upwards pressure on wages. This is because employees
would experience a significant loss of pay through the loss of
overtime payments. Some companies estimate this could amount to
a loss of as much as £6,100 in annual pay. One electrical
retailer cited in the working time case study report estimates
that the direct cost of loss of the opt-out to their business
could be as much as £300,000 per week during peak periods
of the year. Businesses where margins are tight would have no
choice but to pass on such costs to their customers, if they were
to remain profitable. This would result in an inevitable knock-on
inflationary effect.
7. There is evidence that many employees
want to work longer hours and benefit from being able to do so.
This is either because they value the extra income they can earn
through overtime or because they gain increased job satisfaction
through working extra hours to finish a job and do it well. The
fact that it is often the employees who want to work the extra
hours is most clearly demonstrated by the case of Clark v Pershore
Group of Colleges [1]
referred to in the Barnard report. In this case the employee actually
unsuccessfully attempted to sue his employer for reducing his
overtime after the implementation of the working time regulations.
8. The idea that it is often employees who
wish to work the extra time was backed up with evidence gathered
for the CBI's working time report. In a number of the case studies,
employers commented that they would likely suffer significant
employee relations difficulties when employees realised the reduction
in pay they would suffer as a result of the removal of the opt
out. This was highlighted in one case study where it was commented
that employees would simply not understand the logic of being
refused overtime during peak periods and would resent the greater
use of temporary agency workers.
9. There is also research evidence which
suggests that it is not the case that employees who work long
hours are necessarily generally unhappy at work. The British Household
Panel Survey conducted in 1998[2]
revealed that while satisfaction with numbers of hours worked
did reduce as the number of working hours increased, both satisfaction
with promotion prospects and overall job satisfaction actually
increased. This was true across all professions but was particularly
marked for associated professionals and plant and machine operators;
two groups which CBI members have highlighted are likely to work
longer hours.
THE UK LABOUR
MARKET IS
DIFFERENT TO
THAT OF
OTHER EU STATES
AND THE
OPT-OUT
PROVIDES FLEXIBILITY
WHICH OTHER
MEMBER STATES
OBTAIN BY
DIFFERENT ROUTES
10. Unlike many other European countries,
typically UK private sector employers and employees prefer individual
rather than collective agreements. This has resulted in many of
the other flexibilities, relied upon by other European countries,
not being easily accessible in the UK. In addition, UK companies
feel that they have been hampered by what they feel is a restrictive
interpretation of some of the other elements of the Directive
which puts UK businesses at a significant disadvantage compared
with other member states.
11. The two flexibilities which are typically
relied upon by other Member States—where use of the opt-out
is usually unavailable (or at least restricted to particular sectors)
is the use of extended reference periods or a more liberal interpretation
of the autonomous worker derogation. Extended reference periods
(from four months up to 52 weeks) are available to UK companies
but in order to use this flexibility, employers must make either
a collective or a workforce agreement. However, the vast majority
of private sector companies negotiate contracts on an individual
level with their workforce, collective bargaining coverage remains
extremely low and only 20 per cent of private sector employees
are members of a union. Companies have also reported that the
procedures for negotiating workforce agreements are extremely
complex.
12. Companies in the UK would benefit from
being able to take advantage of an increased reference period,
in particular because a year fits more logically with other company
systems such as tax returns and would make it simpler to monitor
the effects of the Directive. They would therefore welcome any
amendment to the regulations which allowed such extended reference
periods to be negotiated on an individual, as well as a collective
level. However, it should be noted that this should not be seen
as a panacea for solving the problems of the UK regarding the
working time Directive and it does not negate the need for the
individual opt-out. As one of the case studies highlighted in
the CBI's working time report there are companies who have successfully
negotiated an extended reference period with their workforce who
still need the individual opt-out—for example in sectors
such as food manufacturing where there are significant skill shortages.
13. Another flexibility which is relied
upon by other European countries but which is not available to
the UK is the exclusion of supervisory and white-collar workers
through the definition of the autonomous worker definition. In
the UK, it is recognised that individuals who have control over
when and how they perform their work should be excluded entirely
from the provisions of the Directive. However, many Member States
provide much clearer guidance as to which groups are covered by
this derogation. For example, the Netherlands has adopted a definition
which excludes anyone who earns a certain multiple of the current
minimum wage. Practice in other Member States includes excluding
workers who are not required to record their working hours. In
the UK, however, the regulations are much more restrictive and
the accompanying guidance extremely complex. This has resulted
in many employers being uncertain who is and who is not an autonomous
worker and possibly results in companies using individual opt-out
agreements when there is no need.
14. The CBI would welcome the UK Government
reviewing the definition of autonomous worker provided in the
UK regulations and looking at more flexible definitions adopted
in other Member States. However, such reform should not be seen
as an alternative to keeping the opt-out. While the CBI firmly
believes that the autonomous worker definition could be reformed
in the UK, this will likely remain an area of particular controversy
both at European and Member State level. In addition it would
not deal with opted-out employees at the lower end of the pay
spectrum who are working long hours primarily for increased overtime
payments.
WHEN USED
PROPERLY THE
OPT-OUT
BENEFITS EMPLOYEES
AND THE
CBI IS COMMITTED
TO TACKLING
ANY ABUSE
THAT EXISTS
15. In its recent Communication on the subject
of the working time opt-out, the Commission put a great deal of
emphasis on suggestions that companies are abusing the individual
opt-out. The Barnard Report highlighted a number of unacceptable
practices, for example, companies which made signing the opt-out
a condition of employment, or who were requesting that employees
work extremely long hours even when no individual opt-out had
been signed.
16. The CBI believes that such cases of
abuse are clearly unacceptable—they undermine the spirit
and operation of the regulations and place law-abiding companies
at a competitive disadvantage. However, the CBI believes that
the issue is often one of genuine misunderstanding by companies
as to the working time rules—which are acknowledged as some
of the most complex and confusing employment regulations in the
UK. This fact was also highlighted in the Barnard Report.[3]
For example two companies interviewed reported thinking that employees
were under a duty to opt-in rather than the emphasis being to
opt-out.
17. The CBI believes that it is vital that
the DTI works with companies to ensure that employers are better
informed as to the requirement of the regulations and that abuse
is tackled. It is essential that all companies are aware that
the individual opt-out should be about genuine choice on the part
of employees. The CBI is committed to tackling the issue of abuse
and has committed to take part in discussions with the TUC and
the DTI which should result in some concrete proposals on how
to take this issue forward.
18. However, the CBI also believes that
claims of widespread abuse are a gross exaggeration of the problem.
We believe the vast majority of companies use the opt-out responsibly
when the decision to opt out is genuinely one for the individual
employee. While the Barnard Report case studies did highlight
some elements of abuse, the report also highlighted that complaints
relating to individuals being forced to sign opt-outs against
their will were rare. ACAS report that the number of complaints
to its helpline which relate to abuse of the opt-out are very
low[4]—employees
are more concerned about not receiving their correct holiday entitlements
than being required to work long hours. In addition, the number
of cases registered with employment tribunals on the issue of
the individual opt-out remains extremely low. Only 4 per cent
of all employment tribunal claims last year involved a complaint
relating to working time, and these claims would include complaints
regarding holiday entitlements and rest periods as well as long
working hours.[5]
Such cases are also more likely to only raise working time as
a subsidiary issue to another claim, such as redundancy, rather
than being the focus of the case, this was recognised in the Barnard
report.[6]
A recent CBI survey of members regarding use of the working time
opt-out also suggested that the practice of placing the opt-out
in the employment contract, while still happening in a minority
of cases, is now quite rare.
UK EMPLOYEES HAVE
THE FLEXIBILITY
TO RECONCILE
WORK AND
FAMILY LIFE
. . .
19. A common complaint regarding the individual
opt-out is that it damages workers' ability to reconcile work
and family life and has an adverse affect on the career prospects
of women who are less likely to be able to work long hours. The
CBI is concerned that such claims have tended to concentrate only
on the effects of the working time opt-out rather than assessing
this in the context of the UK's wider flexible labour market.
20. In fact UK employers have an excellent
record in enabling employees to reconcile their work and family
life. This is demonstrated by the fact that the UK has the third-highest
employment rate for women across the EU and the second-highest
incidence of the part-time working that so suits employees with
child or eldercare responsibilities. The UK also has an excellent
record in providing agency work, telework, and fixed term work.
While often criticised at a European level as "lesser"
forms of work, CBI members firmly believe that such practices
benefit, not only employers but also workers. In particular they
provide valuable employment options to individuals, who do not
want to work a traditional nine to five day, five days a week.
These forms of work also provide valuable routes into employment
for traditional labour market outsiders such as working mothers,
those nearing retirement, students etc.
21. Individual companies are also finding
increasingly innovative methods of enabling current employees
to adapt their working patterns to suit their individual circumstances.
The CBI's annual employment trends survey demonstrates how employers
are increasingly recognising the value in offering flexible working
practices and the results in the 2003 survey revealed that a record
96 per cent of respondents have at least one flexible working
practice with 60 per cent offering at least three.
22. The new right to request flexible work
for working parents is also likely to result in an increased proliferation
of flexible working practices. Many employers are voluntarily
extending flexible working practices beyond parents of young children
to other workers who for various reasons want to alter their working
hours, where practical. This is a positive trend and employers
are willing to accommodate employees' needs: employees who wish
to work more flexibly should have the opportunity to request to
work longer hours through increased overtime as well as the right
to reduce or change working hours.
. . . AND CLAIMS
THAT LONG
HOURS ALWAYS
DAMAGE EMPLOYEE
HEALTH AND
SAFETY ARE
UNPROVEN
23. It is commonly claimed that while employees
may prefer to work longer hours it is in the interests of the
state to prevent such practices since it is damaging both to workers
health and safety. The risk which signing the individual opt-out
could pose to individual health and safety was specifically highlighted
in the European Commission's Communication. The CBI believes that
it is vital that employees are not put under excessive risk through
working long hours, and CBI members recognise that it is not in
the interests of productivity and performance for employees to
have to work excessively long hours over a long period of time.
24. However, the links between long working
hours and health and safety are less clear cut than has often
been stated and an analysis of the actual evidence shows a more
complex picture. As a recent DTI publication highlighted,[7]
the research which has been conducted has not been clear in establishing
a direct link between long hours working and an increased health
and safety risk. In particular, much of the research on this issue
to date has concentrated on issues surrounding the effects of
shift working and working unsociable hours rather than the specific
issue of long hours working. In addition such research has tended
to concentrate on self-reporting and subjective measures of health
which present difficulties in definitely concluding that there
is a link.
25. The research which has been conducted
to date has demonstrated that while large scale studies of total
workforce may demonstrate a link between long hours working and
certain health problems, at an individual level the issue is much
more complex. The effects of long hours working appear to relate
to a diversity of different factors. A key element which has been
identified in all of the research is that health problems are
less likely to be manifest when individuals are choosing themselves
to work long hours rather than when these are being forced upon
them.
26. This is most clearly demonstrated by
Scale et al's[8]
study of the British Household survey results which revealed that
the self-employed who work longer hours (and who clearly have
the most choice over the hours which they work) had fewer health
problems than those who were not self-employed. The finding is
also backed up by the findings of a review of long hours and health
conducted by the BMA. This found that "workers who choose
themselves to work long hours, due to personal commitment or enjoyment
of work are more likely to suffer less than workers who are forced
to work long hours".[9]
This demonstrates that providing that the individual opt-out is
freely given there is no reason to feel that it will have an adverse
effect on most workers' health and safety.
THE CONTINUING
AVAILABILITY OF
THE OPT-OUT
WILL BE
ESSENTIAL ONCE
THE FULL
IMPACT OF
THE JAEGER
AND SIMAP
CASES ARE
UNDERSTOOD
27. So far this evidence has examined the
advantages of keeping the opt-out from the position of both businesses
(who value the flexibility) and employees (who value the individual
choice). A third reason why this is vital for the UK is that the
full effects of the working time Directive are still not understood
at a European level and the ECJ jurisprudence on this issue is
still developing. This results in difficulties as new judgments
can result in previously accepted practices needing to be changed
instantly; the individual opt-out provides a valuable tool to
guard against such situations.
28. The difficulties that can be caused
by the expanding case law have been demonstrated most recently
in the Jaeger and SiMAP cases. These looked at the
definition of working time and how this should be applied to on-call
time. In these cases the ECJ ruled that the current practice across
the European Union of not including on-call time as working time,
even when this required the individual to be on the premises,
was unlawful. It ruled that where individuals were required to
be present at a place determined by the employer and to be available
to the employer to provide service immediately then this counted
as working time, even if the employee was free to sleep and rest
during those times.
29. This judgment is unlikely to have a
widespread impact on the private sector. However, there are some
sectors which will be affected by the judgment, including offshore
oil rigs, private sector health trusts and the hospitality industry.
If this judgment was ever extended to all on-call employees including
those who were allowed to spend the time at home but are required
to be connectable by telephone, then its effects across the private
sector would be immense. Sectors such as engineering, IT and power
supply would be hugely affected.
30. It is vital that the European Union
finds an effective means of dealing with this judgment, which
could have serious effects for the health sector, which is already
suffering from major skills shortages. One possible short-term
measure will no doubt be to use the individual opt-out and this
is the option which has been adopted in many other European countries
eg Spain which has introduced the opt-out specifically for the
medical sector. Given the complexities of the working time definition
and the possibility of further adverse judgments which could challenge
common practices and seriously affect how certain sectors operate,
the CBI believes that it is essential that the opt-out be maintained
to guard against such eventualities.
Human Resources Directorate
February 2004
1 Case number 5203317/99. Back
2
Kodz et al Employment Relations Research Series No 16,
Working long hours: a review of the evidence. Volume 1-Main
report (EMAR, 2003), pg 220-239. Back
3
Barnard et al The use and necessity of Article 18.1 of
the Working Time Directive in the United Kingdom-final report
(Dec 2003), pg 50-51. Back
4
Barnard et al The use and necessity of Article 18.1 of
the Working Time Directive in the United Kingdom-final report
(Dec 2003), pg 42. Back
5
Employment Tribunal Service Annual report 2002-03-pg 23. Back
6
Barnard et al The use and necessity of Article 18.1 of
the Working Time Directive in the United Kingdom-final report
(Dec 2003), pg 23. Back
7
Kodz et al Employment Relations Research Series No 16,
Working long hours: a review of the evidence. Volume 1-Main
report (EMAR, 2003), pg 220-239. Back
8
Sparks et al "Effects of hours of work on health: a meta-analytic
review" Journal of Occupational Organisational Psychology
70 pp 367-375. Back
9
BMA Implications for Health and Safety of Junior Doctors'
working arrangements (British Medical Association, August
2000). Back
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