Memorandum by Department of Trade and
15725/06Commission 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 Workprotecting
vulnerable workers; supporting good employers"
(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.
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
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 flexicuritya 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 objectivesjobs,
growth and social cohesion, not a specific model for all EU Member,
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
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
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
29 March 2007
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