Annex
1. EEF is the representative voice of manufacturing,
engineering and technology-based businesses in the UK. 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. We
are also the UK member of the Council of European Employers of
the Metal, Engineering and Technology-Based Industries (CEEMET),
which represents the interests of employers' organisations in
these sectors across Europe.
2. This response is based on consultations
with EEF's regional Associations and member companies, particularly
EEF's Employment Policy Committee.
EXECUTIVE SUMMARY
The differences between Member States
— In an EU compromising 27 Member States
it is unrealistic to think that a single labour market model could
or should suit them all.
— There may be lessons to be learned
from the Danish concept of "flexicurity" and the EU
has a role in promoting the sharing of good practice in this area.
Further legislation, however, is the responsibility chiefly of
Member States.
Flexibility (Consultation Questions 1-5)
— The UK's labour market model balances
flexibility and security.
— For manufacturers, the ability to
make changes to the size, structure and working arrangements of
the workforce is critical to meeting demand and retaining competitiveness.
— Many workers in the UK actually demand
flexibility in their hours and contractual arrangements in order
to achieve a better work/life balance.
— EEF members do not demand significant
or wholesale reform of current employment law in the UK, but they
see a need for greater simplicity and transparency in the law.
Security (Consultation Questions 4-6)
— True employment security comes not
from just having employment rights or protection against dismissal.
Workers feel truly secure when they know that:
— a high proportion of those who want
to work can find work (i.e. 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; and
— they work for an organisation which
is profitable and competitive enough to survive in today's challenging
environment.
— Economic, education and active labour
market policies are much more effective in promoting employment
security than employment rights alone.
Rights of workers (Consultation questions 2,8
and 12)
— Being able to use "workers"
in a flexible way is critical for UK employers, especially those
in manufacturing who need the ability to respond to changes in
demand.
— It is wrong to typecast all "workers"
in the UK as being excluded or exploited. Many are highly-skilled,
paid at higher rates than comparable employees and choose to work
on "non-standard" contracts.
— We are opposed to national or EU
legislation extending full employee status to workers because:
— Doing so would be impractical or
would drive up labour costs
— It would undermine the flexible way
in which our sector engages such workers and so defeat the purpose
of recruiting them
— Workers in the UK are already well-protected
by UK employment law
— It would not deliver true employment
security.
— The UK's targeted approach to the
rights of workers is the correct one.
Rights of Agency Workers (Questions 9 and 10)
— The EU should not undermine the principle
of agency work by bringing in legislation which, in effect, turns
it into a standard employment relationship.
— In the UK, there is a need to clarify
that the agency bears sole responsibility for any employment rights.
— We are unaware of any issues created
by commercial sub-contracting in the UK.
Harmonising the definition of worker (Consultation
question 12)
— A standard EU definition of "worker"
and "employee" is unworkable, largely due to the differences
in Member States' tax and social security regimes.
— Any concerns with the employment
status of frontier workers should not be allowed to dictate the
approach throughout the whole of the EU.
Self Employment (Consultation questions 7 and
8)
— The concept of "economically
dependent work" is not appropriate for deciding which employment
rights (if any) an individual should enjoy. In the UK many individuals
who might be regarded as economically dependent are already protected
by law.
Enforcement (Consultation questions 13 and 14)
— We believe that the enforcement of
labour law generally, and monitoring of undeclared work specifically,
is best left to Member States.
Working Time (Consultation question 11)
— EEF believes that the opt-out from
the average 48-hour working week must be preserved. Working time
should be automatically averaged over 52 weeks.
— The priority in this area is to resolve
the issue created by the ECJ decisions concerning "on-call"
working time.
Improving and reforming labour law (Consultation
question 1 and 3)
— The EU needs to do more to ensure
that the principles of better regulation become central to EU
employment law. Impact assessments must become structured, meaningful
and comprehensive, and greater consideration must be given to
the practical implications of ECJ rulings.
INTRODUCTION
3. Manufacturing is on the front line of
globalisation and EEF members face competition from companies
in lower-cost economies to a greater extent than companies in
most other sectors. The ability to adapt quickly and efficiently
to this changing economic climate is critical for manufacturing
companies if they are to remain internationally competitive in
the 21st century.
4. Against this background, EEF members
welcome the opportunity of having a constructive debate over modernising
labour law to meet these new challenges. They particularly welcome
the emphasis in the Green Paper on the importance of promoting
flexibility to enable them to respond to competitive pressure.
They also recognise that this flexibility should be complemented
by providing some element of security for employees and workers.
5. While the Green Paper poses some specific
questions, we believe that the key themes which lie behind these
questions are potentially more significant. In discussions with
our members, they have highlighted the following issues which
need acknowledging or addressing in any debate on modernising
labour law both at national and European level:
— The differences between Member States
— Rights of agency workers
— Harmonising the definition of worker
— Improving and reforming labour law
— The role of the European Union (EU)
6. Our response therefore addresses each
of these themes directly. Wherever possible, we have also tried
to cross-refer to the relevant questions in the Green Paper and
include some specific examples from the UK.
THE DIFFERENCES
BETWEEN MEMBER
STATES
7. There is much interest in the EU in the
concept of "flexicurity"—a term used to describe
the Danish labour market model, which combines flexible employment
law, generous benefits for the unemployed and a pro-active labour
market policy.
8. In an EU compromising 27 Member States,
it is unrealistic to think that a single labour market model will
suit all of them. There are key differences in terms of economic
policy, tax/social security policy, the role of collective bargaining,
employee relations history/culture and political ideology. These
differences make uniformity impossible, even if it were desirable.
9. For these reasons, we believe that we
cannot simply apply the Danish model of flexicurity across the
EU. Whilst it undoubtedly offers many useful learning points for
other Member States and appears to be working well in Denmark,
it would be wrong to see it as the only suitable labour market
model. In our view, the Danish model would not suit all Member
States any more than the UK model would. Equally, we cannot assume
that labour market problems in some Member States are the same
as the problems in others or that a solution which is appropriate
for one Member State would work equally well in another. For example:
— sectoral collective bargaining is
successful and widespread in some Member States but very rare
in others; and
— targeted solutions that address specific
issues, such as the recent UK legislation on gangmasters, may
be effective in the UK but not in other Member States.
10. What Member States can do however, is
share experiences about what has worked and, equally importantly,
has not worked and develop ideas from sharing good practice. A
mechanism for doing so already exists in the form of the European
Jobs and Growth Strategy and through the "Open Method of
Coordination". We are opposed to a top-down legislative approach
being taken to these issues.
11. In the UK, the term "flexicurity"
is not widely used or understood. However, the UK combines flexibility
and security within its own particular labour market model (see
Box 1 below).
Flexibility (Consultation questions 1-5)
12. Contrary to popular perception in some
quarters, the UK has a wide range of employment laws. To name
but a few, there are legal restrictions on the circumstances in
which employers can dismiss employees; procedures to be followed
in making single and multiple redundancies; minimum redundancy
payments and notice periods; and a National Minimum Wage. Nonetheless,
the view of our members is that the UK still remains a relatively
flexible place to do business when compared to many other Member
States.
13. Retaining and enhancing this flexibility
is critical for the success of EEF members. If employers are unable
to make changes to the size and structure of their workforces,
they may be reluctant to recruit. This has potentially serious
consequences for employment levels and economic growth. However,
the need for flexibility goes further than flexibility in relation
to employment levels. Our members also need flexibility, for example,
in relation to the organisation of working time or the contractual
arrangements they can offer to prospective new workers.
14. Our members' need for flexibility in
this latter sense, ie in terms of hours worked and contractual
arrangements, coincides with a demand from workers themselves
for the same types of flexibility in terms of work/life balance.
Unfortunately, this is not always apparent from listening to the
views expressed by some trade unions. This may be because trade
unions have traditionally represented employees on permanent "standard"
employment contracts, or the so-called "insider" group,
and have been relatively unsuccessful in recruiting other workers
into membership. Moreover, whilst many EEF members recognise unions
for some of their employees and generally have constructive relationships
with them, union membership is generally on decline in the UK,
with just 17.2 per cent of employees in the private sector being
union members.[76]
As a result, the views expressed by trade unions do not necessarily
accurately reflect the views of the majority of the workforce.
15. A recent UK survey[77]
concluded that 50 per cent of all working adults (52 per cent
of men and 48 per cent of women) now want to work more flexible
hours. Moreover, UK employers are responding to this demand, where
possible, in order to recruit and retain their most talented workers.
At the same time, many individuals choose to avoid so-called standard
employment contracts precisely because they want to be able to
decide for themselves whether and when they work.
16. EEF members do not demand significant
or wholesale reform of current UK employment law in order to achieve
flexibility; but they wish to see that level of flexibility preserved.
They also see the need for greater simplicity and transparency
in the law (see below under "reform of labour law")
and the way in which it is enforced.
Security (Consultation questions 4-6)
17. The UK already protects workers as well
as employees by a floor of key employment rights (see below under
"rights of workers").
18. However, we do not believe that true
employment security comes from just having employment rights or
protection against dismissal. Instead, we believe that workers
feel truly secure when they know that:
— a high proportion of those who want
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; and
— they work for an organisation which
is profitable and competitive enough to survive in today's challenging
environment.
19. The Green Paper encourages a debate
about what role labour law can play in promoting security. However,
as outlined above, we do not see labour law as the primary or
most effective means of delivering security. Labour law can confer
job protection, but true employment security comes from being
employable. Economic, education, and active labour market policies
are much more effective in promoting employment security.
20. There is a role for employers, governments
and indeed individuals themselves to ensure that workers have
the requisite experience, skills and attributes to be employable.
But this is, and should remain, an issue for national governments.
The EU's role should be limited to encouraging the sharing of
good practice across Member States.
Rights of workers (Consultation questions 2,8
and 12)
21. In the UK, a "worker" is (broadly
speaking) somebody who is neither an employee or self-employed
and running their own business.
22. Many EEF members use a wide variety
of workers, including agency workers, casual workers, homeworkers
and labour-only subcontractors. They are used for many different
reasons, including coping with seasonal or unforeseen changes
in the demand for products, staffing absence or because a particular
type of working (such as homeworking) suits a certain work process.
23. Being able to use such workers in a
flexible way is critical for employers. 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
be able 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 seeking cover when permanent employees are
absent on, for example, maternity leave or holiday.
24. It is wrong to typecast all "workers"
in the UK as being excluded or exploited. On the contrary, many
of them:
— 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 due to childcare, unemployment or long-term illness.
This is true of lower-skilled workers as well as higher-skilled
ones.
25. UK employers may not extend their full
employee benefit package to workers sometimes because such workers
lack "employee status" but also because the temporary
or sporadic basis on which such workers tend to be engaged would
make it impractical for employers to do so. For example, a company
sick pay scheme might offer full salary on any day when an employee
is too sick to work, but such schemes are unworkable if workers
can choose their working days. Where such employee benefits are
not extended to workers, this can be one (but not the only) reason
why such workers may receive a higher rate of pay than comparable
employees.
26. Not all UK employment rights extend
to workers, as opposed to employees. Again, this is partly for
reasons of practicality. For example, it it is difficult to give
paternity leave to a worker who has no ongoing obligation to do
any work or rights to time off to a worker who can choose his
working days. However, it is also the result of the targeted approach
adopted by the UK, which is referred to in the Green Paper and
illustrated further in Box 2 below.
27. Equally, workers in the UK do not have
the same legal employment obligations as employees. Often, workers
can choose whether and when to work. They also do not owe obligations
to give notice or duties of trust and confidence towards the employer.
28. The question of whether or not employment
rights should be extended to all workers is a key theme running
through the Green Paper. We would strongly resist any EU or national
legislation which had the effect of extending employment rights
to all workers in the UK for the following reasons:
— extending many employment rights
to workers would be impractical for the reasons described above;
— it could significantly increase labour
costs;
— it would undermine the flexible way
in which our sector currently engages such workers and thereby
defeat the purpose of recruiting them;
— workers in the UK are already adequately
protected by UK employment law and the UK government has concluded,
after extensive consultation, that there is no need for further
legislation in this area (see Box 2); and
— it would not deliver employment security
because, as outlined above, we believe that this ultimately comes
from employability not just employment rights.
Rights of agency workers (Consultation questions
9 and 10)
29. EEF members use agency workers in the
same way and for the same reasons as other "workers".
All agency workers have the floor of rights described in Box 2
above. Many agency workers are taken on by the agency as employees
and so gain additional rights. However, whether the individual
is engaged by the agency as a worker or as an employee, the essence
of an agency work arrangement is that the agency bears all of
the costs, uncertainties and risks involved in being an employer,
and receives a fee from the client company in return for this.
The client company, on the other hand, benefits from being able
to source specialist skills, bring on board extra workers quickly
at peak times or "try out" workers it might later want
to recruit on a more permanent basis.
30. In our view, it is critical that the
EU does not undermine the main purpose of agency work by converting
agency work contracts into standard employment contracts.
31. In the UK, however, there is a need
to clarify who should be responsible for compliance with any employment
rights of agency workers. At the moment, the agency clearly bears
the responsibility for paying tax and social security and ensuring
compliance with the National Minimum Wage and working time legislation.
However, there have been some recent UK court decisions in which
the client (not the agency) has been found to bear responsibility
for compliance with employment rights. This has led to uncertainty
with employers, agencies and agency workers not knowing where
they stand. It is in the interests of all three parties that this
situation is resolved. We understand that the UK government appreciates
this and is considering how best to address this complex issue.
32. Whilst many employers might welcome
EU legislation clarifying (and only clarifying) that the agency
bears sole responsibility for any employment rights, we believe
that such legislation would be better coming from the UK government.
This is partly because the solution can then be better targeted
at the specific problems within the UK. It is also partly because
we are unconvinced that the EU can realistically hope to achieve
workable legislation on agency workers, not least because different
Member States have historically taken very different approaches
to the position of agency workers and this is reflected in the
issues (or lack of them) which these Member States have in relation
to such workers today.
33. Clarifying that the agency bears responsibility
for any employment rights would ensure a floor of rights for all
such workers. However, the UK government has recognised that there
are pockets of agency work where individuals are particularly
vulnerable and has sought to address them through its recent legislation
on gangmasters and its proposed legislation on particular types
of agency work (see Boxes 3 and 4). This is a good illustration
of the targeted approach to addressing specific problems that
the UK is now following and which we support.
34. In the Green Paper, the Commission has
linked the questions about agency work with questions about sub-contracting
to commercial partners. In the UK, we would not tend to regard
these issues as being related. Indeed, we are not aware of any
issues presented by commercial sub-contracting in the UK. If a
sub-contractor engages employees to perform a contract, the sub-contractor
is responsible for ensuring compliance with their employment rights.
No doubt there are some unscrupulous sub-contractors (just as
there will always be a small minority of unscrupulous employers
of every type). However, we are unaware of any kind of systemic
problem with commercial sub-contracting in the UK. Indeed, we
would have thought that the real problem, (if there is one) occurs
with subcontracting to commercial partners outside of the EU,
where compliance with employment laws may be much harder to ensure.
Any legislation on this issue is likely to encourage more sub-contracting
outside of the EU, and thereby worsen any problems rather than
solve them.
Harmonising the definition of worker (Consultation
question 12)
35. We recognise that the definitions of
"worker" and "employee" in the UK are, to
an extent, complex and unclear. However, this is the inevitable
result of needing to:
— reconcile the approach of the taxation
authorities towards tax/social security status with that of the
courts towards employment status; and
— fit a wide (and constantly changing)
variety of contractual relationships into a small number of categories.
36. These factors are complex and cannot
be overcome through further legislation whether from the EU or
the UK. Standardised EU definitions would be particularly inappropriate,
not least because Member States have different tax and social
security regimes.
37. The Green Paper asks the question about
defining who counts as a "worker" in the context of
a discussion about frontier workers, ie workers who live in one
Member State but commute to work in another. Leaving aside certain
highly-paid professionals in the London financial sector, the
UK's experience of such workers is probably confined to Northern
Ireland—where some workers commute across the Irish border.
However, we understand from our Association in Northern Ireland
that employers have no difficulty working out the employment status
of such workers and are not aware of any problems created by the
fact that Ireland may have a different definition of "worker"
from Northern Ireland (see Box 5).
38. When we raised this issue with our members
in the context of the idea of harmonising the definition of worker,
their consistent response has been that most problems arise because
of the understandably different tax and social security rules
between Member States (which of course cannot and should not be
harmonised).
39. We appreciate that employers in some
other Member States may well have difficulty in establishing,
or establishing a consistent approach to, the employment status
of frontier workers. We do not know how difficult these issues
would be to resolve, but we believe that they will be confined
to relatively small geographical areas within the EU. In our view,
it is crucial that such issues (wherever and to whatever extent
they exist) must not dictate the approach that is adopted throughout
the whole of the EU.
Self-employment (Consultation questions 7 and
8)
40. The Green Paper asks questions about
defining self-employment and extending rights to all those engaged
in "economically dependent work".
41. We think that producing a better definition
of "self-employment" is unachievable for the same reasons
that producing a better definition of "worker" and "employee"
is unachievable (see above).
42. We are also unconvinced that the concept
of "economically dependent work" is a useful or meaningful
way of deciding which, if any, individuals should have employment
rights. The fact that a consultant is working exclusively for
one company on a self-employed basis does not necessarily make
him economically dependent upon that company. He may be able to
move onto replacement 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.
43. It is also important that the EU continues
to promote innovation and entrepreneurship. As such, the EU should
be encouraging 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.
44. In any case, in the UK, many individuals
whom the EU might regard as "economically dependent"
are in fact covered by a number of key employment rights, either
because they fall within the definition of "worker"
or because UK legislation goes beyond workers to include the self-employed
(such as, for example, our anti-discrimination legislation).
45. For these reasons, we would not support
any legislation extending rights to self-employed individuals
deemed to be engaged in "economically dependent work".
Enforcement (Consultation questions 13 and 14)
46. As regards the enforcement of both labour
law generally and undeclared work specifically, we do not see
a useful or effective role for the EU. We see this as a matter
that is best left to individual Member States which, over the
years, have developed different approaches that suit their legal
system and employee relations history/culture.
47. In our view, the key to effective enforcement
is to identify the problem areas and then target them through
whatever means are the most effective. This is likely to involve
swift and focused action on a case-by-case basis. EU legislation
is not going to be effective for this purpose and is therefore
unlikely to be helpful.
Working time (Consultation question 11)
48. We consider that the review of the Working
Time Directive must retain the ability for employers and workers
to be able to agree working time arrangements that suit them and
reflect workload peaks and troughs. In particular, EEF members
are firmly of the view that:
— Working time should be automatically
averaged over 52 weeks; and
— The individual opt-out from the average
48-hour working week should be retained.
49. EEF recognises that there are major
differences of opinion between Member States as to how this review
should be progressed. We consider that one way in which the current
impasse could be addressed is to follow the suggestion of CEEMET,
the European employers' organisation to which EEF belongs, of:
— First, finding a practical resolution
of the issues arising from the ECJ decisions in SiMAP/Jaeger;
and then
— Second, addressing the specific request
in Article 22 of the Directive requiring the Council to "re-examine
the provisions of this paragraph" which would address the
individual opt-out question.
Improving and reforming labour law (Consultation
questions 1 and 3)
50. The Green Paper asks how labour law
might be reformed to address the various challenges of the future.
51. As far as the reform of domestic labour
law is concerned, we have already highlighted the need for reform
in relation to agency workers in the UK. There is also a need
for greater simplicity and transparency in our domestic law. At
present, 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. As a result, businesses
often do not know in advance if a business decision will be legally
compliant or not. In response to a recent DTI consultation on
simplification of employment legislation, we called for a reduction
in the amount of legislation introduced annually, more reliable
government guidance centred on business processes and the simplification
of certain legislation.
52. As far as reform of EU labour law is
concerned, if de-regulation is not on the agenda, there is nonetheless
a need for better regulation.
53. First, we believe there is a need for
greater clarity in EU legislation. This is particularly the case
for SMEs, who should not need to take specialist legal advice
before making seemingly-routine business decisions. 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. Member States must retain sufficient room
for manoeuvre but EU legislation should not be an invitation to
litigate.
54. Second, we believe that EU directives
on labour law should only be issued after an impact assessment
has been carried out. It is important that:
— impact assessments are structured,
meaningful and comprehensive;
— there is a genuine attempt to assess
the practical impact of the would-be Directive in each Member
State;
— any issues exposed by the impact
assessment are resolved as far as possible before the Directive
is issued.
55. Third, in relation to ECJ judgments,
we believe that steps should be taken to ensure that ECJ judges
have a better insight into the practical impact of judgments they
may be about to issue. It is extremely hard to reverse decisions
which have already been taken, but some decisions might have been
avoided altogether had their practical impact been fully understood.
For example, the ECJ decision on rolled-up holiday pay in Robinson-Steele
etc has caused serious uncertainty and dissatisfaction in the
UK and is almost impossible to apply to the UK practice of using
"casual-as-required" labour. Equally, the ECJ decisions
in SiMAP/Jaeger have, according to the Commission, left the majority
of Member States in breach of the Working Time Directive in relation
to on-call work. All of these decisions involve the ECJ simply
transposing principles which might be appropriate for "normal"
employment contracts into very different "non-standard"
types of contract. A better insight into how "non-standard"
contracts are being used within Member States might have resulted
in a different outcome.
CONCLUSION: THE
ROLE OF
EU
56. The question of what role the EU—as
opposed to the Member States—should play in any programme
of modernisation is a key theme throughout the Green Paper.
57. We see a critical role for the EU in
promoting examples of good practice and in continuing to push
forward the debate. For example, a number of EEF members have
expressed interest in learning more about the Danish model of
flexicurity and in what elements of this model might be adaptable
for the UK.
58. However we believe that the main responsibility
for labour law must remain with Member States and the EU should
refrain from any top-down legislative measures in this area.
March 2007
76 DTI (2006) Trade Union Membership 2005. Back
77
Holmes et al (2007), The future of Work: Individuals and Workplace
Transformation. Back
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