It is a pleasure to be here with you this afternoon and I thank Adrian Marlowe for giving me the opportunity to present the Conservative’s views on the Agency Workers Directive and the Working Time Directive.

 

In our recent manifesto for the European Parliamentary Elections we made it clear that we have “fought to protect the opt-out from the Working Time Directive and against the Agency Workers Directive – both of which would cost jobs and hit small firms hardest”[1].

 

As we continue through this period of economic instability, we believe that preserving the flexibility of our labour market is vital to our economy. Making sure that businesses are given the opportunity to organise their workforces in a flexible way will be the cornerstone of any economically sound employment legislation.

 

In the recent past, what we have seen from this Labour Government is a significant upsurge in employment laws and a subsequent over-regulation of the labour market. Since 1997, the Government have introduced approximately 20 Acts and 300, statutory instruments directly dealing with employment. This legislation has often left employers bemused, baffled and bewildered. It has had a profoundly negative impact on UK companies. Indeed, the British Chamber of Commerce (BCC) estimates that Government regulation has cost British business in excess of £76 billion since 1998.[2]It is an example such as this that highlights how we believe the Labour Government has continually damaged the UK’s labour market.

 

We, the Conservatives, believe that at a time when our economy is weakening and the likelihood of unemployment grows stronger, we should not be further reducing flexibility in the labour market.

 

And this is a time of significant labour market upheaval. A new survey of key workplace trends by the CBI and leading recruitment experts Harvey Nash showed almost two thirds of employers have made or are considering making significant changes to the way they organise their workforce and working patterns[3]. More flexible working hours, extended shut-downs, extra holiday and cuts in paid overtime have all become commonplace as the recession has deepened and firms have become determined to cut costs.

 

Lord Mandelson, to his credit, has spoken about lifting the regulatory burdens, however, the reality remains that Labour continue to burden businesses with their legislative overkill. 

 

However, with a Labour Party increasingly vulnerable and reliant on Union funding (which provides up to 90% of Labour’s Party donations) they are still proposing to immediately institute such changes as increased rights for temporary and agency workers as seen in the Temporary and Agency Workers Directive and improve the right to request time off for training.

 

But tone can also be as important as policy. In that regard, just listen to the new class war rhetoric of Harriet Harman at the TUC conference in September of last year, announcing plans for a National Inequality Panel to study social inequality. And now in her Equality Bill we see that she wishes to introduce gender pay audits, which will

be expensive, time consuming and bureaucratic.  There are certainly mixed messages coming from the Government. On this topic our view on pay audits is that they should only be used for those employers who have been found guilty of discrimination at tribunal.

 

What we have been seeing is that, when the Unions say ‘jump’, many Labour MPs say ‘how high?’ Recently we have seen Labour backbenchers, acting as stalking horses to put forward union drafted Private Members Bills, (PMB), such as those dealing with agency workers and last year extending TUPE to share sales. The offering this year is the Statutory Redundancy Pay (Amendment) Bill PMB which aims to link the weekly statutory cap on redundancy payments to average weekly earnings, which could have the effect of raising the cap from £350 to approximately £470, exerting even more pressure on small businesses. In this case, both the Minister Pat McFadden and I spoke against the Bill but were outvoted by 87 Labour MP’s who turned out at the behest of their union sponsors on what is a normally an empty Friday chamber. Despite the Government opposing this Bill, they have just made a significant concession to the unions by passing an early uplift of the figure to £380[4]. This, by the way, was the second increase this year.

  

In this way Labour backbenchers are exerting pressure on the Government in order to uphold promises made in the Warwick Agreement at the time of the last election.

 

Precisely the same tactics were also used to promote the union drafted Temporary and Agency Workers PMB. In that case the Labour backbenchers in committee rebelled against the Government and defeated the Government timetabling motion; this meant that the unions were able to continue destabilising the Governments’ position throughout the key stages of their Brussels negotiations on the directive.

 

This process is now ongoing with the secretive Warwick II discussions held last summer where the Unions have presented yet more demands on the Government including, we understand from the press, a rejection of using private companies in the public sector and a return to secondary picketing. 

 

Last May, after six years of opposition to the plans, the Government agreed to bring forward legislation to give Temporary and Agency Workers equal rights in relation to pay and some other conditions, after just 12 weeks of work. As much as we opposed the deal itself, we were also shocked by the underhand 1970’s style “beer and sandwiches” negotiations used by the Government, the CBI and the unions to secure it. Apart from the CBI, no other business organisation, let alone Parliament, was consulted before the deal was entered into. The Conservatives remain opposed to this deal and the proposed law. A recent survey by the Recruitment and Employment Confederation showed that 49% of recruiters thought that the additional bureaucracy would drive an uplift in costs and a further 19% see the threat of increased employment tribunals as a major cause of increased costs for agencies and employees[5].

 

The view of the Conservatives is that this concession will be extremely costly and burdensome for businesses, and that it will be detrimental to those which it has been (misguidedly) designed to help. Many employees resent the concept that a temp should receive equality of pay or occupational benefits, effectively ignoring the loyalty of the full timer.

 

Furthermore, statistics show that most temporary workers choose to be so (and are often better paid) and do not want to be treated like permanent employees. Indeed, I have been shown a private survey, commissioned by the TUC, which shows that only 29% of temps want to be permanent workers. Only the Unions seem to want it – I wonder why?

 

It will always be important that we look to achieve an effective balance between protecting employees and providing employment. However, working flexibility should not be confused with poor terms of employment - and so there is no reason why the UK’s labour market flexibility should not be effective for both businesses and workers. Agency work is certainly a key part of this flexibility.

 

Contracts with temporary workers are formed under specific circumstances and for specific reasons. Agency work allows businesses to meet peaks in demand and cover for staff on long-term absences, particularly through maternity leave, for example. The Government has in fact increased the need for agency temporary workers through the expansion of paid maternity leave to 12 months in two phases from 2007. On the twelfth of March of this year, Lord Mandelson announced that he was delaying the second phase of this expansion as it was not yet appropriate due to the current economic situation. Nevertheless, with the first phase complete, many companies believe that this has led to a greater number of women taking a longer period of maternity leave and it is important that firms retain the ability to find cover from agency workers during these periods.

 

Agency temporary workers frequently benefit from the opportunity to work on a flexible basis around other commitments, such as students during vacation or those with caring responsibilities. Others choose to temp on a long term basis in order to benefit from the freedom and flexibility. It is also easy to assume that we are talking about the low paid here. This would be incorrect as temporary workers, particularly those with skills, are often paid higher than full time equivalents. Industry survey results provided by the CBI show that 52% of agency workers choose temping for positive reasons such as increased flexibility, better pay or to gain valuable work experience and 20% use temporary work as a route into a permanent job. Figures provided by the Recruitment and Employment Confederation show that in 2006 77% of temporary workers were satisfied with their assignments.

 

Agency work does indeed form a valuable avenue back into work for groups such as the young and the long term unemployed. Many businesses are prepared to take on inexperienced staff, who may have had gaps in their careers, as an agency temp, but would not employ them directly. The Recruitment and Employment Confederation has conducted research that highlights that only 14% of employers said that they would take on a permanent member of staff if an agency worker was not available. This Bill could lead to an increased administrative burden on businesses wanting to take on temporary workers which might lead to them being forced to stop using them altogether. This would create a negative impact on both businesses and employees who rely on temporary work. What the unions call better job security could actually mean more British jobs going to East Asia.

 

The scare stories sometimes put out against temporary workers are often inaccurate. Temporary workers and agency workers already enjoy many of the same rights as permanent employees. They are entitled to four weeks paid holiday, rest breaks, the national minimum wage, statutory maternity and paternity pay, and statutory sick pay if they have worked for the same agency for three months. Agency and temporary workers are also covered by the working time regulations and all strands of equality legislation; in fact, the only rights that they do not enjoy are those on which the flexibility of the agency model depends. 

 

We have made calls for tougher sanctions for those who attempt to exploit workers and we fully support moves made through the Ministerial Vulnerable Workers Group Forum to tackle the issues of non-compliance and to improve enforcement of the existing legislation. We therefore echo the CBI’s support for the additional staff and resources that have been provided for the Employment Agency Standards Inspectorate to ensure agencies are compliant.

 

Temporary work is viable because it is a fast and dynamic industry. Workers can be placed in work in a matter of hours and employers can call on temporary workers to cover sickness or peaks in demand at short notice. Most businesses supplied by agencies do not have a pay scale within which it would be easy to find a “comparable direct worker” to compare a temporary worker to. The CBI has highlighted that the provision of equal pay between agency temporary workers and permanent employees cannot always be justified.

 

Many agency workers in fact get a higher rate of pay than they would get in permanent roles, such as skilled IT and accountancy temps. Some agency temps receive equal pay to permanent staff but do not receive other benefits such as access to a workplace pension scheme. In some areas temps are paid less than permanent workers as the experience and commitment which they provide are not equivalent to permanent experienced staff.

 

This variation and allowance for flexibility in the labour market is of benefit to both employers and employees and attempts should not be made to provide a rigid structure of direct comparisons with permanent workers when such comparisons are often impractical. More to the point, to bring in such rigidity would seriously reduce our companies’ competitive ability and hit productivity – two issues we currently have problems enough with before looking at this legislation.

 

The Agency Workers Directive is a significant burden on businesses and when implemented, businesses could be less inclined to use workers as they will probably be forced to pay higher rates than they were doing for agency workers. And they will have to provide the same on-site working conditions for agency workers – this could be unnecessary or even infeasible. The cost of the Agency Workers Directive is immense and on the Government’s own figures it is estimated that the cost to both the public and private sector will represent 0.6 per cent. of the total UK pay bill – that is a staggering £35.8 billion to £39.6 billion over the next ten years[6].

 

It could not be clearer – the Agency Workers Directive will seriously undermine the flexibility of our labour market. We, the Conservatives, will continue to oppose the harmful implementation of this directive and the speed which the Government wants to implement it. We continue to do this for employers, employees and the recruitment industry. There is no urgent need to bring in these changes and doing so will be detrimental to our economy. Let us wait until much closer to the deadline of November 2011 and see how other European countries implement it.

 

As you know, Pat McFadden announced on the eighth of May that he was launching a consultation on the implementation of the Agency Workers Directive, which will run until 31 July. We have been listening to many interested parties for some time and appreciate that there are many views on the Directive. We appreciate that some parties believe that there should be different thresholds for agency workers so that a vulnerable worker would be awarded the equivalent rights as a permanent worker after 12 weeks whereas non vulnerable workers would be subject to a longer period. We also recognise that some parties propose that there needs to be an exclusion based on salary level, with those agency workers earning high salaries excluded from the Directive.

 

We are also aware that some parties believe that the scope of equal treatment should be limited to basic salary and other basic statutory rights and that there should be a simple definition of what equal treatment is. Others have made it clear to us that the 12 weeks qualifying period must be easy to administer and that there should be recognition for a genuine break between assignments. There is also a strong view that any liability for not conforming to the Directive must be shared between the end user as well as the recruitment agency. Recruitment agencies are keen not to be held liable if any information that they reasonably obtained turns out to be incorrect.

 

We are fully aware that the Directive has now been passed in Europe, albeit permissively. However, the question now is how it is enacted into national law. There are differing views across the industry and I know that you are making them known to the Government before the 31 July deadline.

The Conservatives will be following this process carefully and I hope that legislation can be staved off until after the election.

 

The Government informed the EU that it would not oppose the Agency Workers Directive so long as there was a 12 week derogation period and if the EU permitted the UK’s current ability to allow opt outs from the 48 hour working week under the Working Time Directive. This grouping of issues was never going to work given the Socialist MEP programme and in our view the Government were always naïve to think this.

 

The Conservatives are strongly in favour of maintaining the UK opt-out from the maximum 48 hour working week. Abolishing the opt-out would have a serious detrimental effect on the flexibility of our labour market and the competitiveness of British business. Removing it during a recession can only make the economic situation worse. Many businesses invest in the UK due to our flexible labour market and we need to give these businesses certainty that the UK will stand up and not allow the opt-out to be removed.

 

The rigid enforcement of a 48 hour week could make workforce planning extremely difficult for business with sharp (often seasonal) fluctuations in levels of trade. This is exacerbated if the industry concerned requires highly skilled labour, which is, in general, not readily available in quantity at short notice.

 

We wholeheartedly believe in looking after the rights and wellbeing of workers, but we also strongly feel that it should be up to the individual concerned whether or not to work overtime. Indeed, many people actively seek out jobs that offer additional hours above and beyond those that they are contracted to work, in order to earn extra money, perhaps in advance of a holiday or other significant expenditure. The opt-out works because it gives individuals the right to choose. If they want to work longer hours to support their employer through busy periods or volunteer as a retained fire-fighter or member of the RNLI, for example, then we should not take this choice away from them.

 

The European Parliament failed to agree the current form of the opt-out with the European Commission. This means that this issue will have to be dealt with in the Autumn. Conservative MEP’s are currently building an alliance across Europe in order to retain the opt-out so that we can keep our flexible labour market, maintain our competitive advantage over other economies and let individuals choose how many hours they work each week.

 

I hope that the outcome of today’s seminar is that we can help the recruitment industry work a way out of the situation that the Government has created for us regarding the Agency Workers Directive and the Working Time Directive.

 

The Conservatives have, and are continuing to listen to companies, associations and interested parties involved in the recruitment industry. Unlike, the Government, we appreciate your expertise in this area and realise that a continuing dialogue with your industry is important to achieve a fair solution for both business and agency workers. Whether it is an exclusion for top end professional workers or a longer qualifying period for less vulnerable workers – we are listening to what you have to say.

 

We would not have done a deal with the CBI and the TUC and ignored wider viewpoints in this contentious area. We realise, that in order to protect our economy and the interests of our workers, we need to consult widely with the recruitment industry. We have listened to your views and they echo our fundamental principles.

 

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