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The second change that the regulations will make, on the treatment of tips, also has at its heart issues of fairness. Since the national minimum wage came into being in 1999, it has been legal for an employer to use tips, service charges, gratuities and cover charges to count towards payment of the minimum wage where they are paid to a worker through the employer's payroll. We have reviewed this position and have come to the conclusion that it is not right. The time is now right to ensure equity for all workers and create a level
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The third change that the regulations make is about ensuring consistent application of national minimum wage rules. It concerns the European Union's lifelong learning initiative, which supports member states' policies on employability, lifelong learning and social exclusion, and gives students the chance to gain work experience in other countries.
Work placements under one of the programmes under the lifelong learning umbrella, a scheme called Leonardo da Vinci, were specifically exempted from the national minimum wage in 2007. However, work placements carried out in the same way under two other programmes, Comenius and Erasmus, are not subject to the same exemption. Regulation 3 will ensure that work placements under both the Comenius and Erasmus programmes are exempt from the national minimum wage. We estimate that around 1,700 students a year are undertaking work placements under those programmes.
We should not stand by and let vulnerable or low-paid workers suffer particularly during this recession. At the same time, we have a duty to make sure that our regulations do not push struggling businesses over the edge. The measures contained in these regulations strike the right balance. For these reasons, I commend this instrument to the Committee. I beg to move.
Lord De Mauley: I thank the Minister for introducing the regulations, which, at least in respect of the annual uprating, we debate each year. Before dealing with the annual uprating, I should say that we on these Benches welcome the fact that, in the hospitality industry, no deduction for tips will be made for purposes of assessing whether the minimum wage has been met. The old practice seemed to us to be unfair.
On the annual uprating, is the Minister aware of reports that people are being asked in the Government's own jobcentres if they will accept wages below the national minimum wage? If such reports are true, do they not make a bit of a nonsense of the process, and are the Government taking any action on this?
Lastly, I would be interested to know what the Government would do if the Low Pay Commission-which has, after all, said that pressures on average earnings are on the downside and that forecast earnings in the fourth quarters of both 2009 and 2010 could prove optimistic-was in future to recommend a reduction in the minimum wage?
Lord Razzall: As the Minister will be aware, we on these Benches supported the introduction of the minimum wage and have been consistently supportive of the Government's decisions in the 10 years since the minimum wage was introduced.
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Two issues were discussed at length when these regulations were considered in another place. The first, obviously, is tipping. We certainly support both what the Government have done and what the noble Lord, Lord De Mauley, has indicated. Tipping vis-à-vis the minimum wage is not quite as straightforward an issue as it might seem on the surface because it has long been the practice in restaurants either to pool tips or to ensure that people who are not actually serving the meal receive a share of tips. People often say, "When we gave a tip in the restaurant we assumed that it would go to the waiter", and they sometimes ask the waiter whether he will receive the tip for the service. However, there are often perfectly legitimate reasons why the individual waiter or waitress has not received 100 per cent of the tip, because the chef and the maitre d' will receive a share, as will those who do the washing up. That is a perfectly legitimate practice. The regulations need to ensure that that practice is not discontinued as a result of the minimum wage deduction. But I am sure that it will not be, because properly run restaurants have been doing it for years while paying their staff properly.
The second issue which caused some debate in another place is the position that the Tory Party will take on the minimum wage should it get into government. The noble Lord, Lord De Mauley, may well indicate that that decision is slightly above his pay grade, or indeed his minimum wage grade; however, we on these Benches have watched with interest the change in the position that the Tory party has taken on this. It opposed the original Bill then, some years later, shifted its position when it was apparent that the minimum wage did not have the devastating effect on employers that the Tory Party had feared it might.
We on these Benches have always indicated that we support the minimum wage. That is particularly so when the Government have been taking into account the recommendations of the Low Pay Commission. It should not simply be a matter of a Minister saying, "We'll put it up by x". Were that to be the case, particularly bearing in mind the relationship between this Government and the trade union movement, there would always be a suspicion that objectivity was being lost. I know that the Minister himself cannot answer that, and the noble Lord, Lord De Mauley, has finished speaking in any event, but it would be interesting to know whether, were they to get into government, the Tories would support the continuation of the minimum wage, and whether they support the continuation of the Low Pay Commission.
Lord Young of Norwood Green: I am pleased to see that the noble Lord, Lord De Mauley, welcomes the introduction of the amendment on tips, gratuities and so on. As I said earlier, the Low Pay Commission has the balance right on annual uprating. On people being asked in jobcentres whether they will accept less than the minimum wage, we would be appalled if that were the case. We are not aware of it. If the noble Lord has details, we will certainly check the situation and write to him to clear that up, so that there is no dubiety.
It would certainly not be appropriate to speculate about what might be the reaction to the Low Pay Commission's recommendations in a hypothetical
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On pooling, we are taking forward proposals on transparency and providing clear information for consumers about tips. We are working with businesses in the tipping sector, as well as consumer and worker groups, to develop best-practice guidance for business and clearer information for consumers. We have no intention of getting involved in the process of the tipping business. As the noble Lord, Lord Razzall, reminded us, pooling has been going for a long time. As long as it is not included in any calculations for minimum wage, determining the way forward is best left to individual businesses. However, clarifying the situation is certainly a good idea-such as for tipping by credit card, which is not always the best way to do so.
On the Opposition's view of the minimum wage, I can only say that the dire predictions did not come about. They did not come about because we had a representative Low Pay Commission, excellently chaired by Sir George Bain, which took getting the right balance into account when the minimum wage was introduced. All my information was that if we got that right, it would have a positive effect. It did, and something like 2 million people benefited as a result. I think that I have answered all the questions.
ACAS Code of Practice on Time Off for Trade Union Duties and Activities
Considered in Grand Committee
4.42 pm
Moved by Lord Young of Norwood Green
That the Grand Committee do report to the House that it has considered the ACAS Code of Practice on Time Off for Trade Union Duties and Activities.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): I have pleasure in introducing the ACAS code of practice on time off for trade union duties and activities. Before this code can come into force, it needs the approval of both Houses. It provides practical advice and guidance on the operation of statutory rights to time off for trade union representatives and other union members.
The code covers entitlements for a range of trade union representatives including shop stewards, union learning reps and those union representatives who are consulted on a one-off basis when large-scale redundancies
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Much of the code has remained unchanged since it was first put in place 30 years ago, in April 1978. Since then, the world of work has changed significantly. New technology is widely available and has transformed the way we communicate. Working patterns are much more diverse, and the role of union representatives has progressed. During this period, the code has been revised as appropriate to keep up with changes to the law. However, there is now a good case for a more thorough revision.
In 2007, a large-scale review of the facilities and facility time of workplace representatives strongly supported the case for the revision of the ACAS code. As a consequence, my right honourable friend the Minister for Employment Relations wrote to the chair of ACAS asking his council to consider redrafting the code. ACAS is independent from the Government, and members of its council are drawn from leading figures in the employment relations field. The views of the council always carry great respect and draw on a range of sources.
4.45 pm
I would like to take this opportunity to thank ACAS and its council for their work in preparing the revised code for us to consider. ACAS released an initial draft of the code for consultation in December 2008 and responses from that have shaped the draft of the code we have today.
I now turn to the substance of the code. Within this draft, ACAS has made some significant changes to its guidance. However, the legal framework that the code refers to has remained much the same. Therefore, I will focus on the areas in which the code has been developed.
As I have already stated, this revision updates the guidance in relation to changes in the modern workplace. It provides more guidance than before on the confidential and sensitive nature of communications involving union representatives. That will help employers in reassuring their staff that their communications with union representatives are not being monitored, while ensuring workplace security. Trade union representatives often have tasks that are demanding, complex and require great knowledge of employment law and the way the workplace functions. The provision of training has developed greatly in recent times with the widespread use of e-learning tools. That, too, is reflected in the guidance.
There is considerably more guidance on union representatives being given access to facilities at the workplace. By facilities, I mean the provision of workplace services such as office equipment, meeting rooms and stationery. These facilities will assist in communication and research in line with union representatives' duties. It provides more information on the provision of cover for employees who take time off to perform trade union duties and activities. That is important at a time when there are increasing pressures in the workplace. Line managers are key to the smooth running and organisation of time off for representatives. It is for that reason the position of line managers is explored in more detail in this revision of the code.
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The chairman of ACAS has produced a revised code that offers balanced, sensible and practical advice on time off for trade union duties and activities. It will be positive for both employers and unions in successfully interpreting and applying the law in their industrial relations. I strongly commend the code to the Committee for approval.
Lord De Mauley: I thank the Minister for introducing the draft code of practice. As we debate it, we should bear in mind that it comes at a time of increasingly strained relations between some trade unions and employers. ACAS has a duty to provide practical guidance on the time off to be permitted by employers to trade union officials and members. It therefore produces this code of practice, which must be approved by Parliament.
While the general purpose of the code of practice is to aid and improve the effectiveness of relationships between employers and trade unions and offer guidance for employers, employees and trade unions, all of which is sensible, I would like to take this opportunity to ask the Minister a couple of questions. First, anyone who has read the newspapers knows that we face an economic crisis greater than anything in living memory. Honda workers have been on extended leave, many thousands of workers have been made redundant and the weekend press tells us, among other things, that BT is offering staff long holidays in return for a substantial wage reduction-yet here we are discussing leave for union representatives paid for by employers so that they can undertake union activities as if nothing has happened. Although I acknowledge the purpose of the code and our need to debate it, do the Government not understand that to the layman this sounds like fiddling while Rome burns?
My other question is more specific. In February, workers went on strike when Total employed an exclusively Italian and Portuguese workforce-not British workers but nevertheless all EU workers-to construct an extension at its Lindsey oil refinery. Sympathy strikes, which are currently illegal, sprang up quickly, and by 4 February, 22 other sites had been affected with an estimated 6,000 workers walking out. The dispute was settled in the end when Total offered 100 new jobs to be advertised by local contractors. I am not proposing a debate on whether Total or the union was in the right, but had a deal not been reached, which would have resulted in the Government being faced with a spate of illegal sympathy strikes, what would they have done? Perhaps I should ask what they will do when that happens.
Lord Razzall: We support these regulations. The noble Lord, Lord De Mauley, raises issues that I thought had long been resolved. It has long been accepted that engaging in trade union activities is an appropriate use of an employee's time. That is perfectly legitimate, and it is appropriate for an employer to allow an employee to have the time off for that. That principle is long established, and it certainly would not be fit to re-open it.
I make one point on the documentation in front of us. The Minister tried to indicate the significant changes from the previous code, but in future, when we have a
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Lord Young of Norwood Green: The noble Lord, Lord De Mauley, talks about the impact at a time of increasingly strained industrial relations. In the current economic crisis, it is interesting to see some of the deals that are being negotiated as collective bargaining agreements. They are difficult deals-significant time off work on reduced pay, holidays and so on-and yet unions involved in collective bargaining have negotiated those deals. ACAS is trying to ensure that the situation is clarified in relation to time off. I do not take the view, to use a colourful metaphor, that we are fiddling while Rome burns. I think we are making a positive contribution to the development of employee relations. If employers use it in that way, they will gain as much as employees in a collective bargaining situation.
On revising the code in the current economic climate, we are not imposing any additional regulation or burden on business. The revised code will help business as it is made more relevant to modern workplace conditions. Allowing workers to have more time off will certainly not damage business because the revised code does not change the statutory entitlement for time off for trade union duties. Instead, the code assists business by providing more guidance on how it can manage the process of time off to enable union representatives to perform their functions both as employees and as representatives efficiently. Where that works well, as I quoted in situations like Honda or BT, there is a win-win scenario. I welcome the support from the noble Lord, Lord Razzall. He made a valid point about the material differences, which we need to take into account for the future.
On the Government's approach to the Total dispute, I believe that the Gibson review is looking at the question of productivity and so on in those sorts of industries. I would not want to speculate on the future. The Government's role has been to try to ensure that the appropriate organisations-ACAS and so on-have been involved to ensure that we end these disputes as quickly as possible.
Companies (Share Capital and Acquisition by Company of its Own Shares) Regulations 2009
Copy of the Regulation
18th Report from the JCSI
Considered in Grand Committee
4.54 pm
Moved by Lord Young of Norwood Green
That the Grand Committee do report to the House that it has considered the Companies (Share Capital and Acquisition by Company of its Own Shares) Regulations 2009.
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): The draft statutory instruments that we are to debate this afternoon are an important part of our implementation of the Companies Act 2006. The Act reformed and clarified company law in many areas and brought company legislation together in one place. The Act makes it easier to set up businesses, gives investors greater information and confidence, and promotes shareholder engagement and effective dialogue between business and investors. The Act has been implemented in stages, and these statutory instruments relate to provisions which are due to come into force in October 2009. This staged approach gave companies time to prepare, allowed us to implement changes in parallel with EU requirements and allowed Companies House to update its systems to support the new measures.
The Companies (Share Capital and Acquisition by Company of its Own Shares) Regulations 2009 are the first of these regulations to be debated. These regulations amend three aspects of the Companies Act 2006 and they will be commenced on 1 October 2009. The first is to reduce from 21 to 14 days the minimum period of notice that a company can give its shareholders when it makes a rights issue. This change is being introduced in response to concerns that the time taken to raise capital by selling new shares could expose companies to market abuse and volatility. Fourteen days is the shortest minimum period allowed by the second company law directive.
The second of the three changes is a minor change in the rights of creditors of a company when the company reduces its capital by applying to the court. The regulations will change the Companies Act 2006 so that it is explicit that a creditor who wants to object to the reduction will have to demonstrate that the reduction would create a real likelihood of his or her not being paid. This simply brings the 2006 Act into line with a corresponding change already made to the Companies Act 1985 last year.
The third aspect of company law addressed by these regulations is the rules on the purchase by a company of its own shares, where there are two changes. The regulations will remove the current 10 per cent cap on a company holding its own shares, and they will extend the maximum period for which authorisation can be given for the company to purchase its own shares from 18 months to five years. Until 2003, when a company purchased its own shares, it had to cancel them. In 2003, the law was amended to allow a company to hold its own shares in treasury up to a maximum of 10 per cent of its share capital, in line with the maximum permitted by the second company law directive. That directive has now been amended to remove that limit, and these regulations would remove the limit from UK law, increasing the flexibility for companies to hold their own shares. The only significant dissent from these proposals when we last consulted was to this removal of the 10 per cent cap. One respondent argued that there was no evidence that any company needed this extra flexibility, and that there might be some risk of abuse. Other respondents supported the relaxation.
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We considered the objection carefully. Shareholders have a number of other protections in this area; their approval is needed for any purchase of own shares, and they have pre-emption rights when treasury shares are resold. Taking these into account, we decided that it made sense to give companies more flexibility by removing the arbitrary 10 per cent limit. No concerns were raised in respect of the other change in relation to purchase of own shares-the extension of the period for which authorisation can be given.
In conclusion, I should make it clear that the amendments made by these draft regulations are minor adjustments to the rules on capital and shares but, at the margin, they will provide companies with some additional flexibility to manage their capital, without removing any necessary protection for creditors or shareholders. I beg to move.
5 pm
Lord De Mauley: I thank the Minister for introducing the regulations, which seem to contain rather a jumble of consequential changes in the law with regard to company shares and their creditors. I defer to the noble Lord, Lord Razzall, who is the only noble Lord present who was fully involved in debates on the Bill and who may be able to shed some more light on this. However, I shall make a few observations and ask a few questions.
These are subjects with which I have some rather dated familiarity. I am a chartered accountant and, among other things, I practised in the insolvency area in the late 1970s and early 1980s and, subsequently, through the 1980s and 1990s I advised companies as an investment banker in, among other things, raising money in rights issues.
So, first, as regards the reduction in the minimum period during which a rights issue may be left open, am I right in thinking that this does not affect the maximum period for which it may be left open? I do not think that there is a maximum period. Assuming that that is correct, and although I do not particularly object to what is being done here, I think that the Government's complaint seems to have been directed primarily at the longer rights issues, such as those of HBOS and Bradford & Bingley. I cannot quite see how this move will improve things, and I suspect that this whole area is a bit more complicated than the Government think it is, but I very much look forward to hearing what the Minister has to say about it and indeed to seeing what difference it makes in practice.
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