Memorandum by the Confederation of West
Midlands Chambers of Commerce
INTRODUCTION
The Confederation of West Midlands Chambers
of Commerce is pleased to respond to the consultation and discussion
surrounding the EU Green Paper on Labour Law. The Confederation
consists of all of the Chambers of Commerce within the West Midlands
Region, which include:
— Birmingham Chamber of Commerce and
Industry (which incorporates Solihull Chamber of Commerce and
Industry)
— Black Country Chamber of Commerce
and Industry
— Coventry and Warwickshire Chamber
of Commerce and Industry
— Herefordshire and Worcestershire
Chamber of Commerce and Industry
— North Staffordshire Chamber of Commerce
and Industry
— Shropshire Chamber of Commerce and
Industry
— South Staffordshire Chamber of Commerce
and Industry
The Chambers of Commerce that comprise the Confederation
represent over 13,000 businesses in the region as a whole, offering
extensive services to industry and commerce, promoting trade and
advocating the interests of business locally, nationally and internationally.
RESPONSE TO
QUESTIONS RAISED
BY THE
GREEN PAPER
1. What would you consider to be the priorities
for a meaningful labour law reform agenda?
Businesses across the UK are already expressing
concerns about the raft of employment legislation. Any laws that
are introduced must be a clear advance from the existing legislation.
They must reduce and simplify the work needed to administer a
business and promote a clear and flexible vision for European
labour relationships in the future.
It must recognise that increasingly our competition
is not other nations within the EU, but nations with a less "comfortable"
relationship with work and employment rights. It should also seek
to simplify the bureaucracy of cross border working.
In areas of our economy that are declining,
we need to understand that this change is part of a global process.
Low-value manufacturing and assembly and similar low-value jobs
in other sectors will increasingly go elsewhere. To succeed businesses
needs to be able to access high quality employees and be allowed
the freedom to make decisions based on their business needs. This
flexibility will ensure that companies are able to expand their
businesses and create a more stable long-term future for their
employees.
Any new regime for regulating the business relationship
between companies and employees therefore needs to ensure that
the flexibility element of the proposed flexicurity model is the
most important component. Businesses require flexibility in order
to survive.
The second part of flexicurity, the need for
security and a regulated, controlled labour market suggests that
there EU jobs market is failing to live up to the promise of the
Lisbon Agenda. It would also suggest that the education system
fails to produce employable people. The future for Europe should
be to provide its' citizens with the necessary skills and opportunities
to ensure that there is no need for employees to languish in jobs
where they feel abused.
2. Can the adaptation of labour law and collective
agreements contribute to improved flexibility and employment security
and a reduction in labour market segmentation? If yes, then how?
Collective agreements are largely irrelevant
to the majority of UK companies. The mass of employers are too
small to have taken part in union-brokered negotiations or in
similar collective bargaining. Whilst there is some merit in this
approach for larger companies, we do not feel that it would be
beneficial for SME businesses to be forced to face an additional
layer of bureaucracy.
As a group, we would not wish to see additional
burdens placed on businesses, particularly small business. However,
we recognise that many workers in semi-informal areas such as
non-contract home-working schemes or in temporary positions may
find their position far from ideal.
For businesses, the major reason for using these
methods of employment is the inherent flexibility. There is little
doubt that if these schemes were more heavily policed this avenue
of employment would disappear for home workers and for some of
the lower skilled employees in the formal temporary sector.
3. Do existing regulations, whether in the
form of law and/or collective agreements, hinder or stimulate
enterprises and employees seeking to avail of opportunities to
increase productivity and adjust to the introduction of new technologies
and changes linked to international competition? How can improvements
be made in the quality of regulations affecting SMEs, while preserving
their objectives?
The UK has a record of "Gold plating"
EU regulations during the transposition process to UK law. It
is not always easy for lay people to understand where the original
EU regulation finishes and what has been added by the UK. We would
therefore welcome the alignment of the EU and UK Regulatory Impact
Assessments. This would lessen the impact of regulation should
it be proved necessary.
Much current employment legislation creates
an often destructive burden on business particularly SME's. There
is a genuine need to create labour markets that are more flexible
to reduce the pressure on employers. Red tape including administrative,
legislative and tax burdens only serve to promote a long hour's
culture, not to mention the impact on productivity, competitiveness
and innovation.
The demands of modern business often require
flexibility on the side of both employee and the employer. Businesses
can only be expected to embrace flexibility in their working practices
if it can be demonstrated to improve the overall business. Businesses
should be encouraged to develop working practices that provide
more flexibility to both employer and employee. This should be
promoted in terms of the positive impact it can make on business
(e.g. productivity). We would strongly resist any undue attempts
at forcing these changes upon businesses. It should be recognised
that in many cases, SME's are simply not able to offer flexible
working on a formal and sustainable basis.
SME businesses suffer from the greater emphasis
on rights for employees. That is not to say that individual employees
should not have these rights, or that businesses do not want to
provide them. However, a successful, thriving business benefits
both employer and employee, so businesses must have the right
to make employment decisions based on what is genuinely best for
their business, without fear of litigation.
4. How might recruitment under permanent and
temporary contracts be facilitated, whether by law or collective
agreement, so as to allow for more flexibility within the framework
of these contracts while ensuring adequate standards of employment
security and social protection at the same time?
In our opinion, the current UK regulation on
temporary contracts allows roughly equal rights at work, whilst
acknowledging that the position is temporary. We would not wish
to see a major change in this legislation.
It is our assertion that temporary workers are
in many ways necessitated by the high costs and bureaucracy associated
with the hiring of permanent staff. Given this, we would suggest
that there must also be greater flexibility to differentiate wages
for low-skilled jobs.
In the UK, the above inflation National Minimum
Wage rises have had an adverse impact on wage differentials and
this can cause wage stagnation. Paying lower skilled people lower
wages should have two benefits. It will enable businesses to take
on more staff and lessen the need for as many temporary contracts.
It should also encourage the take up of training provision to
improve skills and hence pay levels of individuals.
5. Would it be useful to consider a combination
of more flexible employment protection legislation and a high
level of assistance to the unemployed, both in the form of income
compensation (i.e. passive labour market policies) and active
labour market policies?
Our members believe that they need to be in
control of their businesses, similarly employees want (and need)
to be able to balance their work and home lives. The costs for
businesses that do not meet these needs are striking. The cost
of sickness absence alone is estimated to cost UK employers about
£10 billion a year. In a recent survey over a fifth of senior
women in UK organisations said they would change jobs for more
flexible working arrangements. Typical recruitment costs of replacing
an individual have been estimated at £4,000. Lloyds TSB,
for example, estimates that it costs in the region of £50,000
to replace a senior woman manager. Given these costs, it is clearly
not in the interests of any business that wishes to be successful
to endanger the relationship with their employees as employees
with desirable skills will simply leave the company to work elsewhere.
Businesses require the flexibility to ensure
they can compete in global market places. This is true for businesses
of all sizes and sectors, but is particularly important for SME's.
SME's need to become more flexible in order to compete with fierce
international competition from countries with lower tax bases,
prices and labour costs, less regulation and skilled workforces.
They certainly do not require more restraint on their operations.
It is notable that within the EU the nations
with more flexible employment legislation have shown the best
progress towards the targets of the Lisbon Agenda. Despite the
progress of those with light touch regulation, the European Union
as a whole has lagged behind its competitors in terms of productivity.
A move away from rigid employment legislation is likely to improve
productivity growth.
Assistance to the unemployed is largely a matter
for individual states. However, any such schemes to help individuals
should focus on providing skills needed by the local business
community. Training to improve skills should be targeted to areas
of employment growth. We feel that focusing in this manner would
be beneficial for both employers and potential employee as it
should ensure that a long-term career is available. This should
theoretically reduce existing and future pressures on the State.
We also need to tackle the problem of highly
protective state benefit systems. The UK currently allows those
in receipt of benefits to work up to 15 hours per week. This provides
a barrier to work for those in receipt of benefit as it provides
an artificial safety net preventing those who might be tempted
back in to employment from taking work. This is in part due to
the difficulty in regaining benefit if the employment is not suitable
or otherwise fails.
6. What role might law and/or collective agreements
negotiated between the social partners play in promoting access
to training and transitions between different contractual forms
for upward mobility over the course of a fully active working
life?
The UK has recently made efforts to improve
the responsiveness of training schemes in the UK and to broaden
their attractiveness to small employers. Measures such as Train
to Gain, whilst welcome, need to be simplified and widened. It
is in the interests of the Governments of EU nations to have educated
and flexible employees forming their working age populations.
Well-educated and flexible citizens are usually in more stable
employment. Those with skills are less likely to become unemployed
for the longer term. This impacts on Governments' directly as
it means less spending in benefits payments. It should also deliver
a more consistent tax income.
The concept of job security itself is something
of an oxymoron. It is not possible to create total job security
in an entrepreneurial environment. Entrepreneurialism requires
an element of risk and creating a risk-free society is not desirable
or necessary. What needs to be developed is a quality service
offering training that is valued by employers. If well qualified
people are easy to find, then economic expansion will mean many
more people are able to find work in the expanded job market that
should result.
With the free movement of people, as advocated
by the EU, the concept of a job for life is no longer realistic
or indeed attractive for many employees. However, greater flexibility
in labour laws is likely to lead to greater job creation, which
will enable workers to move jobs easily and securely. This is
what we feel the role of "flexicurity" should be.
7. Is greater clarity needed in Member States'
legal definitions of employment and self-employment to facilitate
bona fide transitions from employment to self-employment and vice
versa?
We would welcome clarification, simplification
and a common definition, particularly if the transition to self-employment
(or vice-versa) were to be made across multiple EU states.
8. Is there a need for a "floor of rights"
dealing with the working conditions of all workers regardless
of the form of their work contract? What, in your view, would
be the impact of such minimum requirements on job creation as
well as on the protection of workers?
We have no clear view from our members on the
concept of a floor of rights. We would need to see further details
of the proposal to see if it was in line with our members"
wishes. Some of the smaller self-employed business people amongst
our membership may well welcome the ideal of protecting economically
dependent self-employed workers. From the point of view of most
businesses however, a floor of rights would not really ease the
complications of dealing with multiple contracts and multiple
benefit and remuneration levels, it would merely create an artificial
floor and dependent on what is required to meet the level of the
floor may raise the compliance costs for companies.
9. Do you think the responsibilities of the
various parties within multiple employment relationships should
be clarified to determine who is accountable for compliance with
employment rights? Would subsidiary liability be an effective
and feasible way to establish that responsibility in the case
of sub-contractors? If not, do you see other ways to ensure adequate
protection of workers in "three-way relationships"?
In the UK, the HMRC are beginning to work in
the manner suggested with regard to the regulation of Construction
Workers and their associated sub-contractors.
We also believe that the new Gangmaster licensing
has a similar concept behind it. It has so far been in limited
operation, but it does seem to have had some success in South
Worcestershire amongst agricultural workers. We can see some benefits
for smaller companies as nominally it should allow these businesses
to share the responsibility for their compliance with employment
legislation.
We have yet to investigate the full benefits
and problems associated with these schemes. Their fundamental
flaw faced by any scheme such as this is that it is not designed
to fix problems and inequalities in the underlying laws. It merely
attempts to alter the nature of the compliance.
10. Is there a need to clarify the employment
status of temporary agency workers?
In our opinion, the current UK regulation on
temporary contracts allows roughly equal rights at work, whilst
acknowledging that the position is temporary. We would not wish
to see a major change in this legislation.
The flexibility that SMEs require is that which
enables them to meet market demands and adjust their workforce
and working practices accordingly. This includes flexible arrangements
for working hours, part-time work, overtime and other types of
employment contracts available. A flexible and open policy is
most likely to ensure that work is available.
11. How could minimum requirements concerning
the organisation of working time be modified in order to provide
greater flexibility for both employers and employees, while ensuring
a high standard of protection of workers' health and safety? What
aspects of the organisation of working time should be tackled
as a matter of priority by the Community?
For many businesses, the retention of the opt-out
is critical to their ability to remain competitive. This is particularly
true of small businesses, where additional staffing costs would
be prohibitive. The Working Time Directive and its' continual
reforms are problematic to businesses throughout the UK. We would
not be receptive to any additional legislation that increases
in either time or financial costs the implementation of the directive.
The continual changes to the working time directive have been
a substantial cost to businesses that have been forced to adapt
working practices and administration systems to meet the requirements
of the Working Time Directive.
Simplification would be welcomed. At the very
least, there needs to be a period of stability. We would suggest
that the move to a longer reference period would be the most beneficial
to business. This change would allow for semi-regular spikes in
working hours. It is difficult for small businesses to remain
competitive when the knowledge in a small team may be held in
one or two people.
12. How can the employment rights of workers
operating in a transnational context, including in particular
frontier workers, be assured throughout the Community? Do you
see a need for more convergent definitions of "worker"
in EU Directives in the interests of ensuring that these workers
can exercise their employment rights, regardless of the Member
State where they work? Or do you believe that Member States should
retain their discretion in this matter?
The Confederation of West Midlands Chambers
of Commerce has been active over the last few years in trying
to shape the prospects for businesses operating in other EU states.
We are committed to the principle that for businesses the legal
framework for conducting the trade should be that of the home
nation as long as there are no problems for health and safety
or fair competition. The costs, particularly for small companies,
in complying with multiple national regulations at present are
unworkable.
However, we would genuinely welcome a flexible,
business-friendly cross-border regulation that would allow companies
to more easily manage employees and the self-employed across the
EU.
13. Do you think it is necessary to reinforce
administrative co-operation between the relevant authorities to
boost their effectiveness in enforcing Community labour law? Do
you see a role for social partners in such cooperation?
The 2004 Kok Report recommended a comprehensive
strategy to improve the quality of work and established a direct
link between the quality of work and labour productivity. The
major elements in this respect are Working conditions promoting
lifelong learning and training, adequate income, social dialogue,
safety, health protection and prevention measures at the workplace,
balance between flexibility and security, compatibility of working
and private life, and in-company integration management. We feel
that the relevant authorities should be working together to promote
these goals. The role for the business sector and its representatives
as a social partner would be to work with governments to enable
these to be achieved through a low regulation environment.
14. Do you consider that further initiatives
are needed at an EU level to support action by the Member States
to combat undeclared work?
Illegal working is caused by two main problems.
The high cost of employing someone (through taxation and labour
law), and the willingness to avoid high taxes and often retain
benefits on the part of the employee.
Whilst companies going to the effort and expense
of operating legally would welcome a crackdown on those who cut
corners and costs by not adhering to the same rules, they may
well feel as though they are supporting a system that is making
their life difficult and feel some sympathy for the aim of escaping
the tax and regulatory burden.
Any short-term purge however is not likely to
answer the problem. In the longer term, legal working needs to
be made more attractive to truly stamp out illegal employment.
Any measures to deal with undeclared work must
not result in additional burdens for business and should be voluntary.
29 March 2007
| 
