Select Committee on European Union Minutes of Evidence


Memorandum by Department of Trade and Industry (DTI)

  15725/06—Commission Green Paper: Modernising Labour law to meet the challenges of the 21st century.

  Further to my letter of 13 March, I am enclosing written evidence for Sub-Committee G's Inquiry into the Green Paper on Labour Law. We have addressed the Sub-Committee's questions directly and the core of our response is based on our formal response to the EU Commission consultation, which I also enclose for information.

Q1.  Flexibility of the labour market

  1.  The UK labour market is characterised by diversity and flexibility with one of the widest range and types of job and ways of working available in the world. This means workers and employers have more choice over the type of employment that suits them.

  2.  General indicators such as the OECD's Employment Protection Legislation (EPL) index show the UK with the least strict EPL across Europe. The European Commission's Employment in Europe 2006 notes that stricter EPL may harm in particular the employment prospects of weak groups.

  3.  But as this Government has shown, flexible labour markets are compatible with social justice and worker rights. We have demonstrated that we can lead the way in providing a framework of rights without overburdening business by applying better regulation principles by using first class and innovative methods of consultation, making effective use of alternatives to regulation (including better guidance, advice and support), pioneering common commencement dates and showing they can work and, when we make changes to the law, balancing, rights and responsibilities.

  4.  In terms of making the UK labour market more, flexible, our policy document "Success at Work—protecting vulnerable workers; supporting good employers"[1] (March 2006) set out a programme to help good employers comply with the law through simpler regulation and improved guidance. We will seek to target our enforcement efforts on the minority of businesses that flout the law.

  5.  For example, the DTI has just launched a consultation on resolving disputes in the workplace[2]. This consultation sets out a package of measures for taking forward the recommendations of the Gibbons review of employment dispute resolution in Great Britain. It seeks views on a package of measures to help solve employment disputes successfully in the workplace so that productivity is raised through improved workplace relations, access to justice is ensured for employees and employers, the cost of resolving disputes is reduced for all parties and disputes are resolved swiftly before they escalate.

Q2.  Employment security

  6.  The UK has a high employment rate of just under 75 per cent, which indicates a strong, healthy labour market and also a low unemployment rate of 5.5 per cent. For 77 per cent of UK unemployed, unemployment is short-term, compared to an EU average of 54 per cent. Only around 11 per cent of UK unemployed would be categorised as very long term unemployed (have been out of work for at least 2 years) compared with 25 per cent in EU25.

  7.  And UK workers feel secure in their jobs; the UK has the second lowest rate in the European for the fear of losing a job in the next six Months (see the European Foundation for the Improvement of Living and Working Conditions: Fourth European Working Conditions Survey 2007). httpJ/www.dti.gov.uk/employment/employment legislation/success-at work/index.html 2 http://www.dti.gov.ulc/consaltations/page38508.html

  8.  Labour law is just one part of a package that includes a range of other measures to encourage and enable people to come into and remain in the workplace. Equipping people to manage and take advantage of change, rather than seek to protect specific sectors or jobs is the best way to manage the uncertainties and opportunities of globalization.

Q3.  The concept of "Flexicurity"

  9.  Europe needs to address its history of poor labour market performance if it is to meet the overall Lisbon employment target of 70 per cent by 2010, maximise the benefits of globalization, and face demographic change. Flexibility is necessary both to achieve our goals, and to achieve modern security: combating social exclusion and giving people security in transitions and employment opportunity, while encouraging labour participation. As such, it is right and welcome that within Europe we examine the relationship between flexibility and security and share experiences of different national approaches.

  10.  For Europe we need a broad interpretation of flexicurity—a framework where flexibility and security are mutually reinforcing, rather than in competition with one another, or balancing each other out. In the right environment, a policy normally associated with security, like providing childcare, also increases flexibility by allowing more people to work. Policies traditionally associated with flexibility, like reform of employment protection legislation and allowing businesses to adjust, also increase security by enabling job creation and preventing two-tier labour markets. Flexicurity offers an approach to our common objectives—jobs, growth and social cohesion, not a specific model for all EU Member, States.

  11.  Having a framework of light touch labour law providing reasonable rights for workers whilst allowing business to make necessary adjustments is just one part of a package that includes a range of other measures to encourage and enable people to come into and remain in the workplace. In the UK we also have in place a comprehensive set of active labour market policies which help people to make transitions in the labour market. Our focus is on helping individuals who find themselves out of work back into the labour market as quickly as possible.

Q4.  Other labour market challenges

  12.  Worklessness remains the key social challenge in Europe with around 18 million unemployed and over 90 million economically inactive. Labour market performance must be addressed if we are to achieve the overall Lisbon employment target of 70 per cent by 2010.  Changing demography means broadening labour market participation must be a priority if we are to meet the competitive challenge and are to continue to afford the social protections we value.

  13.  So, labour law must be consistent with job growth and encouraging more people to come into and stay in the workplace. To do this, flexibility is essential. Businesses need the flexibility to create jobs and people need flexibility to work in ways that balance their work and family life. In the UK, we have more people in work than ever before and the highest employment rate in the G8. Significant progress has also been made in increasing labour market participation. For example, there are more women in work than ever before.

  14.  Even well functioning labour markets have groups of workers that may be vulnerable in some circumstances. The root cause of vulnerability is very often lack of skills. Basic skills (including language skills) are, more important that ever for entering the labour market. Vulnerability can also result from abuse of existing systems, not because of lack of rights but because rights are denied. In these circumstances it is necessary to address lack of awareness or abuse in the specific circumstances in which it occurs.

  15.  The Government is tackling vulnerability through a range of measures detailed in Success At Work, which committed us to protecting vulnerable workers, cracking down on rogue employers and lightening the compliance burden for legitimate business. For example, the DTI is funding two pilots to support vulnerable workers and help their employers to comply with employment rights legislation.

  16.  In July 2002 the Government published a consultation on the issue of the differing rights and responsibilities in employment law of "employees" and "workers". This considered the current framework and coverage of employment rights to see if they were still appropriate and fair and supported our aim of high participation in work. Our response was published in Success At Work. Having reviewed the evidence provided in responses to the consultation and taken account of action already undertaken since 1997, we believe that changes to the legal framework would not prevent instances of abuse or lack of awareness. It could however damage labour market flexibility and result in a reduction in overall employment.

  17.  We have concluded that the present legal framework reflects the wide diversity of working arrangements and the different levels of responsibility and rights in different employment relationships. We believe that it meets the labour market's current needs and there is no need for further legislation in this area. We will help people understand the current framework better, and the rights to which they are entitled, whether that be employee, worker or self-employed and how to enforce those rights. We will improve the guidance available.

Q5.  Groups covered by labour law

  18.  The scope of labour law is a matter for each Member State to determine. A key aspect of the UK labour law framework is that not just employees but other workers, including agency workers, are entitled to certain rights regardless of their employment status. This is not the case in all Member States. In the UK workers (as well as employees) have rights associated with equality of opportunity (non-discrimination), a national minimum wage, health and safety in the workplace, working time entitlements such as paid annual leave, daily and weekly rest breaks, protections against unlawful deductions from wages and the right to be a member of a trade union. Also, workers and others on atypical contracts in the UK are not denied access to social benefits such as those provides through the health service or National Insurance. In some other Member States we understand, this may not always the case. The onus is on Member States to identify where there is need for reform in their social systems.

  19.  However providing for variation in the balance of other rights and responsibilities in the work contract for workers that are not employees provides the benefit of diversity for both business and workers. For example, we have a thriving agency and temporary work sector that is a key part of our economy and in which many choose to work for positive reasons. But this is not at the expense of permanent jobs, which are increasing in number (and accounts for 94 per cent of the workforce). The Government believes that our present legal framework reflects the wide diversity of working arrangements and the different levels of responsibility and associated rights in different employment relationships.

Q6.  Role of EU Regulation

  20.  We have already agreed, or have under consideration, some EU-wide minimum standards that form a common denominator on which all Member States can build on in the way that is best suited to their circumstances. While respecting national traditions and practices, we need to ensure that where common standards are agreed these can be applied fairly across the EU.

  21.  As the Green Paper notes, "It has to be recalled that national traditions are very different when it comes to the formulation and. implementation of labour law and policy." The Government sees little appetite for further significant new EU legislative initiatives at this time. Where the EU can add value is by providing opportunities for identifying and sharing good practice, data gathering, analysis and as appropriate providing guidance on aspects of policy making, better regulation practice and on enforcement.

  22.  The UK experience is that providing a package or framework of certain rights for workers and employees is an essential component of a flexible and fair labour market. However, it is a matter for individual Member States as to what the "floor of rights" should be to reflect national circumstances. In the UK, all workers, not just employees, are entitled to certain rights including those associated with equality of opportunity (non-discrimination), a national minimum wage, health and safety in the workplace, working time entitlements such as paid annual leave, daily and weekly rest breaks, protections against unlawful deductions from wages and the right to be a member of a trade union. Also, workers and others on atypical contracts in the UK are not denied access to social benefits such as those available through the health service or national insurance. We understand that in some other Member States, this may not always be the case. The onus is on Member States to identify where there is need for reform in their social systems.

  23.  We do not believe that it is either necessary or practical for there to be a more convergent definition of "worker" in EU Directives. It should be for Member States to guarantee workers certain minimum rights and protections within their territory whether locally employed or working across borders.

29 March 2007




1   http://www.dti.gov.uk/employment-legislation/success-at-work/index.html Back

2   http://www.dti.gov.uk/consultations/page38508.html Back


 
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