Memorandum by the CBI
1. The CBI is pleased to submit its response
to the European Commission's Green Paper on "Modernising
labour law to meet the challenges of the 21st century". The
CBI welcomes the Green Paper's recognition that EU labour markets
need to become more flexible in order to raise employment and
provide economic growth. In a fiercely competitive global market,
business must adapt quickly to market changes and find staff with
the necessary skills to compete.
2. However, employers are concerned at some
of the Green Paper's analysis and assumptions. In particular,
the Green Paper paints an overly negative view of "atypical"
employment contracts, such as temporary agency work. It argues
that individuals on these types of "precarious" employment
contracts and working patterns represent labour market "outsiders",
as compared to "insiders" on permanent full-time contracts.
The CBI believes this analysis is flawed and does not recognise
that many individuals value the flexibility that these forms of
working provide. Employers therefore do not accept that further
employment legislation is appropriate or necessary.
3. In considering the Green Paper, CBI members;
— welcome the Green Paper's recognition
that a flexible labour market is necessary for continued economic
competitiveness is welcome—but ensuring employment security
and improved labour market transitions is best served though improving
access to training for employers and individuals
— it is clear that the "flexicurity"
approach can mean all things to all people—the CBI urges
caution if the Commission is minded to develop common principles
for Member States to adopt.
4. The CBI has a number of concerns about
the Commission's approach, in particular;
— the pejorative language used to discuss
"atypical" forms of work raises serious concerns
— the introduction of a "floor
of employment rights" for all individuals is unnecessary
as this already exists
— the employment status of agency workers
does not require further clarification and subsidiary liability
is impractical
— Working Time law needs reform to
end confusion and over-regulation
— undeclared work must be combated—but
EU level intervention, other than assisting Member State co-ordination,
is unlikely to be effective.
The Green Paper's recognition that a flexible
labour market is necessary for continued economic competitiveness
is welcome
5. The CBI welcomes the Commission's assessment
that the flexibility of EU labour markets should be increased
and that flexible forms of work benefit both employers and individuals.
The CBI welcomes EU actions to promote labour market flexibility
across Europe and the debate on the modernisation of labour law.
Labour market flexibility has played a key role in making the
UK an attractive place to do business and it is essential that
it is not undermined through excessive employment legislation.
6. The UK has introduced balanced measures
to meet both employers' and employees' flexibility needs. For
example, parents of young children have a right to request flexible
working arrangements with employers being able to refuse a request
where there is a recognised business reason for doing so. The
CBI/Pertemps Employment Trends Survey 2006 found that in 90 per
cent of cases, requests have been accepted by the employer or
a compromise reached, with little differences in acceptance rates
between large and small firms. This indicates the success of the
approach which creates benefits for employees without creating
undue burdens on companies. The right is being extended to carers
of adults from April 2007.
—but ensuring employment security and improved
labour market transitions is best served though improving access
to training for employers and individuals
7. Labour law reforms must focus on facilitating
the creation of new jobs rather than trying to preserve existing
ones—together with the promotion of effective lifelong learning
policies. The Commission is concerned with ensuring that labour
and social security laws are appropriate in assisting workers
in making transitions from one status to another—whether
due to redundancy and dismissal or voluntarily through full-time
education and training, caring responsibilities, career breaks
or parental leave.
8. Whilst there is a need for more flexible
employment protection legislation across Europe, the role of the
Commission is to encourage Member States to introduce the necessary
changes and organise exchanges of experiences so that different
countries can learn from each other and adopt the mix of approaches
most suited to them. There is a need for greater focus on education
and training measures (not an area of EU competence) to assist
individuals with their career development and transitions from
unemployment or different forms of work—rather than relying
on further employment regulation and social security provision
to protect individuals. Reforms should therefore focus on supporting
employers and individuals in adapting to market changes.
9. Ensuring employers and individuals have
access to appropriate training is essential in maintaining levels
of employability and upskilling the workforce to ensure business
remains competitive and individuals have the skills required to
find employment and adapt to a rapidly changing economy.
10. Improvements to training systems are
the responsibility of individual Member States and employers are
clear that the UK system must continue to improve, putting employers'
and individuals' needs at its heart. The CBI has welcomed initiatives
such as "Train to Gain" which are helping to develop
a more demand-led approach to training and continues to lobby
strongly for young people to enter the labour market with employability
skills to ensure that they are successful in the workplace.
11. Legislation is not the right instrument
to influence training and learning behaviour. At European level,
agreements between the social partners have played a useful role
in promoting a life-long learning culture. For example, the CBI
was involved—through BUSINESSEUROPE (formerly UNICE)—in
developing the framework of actions on the life-long development
of competences and qualifications. Subsequent implementation reports
have shown that agreeing on a common approach to life-long learning
contributes to changing attitudes. It is clear from examples across
the EU that the key is to create the conditions that will induce
companies and individuals to invest financial resources, time
and efforts to upskill.
12. The competence to modernise labour law
lies first and foremost with the Member States. Most of the measures
to enable employment security and improved labour market transitions
will therefore need to be taken by national players. The role
of the EU should be to organise exchanges of experiences between
Member States and monitor national reforms using the instruments
of the European growth and jobs strategy. Taking a top-down legislative
approach at the EU level is likely to be counter-productive for
national reforms.
It is clear that the "flexicurity" approach
can mean all things to all people—the CBI urges caution
if the Commission is minded to develop common principles for Member
States to adopt
13. The Green Paper's promotion of the concept
of "flexicurity'—characterised as "balancing flexibility
and security"—in the operation of labour markets is
a welcome addition to the debate on this issue. CBI members understand
there to be four general principles underpinning flexicurity:
— relatively unrestricted access to
hire and dismiss, and to fix wages
— an economic safety net in the event
of unemployment
— an active labour market policy which
assists the unemployed who are unable to find a new job immediately
— a focus on lifelong learning to ensure
individuals remain employable.
14. Although these principles appear to
be a sensible basis for labour market policy, they are open to
interpretation in practice. Individual Member States have different
views and approaches to flexibility in their labour market—depending
on their individual circumstances. It is therefore crucial that
any common flexicurity principles that are developed remain capable
of adaptation to Member States' individual needs. It would be
inappropriate to impose a rigid template on Member States—particularly
those such as the UK which have achieved consistent success through
a flexible labour market, producing high employment rates (71.7
per cent—one of only four Member States to beat the Lisbon
target of 70 per cent) and strong growth.
15. The CBI therefore believes it is vital
that the "subsidiarity" principle is respected on these
matters—the UK is not seeking to impose its model on other
countries, just as another model being imposed on it would be
unacceptable. The CBI believes that flexicurity should not be
forced upon Member States through binding common principles—rather
these principles should be non-binding and suitably non-specific.
The UK should not have to adapt its successful labour market policies
to fit in with an overly rigid flexicurity agenda from the Commission.
The pejorative language used to discuss "atypical"
forms of work raises serious concerns
16. The Green Paper provides an overly negative
view of atypical forms of work—such as fixed term employment,
part-time work, temporary agency work and self-employment. It
argues there is a risk that this part of the workforce becomes
trapped in a succession of short-term, low quality jobs with inadequate
social protection leaving them in a vulnerable position—although
such jobs may in fact serve as a stepping-stone in enabling individuals
to enter the workforce.
17. The Green Paper appears to classify
only those employed on permanent, full-time contracts as labour
market "insiders", with those on other, more flexible
employment contracts viewed as "outsiders" in need of
further protection. This is a flawed use of the insider-outsider
concept. "Outsiders" should instead be the unemployed.
18. Evidence from CBI members and from other
sources shows that atypical work can have significant advantages
for workers. Reports on the motivations behind agency work, for
example, have revealed that temporary work can often suit individual
lifestyle choices. Casual and freelance workers also benefit from
not having to commit themselves to one employer and being able
to work for a number of companies in the same industry. Employers
in the journalism industry, for example, have commented that freelance
journalists value being able to work on a number of different
assignments for different organisations, thus expanding their
portfolio.
19. The UK Government has recognised that
flexible working arrangements do not automatically equate to more
vulnerable workers. As the Government's 2006 "Success at
Work" policy document states, fewer than one in 10 people
who work part-time do so because they cannot find full-time employment.
20. Temporary agency workers provide a valuable
source of labour to the UK economy, used by firms to meet fluctuating
demands in workload or to cover staff absences. Temporary agency
work is a key aspect of the UK's flexible labour market and benefits
both employers and workers. Agency work can act as a stepping
stone from unemployment to employment, and from agency work to
permanent employment. Equally, other workers prefer to work as
agency temps as such working arrangements offer individuals a
wide variety of work and working patterns to suit their individual
lifestyles and aspirations. Agency work therefore enables more
people to work—including parents of young children, older
workers and students. Data from the Recruitment and Employment
Confederation (REC)[1]
suggests that up to half of agency workers are not seeking a permanent
job. REC research (2005) shows that over half (52 per cent) of
agency workers choose temporary work for positive reasons such
as increased flexibility, better pay or to gain valuable work
experience and 20 per cent use temporary work as a route into
a permanent job.
The employment status of agency workers does not
require further clarification and subsidiary liability is impractical
21. Triangular employment relationships—in
particular those involving temporary agency workers—are
also addressed in the Green Paper, with reference to the currently
stalled Temporary Agency Workers Directive. The Green Paper argues
that further clarification is required about accountability for
compliance with employment rights.
22. UK employers are clear that the agency
worker's primary relationship is with the agency. User companies
do not get involved in the details of an agency worker's terms
and conditions and it would not be acceptable for employment responsibilities
to be passed to the user company. User companies are not prepared
to take responsibility for upholding the working rights of temporary
workers, apart from with respect to rights in the workplace, eg
those related to non-discrimination and health and safety, and
will only contract with a temporary agency on the basis that the
agency guarantees the rights of its temporary agency workers.
23. Providing agency workers with an employment
relationship with the user company would remove the benefits contracts
for services and would completely change the UK model of agency
work. Administration and costs for the user company would increase,
removing the incentive for companies to contract with temporary
agencies for work. This would result in significantly fewer agency
workers engaged. The UK would see the removal of vital employment
opportunities and the restriction of important labour market flexibility.
The UK Government concluded in its 2006 "Success at Work"
policy statement that no further clarification was needed on the
employment status of agency workers, and the CBI supports this
position.
24. The Commission is also concerned with
the protection of workers under sub-contracting arrangements.
Sub-contracting, which is essentially a commercial relationship
with contractual obligations but no subordination between the
client and the service provider, must not be confused with temporary
agency work.
25. Subsidiary liability—where any
claim can only be brought against the main contractor in the event
of non-compliance by sub-contractors—is proposed as a means
to deal with establishing responsibility in the case of sub-contracting.
However, this solution is unlikely to be effective. All sub-contractors
must ensure that they follow relevant labour law when dealing
with their employees—contractors and user employers must
therefore be able to expect that sub-contractors are fulfilling
their responsibilities and cannot be held accountable for circumstances
in which sub-contractors have not fulfilled their responsibilities.
Companies using sub-contractors should be able to rely on the
fact that those sub-contractors have to fulfil their labour law
responsibilities—ensuring their sub-contractors comply with
the law is not their responsibility.
26. The subsidiary liability principle could
also place a considerable burden on the main contractor. SMEs
in particular do not have the administrative resources to make
a thorough examination of their subcontractors, let alone situations
where there is a chain of subcontractors. The main contractor
is not in a position to control compliance in practice.
The introduction of a "floor of employment
rights" for all individuals is unnecessary as this already
exists
27. The Green Paper suggests that the emergence
of diverse forms of non-standard work has made the boundaries
between employment law and commercial law less clear, with the
traditional distinction between "employees" and the
independent "self-employed" no longer an adequate depiction
of the economic and social reality of work in Europe.
28. The Commission argues that there could
be a need for greater clarity in Member States' legal definitions
of employment and self-employment and all those individuals not
on a standard employment contract could benefit from a "floor
of rights". The Green Paper also suggests a new concept of
"economically dependent work", which would cover situations
falling between the two established concepts of employment and
independent self-employment. In such situations, workers are formally
self-employed but are economically dependent on a single client
or employer for their source of income and could therefore be
considered "vulnerable".
29. In the UK, employment tribunals, HMRC,
the Benefits Agency and courts use a wide range of tests to determine
the employment status of an individual. There is a wide range
of case law on this issue and it appropriate for Member States
to clarify legal definitions rather than having EU intervention
in this area.
30. The Green Paper recognises the UK's
employee-worker distinction as an example of a "targeted
approach" in dealing with employment status issues. Workers
receive core employment rights but not the full range of labour
law entitlements associated with standard employment contracts.
All workers are therefore covered by the majority of employment
legislation, including the National Minimum Wage, working time
legislation, health and safety and social security provisions
(such as maternity and sick pay). Part-time workers have the same
rights as full-time workers on, for example, pay, access to pensions
and bonuses, and fixed-term workers must also be treated in the
same way as comparable permanent employees.
31. Whilst there are some reports of abuse
and a lack of knowledge about existing rights for some workers,
there is no basis for changing the framework of rights in the
UK—a position which has been accepted by the Government.
The UK system conferring core employment rights on "workers"
is working well. Workers provide a valuable resource to the economy
because they are flexible and can be deployed easily to where
work is available. This is possible because such individuals are
employed on contracts for services, as opposed to contracts of
employment. Under contracts for services, there is no mutuality
of obligation—rather the work provider is under an obligation
only to consider the individual for any work that becomes available.
32. Whilst it is welcome that the Green
Paper is not explicitly calling for an extension of all employment
rights to all individuals regardless of their employment contract,
what the Commission means by a "floor of rights" is
unclear. UK employers would be concerned if the Commission wished
to introduce legislation that is not compatible with the UK approach.
Furthermore, the Green Paper suggests that harmonising definitions
of "workers" across Member States could assist in ensuring
that so-called "frontier workers" are able to exercise
their employment rights regardless of the Member State in which
they work.
33. The UK approach to providing employment
rights to workers has been successful and there are positive aspects
to atypical work for individuals. However, the terms and conditions
of employment of workers are best defined by Member States and
existing EU law—including protection of workers against
forms of discrimination—already amply covers what could
be legislated for at EU level.
34. The role of the Commission is to facilitate
the sharing of experiences of national initiatives to deal with
these issues so that Member States can learn from one another,
rather than a European level generalisation of new legal categories
of "economically-dependent workers" and harmonising
(whether explicitly or implicitly) national definitions of employees
and the self-employed.
Working Time law needs reform to end confusion
and over-regulation
35. The Commission briefly raises working
time as an issue in the Green Paper and asks what aspects of the
legislation should be tackled as a priority. The CBI believes
that, in the UK, overcautious interpretation combined with a fear
of infraction proceedings by the European Commission has led to
the excessive regulation that characterises the UK implementation
of the Directive.
Undeclared work must be combated—but EU
level intervention, other than assisting Member State co-ordination
is unlikely to be effective
36. The issue of enforcement of employment
rights, particularly around undeclared work, is also raised in
the Green Paper. The Commission believes that undeclared work—often
associated with cross-border labour movements—is responsible
for both the exploitation of workers and for distortions in competition.
It is important to note that undeclared work appears to primarily
be a problem for certain countries—primarily the new Member
States—with others, including the UK, having comparatively
few concerns.
37. The EU Social Partners have identified
undeclared work as an issue to be addressed as part of ensuring
a balance between flexibility and security in reforming labour
law in the work programme for 2006-08. The Commission suggests
that there should be more effective co-operation between different
government enforcement agencies.
38. However, effective enforcement of existing
European labour law as transposed into national legislation and
combating undeclared work lies first and foremost in the hands
of national authorities. The EU can play a useful role by organising
exchanges of experiences between national labour inspectorates
as is already done. Furthermore, technical assistance and co-operation
between Member States to help new Member States efforts to enforce
the EU legislation can also be useful.
March 2007
1 REC (2005) Satisfaction levels amongst temporary
agency workers. Back
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