Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 80 - 100)



  Q80  Lord Trefgarne: You have made much in some of the documents that we have seen and elsewhere of what is described as the "gold-plating" of EU regulations when transposed into British legislation. Can you give us some additional examples of that and also perhaps explain how they have thus damaged the small business sector? Is the problem similar in other Member States?

  Mr Tyrrell: I can attempt to give some examples. Last year, in 2006, we produced a book, Burdened by Brussels or the UK together with the Foreign Policy Centre, a study of "gold-plating" which we can provide to members if they wish. One of these eight studies deals with part-time workers and that is the first one here. It is rather a complex thing to try to put across in a meeting of this nature. If I might deal with it in a nutshell and not do justice to exactly what happened, the Part-Time Workers Directive, as passed by the European Union, provided—

  Q81  Lord Trefgarne: Is this the Working Time Directive?

  Mr Tyrrell: No; part-time working which came out of the Social Dialogue. It provided that part-time workers should be treated not less favourably than other workers employed by the same employer under the same contract. The UK Government transposed that in regulation from "under the same contract" into "any contract", so that means that a part-time worker who is there on a fixed-term basis, maybe because they are standing in for someone on maternity leave, would be able to claim compensation on the same basis as a permanent worker in the firm and that enlarged the scope of the directive very considerably and has made it quite difficult for small businesses to take on part-timers safely, indeed it has given rise to quite a lot of difficulty. Then the other extension in that particular directive was that whereas the directive provided that Member States need not apply this directive to casual workers, the UK has applied it to casual workers. There are two other topical ones. The Age Discrimination Directive which came into effect in 2006 dealt with the vexed question, the complicated question of retirement age and retained the Commission's directive position that it is open to Member States to have a default retirement age which has been fixed in this country at the age of 65. However, the UK imported something that is not in the directive at all, "a duty to consider". In order to retire an employee at the age of 65 a procedure has to be gone through. A letter has to be written to the employee no more than 12 and no less than six months in advance stating the proposal to retire and then there is a procedure for listening to an application not to and an appeal procedure and so on. This "duty to consider" is an entire gold plate. Other Member States do not have it to the best of our knowledge and it means that retirement has become quite a major problem for this reason, that if you retire someone without going through the procedure to the letter, the six months, 12 months to the letter, the dismissal is automatically unfair, which can be a very expensive business for a small business employer. That is a second example. May I just comment on the side that retirement is not a problem in small business? 80 per cent in the August survey to which Lucie already referred did not, before the regulation, have a retirement policy because it was all done by agreement; every individual was looked at separately. If it was somebody whose job was foreman of a building company and the owner thought that he was really no longer fit to go up ladders on account of his age and general health, he could deal with the matter on a basis that did not take account of any particular age. Lots of small business employees went on working into their 70s quite happily in the past. So that is the gold-plating part of it. I alluded to the third one already. The Working Time Directive provided that there should be 20 days' minimum holiday a year and commensurate for part-time employees. Those 20 days were translated from the directive into UK law under the working time regulations of 1997 and 1998 and there they have stood until now when they are being amended to grant an extra eight days leave putting up the 20 days to 28 days. That is gold-plating. I am not suggesting it is surreptitious gold-plating, indeed it was in the Labour Party manifesto at the last election. It is not surreptitious, but gold-plating it is and they increased from 20 to 28 and most other countries probably did not; certainly our competitors in Asia did not. There is a great sense of grievance about this because the costs are going to be quite inordinate to allow a small firm to take on temporary staff to enable employees to have an extra eight days. I may say that it applies to 37 per cent of our members, as the others give over 20 days anyway voluntarily, but for those 37 per cent it might be a make or break matter.

  Q82  Baroness Morgan of Huyton: Turning your argument the other way up, is there a set of basic labour laws to which your members subscribe or are you basically against all forms of labour law and protection for workers?

  Mr Tyrrell: No, we are not against all forms. We have been supportive of the national minimum wage for some years. We have a lot of criticisms of it but we support the principle. We support unfair dismissal and we have always supported redundancy.

  Q83  Baroness Morgan of Huyton: But issues relating to maternity, flexible working, all of those you are opposed to, are you?

  Mr Tyrrell: We are saying that small businesses should be separately treated in respect of those.

  Q84  Chairman: Do you have a list or a paper which explains the difference between the two categories which have emerged as a result of Baroness Morgan of Huyton's question? It is difficult for us, who are not small business employers, at least I am not a small business employer, to grasp where the line is, the line that you draw between what is acceptable and what is not acceptable. I do not want to put words in your mouth; I am talking off the cuff. Do you have anywhere where that is available to us in some broader form as it were, a paper which has been written or something of that sort?

  Mr Tyrrell: No, we do not have that.

  Q85  Chairman: An indication?

  Mr Tyrrell: We could locate areas where we have asked for small business exemptions or special treatment, but we do not have a paper that sets it out en bloc.

  Chairman: If you could do that without causing you too much trouble, then that would help the Committee to understand the problems that you are delineating.

  Q86  Lord Trefgarne: May I just ask two supplementaries that flow from that? Firstly, where a regulation is introduced by the Government implementing an EU directive but going much further and is nonetheless made under the European Union Act which provides for Orders in Council to have a swift passage, if that Order is actually going much further than the regulation requires, I suppose it is for consideration as to whether it should be introduced under that Act and therefore enjoying a swift passage to the statute book because there is of course a difference in procedure. If you are not implementing something under the EU Act, there is a 40-day process and all sorts of things you can do to query it. Have you considered briefing parliamentarians in that way? Or maybe I am wrong, maybe even if it is a gold-plating regulation, it still enjoys the privileges of the EU Act?

  Mr Tyrrell: To the best of my knowledge, we have not; certainly not on employment law matters while I have been chairman we have not.

  Q87  Lord Trefgarne: May I ask you to consider that and perhaps you would like to let us have a note.

  Mr Tyrrell: Thank you very much. This is education not by me but to me.

  Q88  Lord Trefgarne: One of the ways of actually meeting the difficulties, and I very much agree with what Baroness Morgan of Huyton was saying, that we have to make sure that we are not portrayed as opposing everything to do with EU regulation as it applies to employment, but nonetheless, it is very burdensome and vexatious for the very smallest businesses which you represent and therefore perhaps we should be arguing for a larger sized company to be exempt from some of these, not all, but some of these regulations. A company which appoints three or four people is surely going to be extremely burdened by, say, having to provide extensive maternity leave for an employee? Have you thought of arguing for a higher level of exemption for the very smallest companies?

  Mr Tyrrell: Yes, we have thought of it. We have not conducted a campaign about it.

  Q89  Lord Trefgarne: It might be worth it.

  Mr Tyrrell: Yes, it might.

  Q90  Baroness Howarth of Breckland: If you are a charity, if you are under a certain level, you are exempted from certain areas of the Charity Commission's hard work so it is quite useful to think about those sorts of structures. I really want to go on to talk about employment security and this curious "flexicurity' word which has been developed, but one of the things that the Green Paper talks about is outsiders and insiders and they describe the insiders as those people who have a good job and it is full time or part time but regular and on the full payroll and others who go in and out of bits of employment. The evidence we have had so far from other witnesses is that that is not really the distinction. The distinction is between those who are employed—and some people would wish to be employed in short bursts for their own requirements—and those people who are unemployed and would like to be employed but just are not employed. I wondered what in your view the best way would be in the small business sector for this area of labour market disadvantage to be addressed. What we have heard is that what are really needed are skills; that is what enables people to get into what we would see as the insider role, being able to get a job as and when they want it. To what extent do small businesses have the capacity to help people to gain skills for the 21st century and what could enhance their future security in employment in the way we have described it just now?

  Mr Tyrrell: As far as skills are concerned, we do regard it as the duty of the Government to make sure that everyone can read and write and we do not think we can do very much for those who cannot. Once they can, of course, the world is at their feet if they want it to be and if they have the ability to make use of it. There was quite a dramatic debate at our annual conference last year. A motion selected by ballot from the floor for a debate dealt with the whole problem of skills and there was a great deal of criticism of the lack of available courses. Small business owners are willing to allow time off for workers to go on day release or even a two- or three-week full-time course, but there just are not any courses available and that problem is being addressed by our Skills Committee which is trying to put forward some kind of proposals that would cover it. Small businesses cover such an enormous range of activities themselves that it is very difficult to put forward a comprehensive strategy. That is being tackled by us in certain areas.

  Q91  Baroness Howarth of Breckland: Do you see your position as lobbying the Government and other organisations to provide courses? Will your Skills Committee define some of the areas in which courses should be provided?

  Mr Tyrrell: That is the idea, but it will be on a sector-by-sector basis and not on a comprehensive, across-the-board basis.

  Q92  Baroness Howarth of Breckland: I know this can work because I have worked in the Food Standards Agency where the Food Standards Agency provided funding for small businesses in the catering industry to be able to develop their skills in hygiene but that was partly because the industry pressed clearly for the kind of skills that were needed; that might be quite helpful.

  Mr Tyrrell: Yes, it might. I have not heard of that one myself.

  Q93  Baroness Greengross: We know that there are more and more calls on temporary staff working really through agencies and you will know that there was a proposal some time ago by the Commission for an EU directive on minimum standards for temporary agency workers. I just wondered whether you had a position on who should be considered the legal employer of such workers. Would it be the agency, would it be the business, would it be one of your members? Do you use a lot of agency workers?

  Mr Tyrrell: We do, yes, but the majority of agency workers are self-employed. They are self-employed by choice. They work under contracts for services not contracts of service. They might have their name down with a number of different agencies and go from one to another, depending on who is offering the most profitable or interesting work and most temporary workers are temporary workers because they want to be and they prize that position of being able to take a week off whenever they like really.

  Q94  Baroness Greengross: If that went on, would that mean that if there was an EU directive, they would not be subject to it if they were self-employed?

  Mr Tyrrell: They would not be covered by EU employment law, no, but they would be covered by English temporary workers' legislation which provides for quite a wide raft of rights, about 11 different rights, tailored simply to temporary workers who are self-employed temporary workers; one group of self-employed who get very real protection from Parliament. As far as Europe is concerned, the temporary workers directive was thrown out by the European Parliament in the last European Parliament before the elections. The central provision of that was that they were to be comparable in pay and conditions with permanent employees and that provision was excised from the directive by the European Parliament. We saw the person working for the Commission, the civil servant responsible for that, soon afterwards and her view was that the whole thing was dead and that was also the view of the President of the European Union Commission, President Barroso, who announced a list of 80 proposals for legislation that were being withdrawn and this was one of them. So I was a bit surprised to see it rear its head again in the Green Paper, but we certainly want the status of self-employment to be enhanced and reinforced rather than reduced. The course we would prefer to take is the one in fact the United Kingdom started to take way back in 1973, but it has been developed a lot since then, in providing various rights for temporary workers. The last big amendment was in 1996 and that seems to have settled down now pretty happily; both the agencies and the workers seem to be satisfied with it. That is the route that the Commission ought to be following, if any.

  Q95  Chairman: Can you just clarify? Are you saying that in the sort of companies which your organisation represents the temporary employees may well be self-employed? Is that a distinction between those who are self-employed and those who are employed by the agency which supplies the temporary employee?

  Mr Tyrrell: Yes. The large majority of temporary workers are people like actors who have their names down with a number of agencies, nurses also usually have their names down with different agencies and that condition can continue. As far as our members are concerned, yes, we are quite big users of temporary workers, we have to be and it is getting worse in the sense that maternity leave means that the demand for temporary workers is increasing, and holiday leave is going to do the same to it. The quid pro quo is that all these rights that temporary workers have been given by Parliament against the agencies with whom they work mean that the agencies are carrying quite heavy financial responsibilities now for the temporary workers and that means that their prices have gone up and temporary workers are in danger of being priced out of the market.

  Q96  Baroness Morgan of Huyton: Obviously we are all aware of the number of workers coming in as a result of EU accession and what we are interested in is what the impact has been of that movement on small businesses, if any, and whether it has been a positive or a negative. Related to that, are there any advantages or disadvantages that your members would see in introducing a level of EU legislation that was about uniformity of employment rights? Would that be a positive or a negative again in terms of your members?

  Mr Tyrrell: I do not think uniformity of rights is practical irrespective of whether it is desirable or not. We are not a political organisation so I would not move into that area. The divergence of the economies is so great that one simply cannot say the terms and conditions of employment of one Member State must be the same as another. This is particularly poignant in the case of the new Eastern European countries who have recently joined, where they think nothing of working 12 hours a day for only half what they would get in France or Germany. We would discount that.

  Q97  Baroness Morgan of Huyton: I was not thinking so much about terms and conditions: I was thinking about employment rights. Obviously we are not suggesting for a minute that terms and conditions as such could be negotiated across the EU, but in terms of the sort of directives that have been coming through which are applicable across the EU, what is the impact of those sorts of directives as far as you can see in terms of workers from the accession countries?

  Mr Tyrrell: We have not had any particular problems arising out of that at all. I think 84 per cent have not employed anybody from outside the European Union, so we are not really involved in that. What we are going to be very much involved in are the new migrant regulations which are at present under preparation, which is going to impose heavy burdens on employers to check that someone who they take on has the right to work. That is causing many problems because there is no simple way of finding out.

  Q98  Chairman: I am reluctant to keep us here any longer. The last question on the legal status of employees and self-employed people is potentially quite complicated. I wonder whether you would be so good as to send us a written answer to that question.

  Mr Tyrrell: Yes.

  Q99  Earl of Dundee: The UK is recognised in Europe for fair mindedness in its approach towards labour law. Yet the UK may still not be thought to show best practice. Which other countries are?

  Mr Tyrrell: Each country has its own mixture of strengths and weaknesses.

  Q100  Earl of Dundee: Lord Wade of Chorlton referred to the productivity test. The absence of red tape is another one. Both reflect good practice and attitudes towards small businesses in certain countries. Which European states may then be better than us at minimising red tape and encouraging productivity as far as small businesses are concerned?

  Mr Tyrrell: I am afraid I just cannot answer that, because each country has its strengths and its weaknesses. The Germans and French have an admirable system of protection for workers but it has made them particularly inflexible. The Danes and the Swedes have a high quality, but on the other hand they have heavy taxes. It is not easy to answer that question. We firmly believe that each Member State should look after its own in this respect and the role of the Commission should be to deal with the cross-border aspects of it, having workers employed in one country but actually working in another. That is where the Commission law should come in, to deal with that situation, not to impose what the substantive law is, but to say which law it is that should be applied.

  Chairman: That in itself raises another series of discussions which I have had in other parts of the Select Committee business which I have been working on. Thank you very much for coming to us today. We have had a very interesting session and if you could write us an answer to that last question and, as I said before, if there is anything you feel you did not get across properly or something that you would have liked to have said and did not, we are very happy to get supplementary evidence from those witnesses who have come before us. Thank you once again for being with us and I hope you have also found it an interesting occasion.

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