Memorandum by EEF, the manufacturers'
organisation
1. EEF is the representative voice of manufacturing,
engineering and technology-based businesses. We have a growing
membership of over 6,000 companies of all sizes, employing over
900,000 people. EEF comprises 11 regional Associations, the Engineering
Construction Industry Association and UK Steel. This response
is based on consultations with the EEF's regional Associations
and members, particularly EEF's Employment Policy Committee.
Flexibility of the labour market—question
1
2. The view of our members is that the UK's
labour market is relatively flexible when compared to many other
Member States. Overall, EEF member companies are not demanding
significant reform of existing UK law in order to achieve more
flexibility. However, they are concerned to ensure that the current
level of flexibility is preserved. This means flexibility in the
ability to makes changes to the size and structure of their workforce,
the organisation of working time and the types of contractual
arrangements that can be offered to prospective new workers.
3. However, a number of changes to UK labour
law would help to preserve and improve upon the current level
of flexibility:
— legislation is needed to clarify
that the agency (and not the client) should be responsible for
compliance with any employment rights of agency workers. Recent
court decisions suggesting otherwise have led to a situation of
uncertainty and risk undermining the purpose of agency work;
— labour law should be simpler and
more transparent. EEF members are struggling to keep pace with
the continual influx of new legislation and case-law and find
it hard to understand how the various rules interact with each
other. In response to the recent DTI consultation on simplification
of employment legislation, we called for a reduction in the amount
of legislation introduced annually, better and more reliable government
guidance and the simplification of certain legislation.
4. As regards EU law, EEF members are mainly
concerned to resist any further legislation. However, they also
see a need for better EU regulation, including greater clarity
and effective impact assessments. For example, the legality of
having a retirement age of 65 is now being challenged in the UK.
This is a matter which could have been dealt with more clearly,
rather than obliquely, from the outset in the 2000/78 EU Framework
Directive. Moreover, ECJ judges should also develop a better insight
into the practical impact of their decisions. The decision in
SiMAP/Jaeger (on on-call working time) has, according to the EU
Commission, left the majority of Member States in breach of the
Working Time Directive. Decisions such as this, and the decision
in Robinson-Steele (on rolled-up holiday pay), might have been
taken differently—or at least better explained—if
their practical impact had been fully understood.
Employment security—question 2
5. We do not see labour law as the primary,
or most effective, means of delivering security. Labour law can
confer job protection, but workers only feel truly secure when
they know that:
— a high proportion of those who want
to work can find work (ie the rate of employment is high);
— they have the experience, skills
and attributes to continue to succeed in their current job and/or
to find new work (ie they are employable); and
— they work for an organisation which
is profitable and competitive enough to survive in today's challenging
environment.
The concept of "flexicurity"—question
3
6. The word "flexicurity" is helpful
insofar as it acts as shorthand to describe the debate about balancing
flexibility with security. This is an important debate for the
EU to be having. However, the word "flexicurity" is
less helpful if used simply to describe the current Danish labour
market model. As explained below, this model cannot simply be
imported to other Member States.
7. We believe that a balance can be struck
between the two ideals of a flexible labour market and employment
security but how this is best done should be left to the Member
States. The UK already seeks to do so through a combination of:
— a relatively high employment rate;
— "traditional" employment
contracts that are relatively flexible whilst still adequately
protecting employees against dismissal;
— extending key employment rights to
"workers" as well as employees;
— the relatively low social security
burden attaching to such contracts; and
— initiatives such as New Deal encouraging
the hard-to-employ back to work.
8. We believe that, for the UK, this strikes
the balance in broadly the right place, except that we continue
to welcome an additional focus on employability—ie ensuring
that workers have the experience, skills and attributes to meet
the challenges of succeeding in their current jobs and/or finding
new work.
Other labour market challenges—question
4
9. The greatest challenge facing the UK
workforce is employability in the face of the increasing pressure
of globalisation. As discussed above, we do not see labour law
as the primary or most effective means of meeting this challenge.
10. We disagree with those who perceive
there to be a general problem of exclusion or exploitation amongst
all "workers" who do not have traditional permanent
employment contracts. We recognise that there are pockets of particularly
vulnerable workers, but they are best protected through specific
and targeted legislation such as the Gangmasters (Licensing) Act
2004 and the Government's current proposals for addressing vulnerable
agency workers. However, many "workers" in the UK:
— are paid at higher rates than comparable
employees; and/or
— have chosen to take this type of
contract because it offers them more choice over when and where
they work or a way of re-entering the labour market after periods
of absence for childcare, unemployment or illness. This is true
of the lower-skilled workers as well as the higher-skilled ones.
Groups covered by labour law—question 5
11. EEF members feel strongly that labour
law should not be extended to cover any further categories of
worker. In the UK, we already use the concept of "workers"
to cover those who are neither employed nor running their own
business. Such workers are already covered by key employment rights
(see the Appendix). We also extend some legislation to cover the
self-employed (for example, our anti-discrimination legislation).
12. We are also unconvinced that the concept
of "economically dependent work" is a useful or meaningful
way of deciding who should have employment rights. The fact that
a consultant is working exclusively for one company does not make
him economically dependent upon that company. He may be able to
find other work very easily. In fact, he may be less economically
dependent than the company itself, which may have just one single
client and be unable to survive if the client, for example, decides
to outsource the work beyond the EU.
13. Furthermore, the EU and UK Government
should continue to promote innovation and entrepreneurship. They
should encourage individuals who are setting up businesses to
be economically independent, supported by the skills and economic
circumstances necessary for success, rather than rewarding and
appearing to put a higher value on economic dependence.
Role of EU regulation—question 6
14. We think that little can be done by
EU-level regulation to achieve a more modernised system of labour
law across the EU as a whole. This is for a number of reasons:
— First, there are too many differences
between the 27 Member States in terms of their current labour
laws, their approach to issues such as agency work and collective
bargaining, their policies on tax, social security and the economy,
their political ideology and their employee relations history/culture.
These differences would make uniformity impossible even if it
were desirable. We cannot therefore import the Danish model of
flexicurity to all Member States. It is possible that some Member
States are looking to the EU to help them demolish certain inflexible
job protections built into their own national laws. However, if
this is the case, the solutions would be better coming from within
those Member States.
— Second, we think that the key role
for the EU in this context should be education, by encouraging
the sharing of good practice through, for example, the "Open
Method of Coordination". Member States should be left to
progress the Lisbon agenda with support from the EU but without
infringement of the subsidiarity principle. We are opposed to
a top-down legislative approach being taken to these issues.
15. We would strongly resist an EU "floor
of rights" and do not think this is viable or appropriate.
"Workers" in the UK already have a floor of rights:
— Extending those rights to include
protection against dismissal would significantly increase costs
when the manufacturing sector is struggling to compete with companies
in lower-cost economies abroad. It would also defeat the purpose
of recruiting such workers. A large proportion of EEF members
face significant peaks and troughs in demand and, when an order
is received, time is of the essence. They need to bring in extra
numbers or specialised skills very quickly, but cannot afford
to retain extra labour once demand drops off. The same applies
when they are using workers to cover for permanent employees who
are absent. In any case, many workers would never accrue the one
year's continuous employment necessary for comparable employees
to gain unfair dismissal rights.
— Extending other types of employment
rights to "workers" would be largely impractical. For
example, it is difficult to give sick pay to someone who can choose
their working days or paternity leave to someone who has no ongoing
obligation to work.
16. In addition, extending employment rights
to "workers" would not actually deliver employment security
because, in our view, true employment security does not come from
employment rights.
17. Moreover, the UK government has already
concluded, after extensive consultation, that there is no need
for further legislation in this area (see the DTI policy statement
Success at Work, 2006).
18. We do not see how an EU-wide definition
of "worker" would promote worker mobility. Other Member
States may struggle with the lack of a consistent approach to
the employment status of frontier workers. However, we believe
that the issue is confined to relatively small geographical areas
within the EU. For example, our members in Northern Ireland, who
employ workers commuting across the Irish border, do not encounter
this problem. Even if an EU-wide definition promoted mobility
in a small geographical area, it would create problems elsewhere.
19. An EU-wide definition of "worker"
would be largely unworkable. The UK definition may be complex
and unclear but this results from trying to fit a wide (and constantly
changing) variety of relationships into a small number of categories
and then reconcile these categories with tax/social security law.
These factors are complex and cannot be overcome through legislation.
Standardised EU definitions would be even more complex and unclear
because there will be an even greater variety of contractual relationships
throughout the EU and Member States have very different tax and
social security regimes (which cannot and should not be harmonised).
30 March 2007
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