Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002

– in the House of Lords at 11:34 pm on 24th July 2002.

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Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, in moving that the draft regulations be approved, I speak also to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002.

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 will transpose the Fixed-Term Work Directive and prevent fixed-term employees from being less favourably treated than comparable permanent employees in terms of pay and pensions. The regulations will protect Britain's 1.2 million fixed-term employees. They will help us to create high performance workplaces where all employees are valued. They will also promote diversity by making fixed-term work pay, encouraging those who cannot or do not wish to take permanent work to participate in the labour market.

The Government consulted extensively on the regulations. We held a consultation on the implementation of the fixed-term directive in spring 2001 and a further consultation on the draft fixed-term employees regulations earlier this year. We published a response to the first consultation this January and to this year's consultation yesterday. Guidance on the draft regulations is also available on the Department of Trade and Industry website. The regulations provide that fixed-term employees shall not be treated less favourably than similar permanent employees, unless the treatment is objectively justified. That requirement applies to all employment conditions, including pay and pensions. The 2001 consultation revealed evidence of pay disparities between fixed-term and permanent employees that the regulations will address.

When assessing whether equal treatment has occurred, the regulations allow employers to compare a fixed term employee's overall package of conditions with that of a permanent employee. That will allow employers to provide higher up-front rewards in return for reduced benefits elsewhere. The regulations also allow employers to compare the conditions of their fixed-term and permanent employees term by term. If employers give certain benefits to their employees after a certain period of service, they should give those benefits to their fixed-term employees after the same qualifying period, unless a different period is objectively justified.

The regulations limit the use of successive fixed-term contracts to four years, unless the use of further fixed-term contracts is justified on objective grounds. That will prevent people from being employed on a string of fixed-term contracts in what is really a permanent job. Where a fixed-term contract is renewed beyond the four-year limit and the renewal is not objectively justified, it will be treated as a contract for an indefinite period. We believe that that measure will have a positive impact in some sectors, including higher education, where the use of fixed-term contracts has increased.

The regulations allow employees or their representatives and employers to adapt the mechanism limiting the use of successive fixed-term contracts according to accepted practices in different sectors. Employers and employees can increase or decrease the four-year limit or agree a different way to prevent the abuse of successive fixed-term contracts via collective or workforce agreements.

We believe that the law, as well as employers, should not treat fixed-term employees less favourably than similar permanent employees without good reason. The regulations amend provisions that we believe provide for less favourable treatment. For example, the Employment Rights Act 1996 allows fixed-term employees to waive their rights to redundancy payments. Permanent employees cannot do that. The fixed-term regulations will remove that redundancy waiver. They will also make sure that all fixed-term employees have the right to statutory sick pay, guarantee payments and payments on medical suspension after the same qualifying period as permanent employees. Fixed-term employees on contracts for a task will also be given the same statutory rights as permanent employees with the same period of service.

I turn to the two amendments to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. Those regulations make it unlawful for employers to treat part-timers less favourably than comparable full-timers in their terms and conditions of employment, unless different treatment can be objectively justified.

The first of those amendments is a consequential amendment required by the fixed-term regulations that I have described. It will allow part-timers on fixed term contracts to compare themselves with full-timers on permanent or fixed-term contracts. Currently, fixed-term part-timers can make a comparison only with fixed-term full-timers, while permanent part-timers can compare themselves with permanent full-timers. Permanent part-timers are much more likely to find a comparator, because of the comparatively small number of fixed-term employees.

The second amendment to the part-time workers regulations is a result of the House of Lords judgment in Preston v Wolverhampton Healthcare Trust. Regulation 8(8) of the current part-time workers regulations provides that the remedies that a tribunal orders, where it has upheld a complaint from a part-timer for equal access to an occupational pension scheme, can go back no further than two years. The two-year time limit was included to ensure consistency with the limit in equal pay and pensions legislation that the Preston judgment overturned. In the light of that judgment, it is being removed. Its removal also makes the part-time workers regulations consistent with the fixed-term employees regulations, which have no such time limit.

We intend that both sets of regulations will come into force on 1st October. I commend the regulations to the House. I beg to move.

Moved, That the draft regulations laid before the House on 9th July be approved [35th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

Photo of Lord Willoughby de Broke Lord Willoughby de Broke Conservative 11:45 pm, 24th July 2002

My Lords, I am sorry for intervening, but I believe that the regulations are slightly more problematic than those we discussed earlier. I was under the impression that the Government were not entirely happy with the regulations, which, after all, will cost British business a so far unquantified amount of money. We do not have an exact figure, but it is certain that they will cost more. I declare my interest as director of a small publishing company that uses part-time workers.

I cannot see that loading extra costs onto employers of part-time workers will add anything to the competitiveness of British industry. After all, there already seems to be a good balance between part-time workers and full-time workers. People work part-time because they want to. They have reasons of their own for doing so; it may be for family reasons or because they have a business of their own. That works well, and I am not sure that this is the right way to approach the matter.

Did the Government approve this in the Council of Ministers or did they oppose it? I do not believe that the move is fully backed by the Government. Was it imposed by qualified majority voting? It will add to the costs of British business, particularly small businesses, even though we hear at every Budget and spending review that the Government are in favour of small businesses. It will add to the cost, without adding any benefit to British industry or to the people who will be affected by it—the companies or the part-time workers. As I said, most part-time workers choose to be part-time workers.

The imposition of all these regulations on British business has reduced our competitiveness. Five years ago, we were the fourth most competitive economy; the most recent figures show that we have slipped down to the relegation zone and are now the 12th most competitive economy. We are down among our European competitors, around the Sheffield Wednesday mark. Is that what the Government want? Do they want British industry and business to become less competitive? That is what is happening.

I am not convinced that this is the right way to go. Will the Minister say whether the Government are in favour? Was the change imposed on them? What will be the cost to industry?

Photo of Lord Rotherwick Lord Rotherwick Conservative

My Lords, we support any legislation that aims to stop abuse of the fixed-term contract system. To that end, we support the regulations.

It is interesting to note that the greatest offenders are in the public sector—the health service and the higher education sector. I am sure that many would agree that it is ridiculous that the Government have had to introduce legislation to enable themselves and the public sector to get their house in order. I also note that it may be the case that not all other EC member states have implemented the legislation. Will the Minister tell us which countries have not, to date, done so?

Photo of Lord Roper Lord Roper Liberal Democrat

On these Benches, we welcome these important regulations and the assistance to fixed-term employees, both full-time and part-time. We also welcome the Government's acceptance of their obligations under the Social Chapter. In particular, we welcome the fact that the Government have provided us with an extremely helpful transposition note on the EC Fixed-Term Work Directive, which enables us to see how the directive is being introduced. It is very interesting that Council directive 1999/70 EC of the 28th June was concluded initially among the social partners—one of the very remarkable ways in which the European Union works forward. It was a collaboration between the Europe TUC, UNICE and CEP, which led to this particular agreement.

Having said that, I associate myself with the two questions raised about the impact of this legislation on our competitiveness. One of the advantages of having a European directive is that, in principle, a level playing field is established so that all European countries are operating on the same basis. If that is the case, and if all our partners are introducing this, it ought not to affect our competitiveness adversely. Therefore, the question as to whether or not the other European Union countries are introducing this particular directive is of considerable importance. I shall be most interested to hear what the Minister has to say.

Looking through the terms and conditions of employment as regards the fixed-term employees' regulations, I was especially interested to see the provision in Regulation 15 for the staff of your Lordships' House. In such regulations, it is rather unusual to find mention of the House of Lords staff—a reference that gives them a particular position. In his response, perhaps the Minister can explain to those of us who are not as familiar with these matters as we might be why it is that the staff of this House have to be specifically referred to in such regulations.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, perhaps I may join my noble friend Lord Willoughby de Broke in failing to welcome these instruments. In doing so, I should declare an interest as chairman of what, I suppose, could be called a medium-sized enterprise—one which, from time to time, employs both part-time and fixed-term workers. I should be grateful if the Minister could confirm to the House whether these regulations are made under single market legislation, in which case they are the fault of the previous Conservative government, or whether they are made under the social chapter, which is my understanding. If the latter is the case, the fault lies fairly and squarely at the door of the present Labour Government.

I should also like to know which way the Government went in these negotiations; for example, whether they attempted to avoid them or whether they welcomed them with the zest displayed in introducing them tonight. I should have thought that these regulations are very likely—indeed, in some cases, certain—to result in less fixed-term and part-time workers being employed, especially in medium and small-sized enterprises. I have in mind fixed-term and part-time workers who could eventually develop into full-time workers if they proved satisfactory, and, indeed, if they wished to do so. I understand that there is a small reverse of that coin to which the Minister referred. But I should have thought that the overriding effect will be to produce less employment.

As we are taking these two sets of regulations together, perhaps I may point out that in the Explanatory Memorandum of each instrument there is a regulatory impact statement, which, to say the least, is somewhat coy. Both say that the regulatory impact assessments were published some time ago and that they are available from,

"Employment Market Analysis and Research, Room UG95, Department of Trade and Industry", and so on. I regret to say that I have not had time to pursue that avenue. I simply ask the Minister: what is the Government's estimate of the cost to the economy of these two instruments? Above all, can he say what the cost will be to small and medium-sized enterprises?

Further, can the Minister say how the Government can pretend that they favour small and medium-sized industries when they nod through this sort of legislation, which, I suspect, will cost billions of pounds as time goes on, at this hour of night? Surely this is the very worst kind of European Union regulation, entirely consistent with the constant encroachment by the Union into our competitive position worldwide. On that I would take issue with the noble Lord, Lord Roper, when he remarked that it is "all right" because all the other countries of the European Union will go along with this nonsense and we shall not be disadvantaged.

But the United Kingdom is a global trading economy. What matters is how the regulations will destroy our competitive position worldwide, in particular against the Americans and the economies of the Far East, where of course the majority of our trade still lies. There cannot be any doubt that this kind of regulation compromises, has compromised and will continue to compromise inward investment and our global trading position.

I look forward to hearing the Minister's replies to the questions that have been put to him by my noble friend Lord Willoughby de Broke and myself. However, I have to say that I do not think that this kind of thing can be nodded through, given the immense damage that it will cause to the British economy and our worldwide position, in particular at this time of night.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 12:00 am, 24th July 2002

My Lords, I am slightly surprised at the last comment made by the noble Lord, to the effect that the regulations are being "nodded through". They are being given proper parliamentary consideration. If the House has been keen on discussing its internal arrangements until a late hour, that is not the fault of the Government. We proposed a series of perfectly straightforward reforms to the working practices of the House which could and should have been agreed in a quarter of an hour. The fact that the reforms were debated for so long is not our responsibility.

No restriction has been placed on any noble Lord who wishes to take part in the debate. Indeed, I would have been glad to welcome a quarter of those noble Lords who took part in the navel-gazing in which we have indulged for the past eight hours to contribute to this debate. I shall attempt to put to rest the fears expressed by noble Lords.

I turn first to the issue of the European dimension of these regulations. As I made clear in my opening speech, the regulations implement a directive. I should confess straightaway that we should have implemented the directive by 10th July of this year; if anything, we are late. However, there is no question of us implementing the directive when others are not doing so. Germany transposed on 1st January 2001 and France transposed earlier this year. Almost all European countries have implemented, while one or two others are bringing forward legislation according to their own constitutional arrangements, as is the case for the UK Government.

I was asked whether the regulations are being implemented under the social chapter, which is the fault of the Labour Government, or under previous arrangements which were the fault of the Conservative government. They have been made under the social chapter. I make no apology for that. The fixed-term directive and the part-time directive were negotiated by the social partners, including representatives of UNICE; that is, the employers of Europe—of which the CBI is a member—as well as with representatives of European trade unions. That is a proper way for these matters to be negotiated in Europe. I should have thought that the Opposition would have welcomed those procedures.

The noble Lords, Lord Pearson and Lord Willoughby de Broke, appeared to suggest that enormous costs would attach to the regulations, in particular with regard to part-time workers. Our regulatory impact assessment indicates that the costs will be extremely small. The average costs to businesses are between £58 and £125 a year. That equates to between £1 and £2.40 a week. It is true that the main costs will fall on the public sector, which uses most fixed-term contract employees.

I neglected to say that the regulations are not imposed by qualified majority voting. We agreed to the part-time work directive. We believe that it will help promote equality, between men and women in particular. We certainly have no objection whatever to what has been done and we have no hesitation in implementing the regulations.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, on the question of costs, are the figures of £58 to £125 per employee per annum? What is the total cost to the economy and small business?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, that is the average to the employer. It includes a large number of small businesses. The cost to large businesses would be significantly more.

I wish to go further. It is being ignored that the use of both fixed-term and part-time contracts has been an attempt by some employers—including employers in the public sector—to evade the proper regulation and protection of workers in this country. I gave the example in my opening remarks about higher education. It is notorious that those entering an academic career suffer for many years a series of fixed-term contracts. It takes them a long time to get qualified in the first place; it takes them even longer to get out of fixed-term contracts, during which time they accumulate no pension rights or any of the other rights of permanent workers. That is an abuse. That is why it is restricted to a period of four years. If the Association of University Teachers were here I am sure that it would agree wholeheartedly with what I have said.

Photo of Lord Willoughby de Broke Lord Willoughby de Broke Conservative

My Lords, are we dealing with both statutory instruments together? My quarrel is not with the fixed-term employees regulations—I have no knowledge of them—but with the part-time workers directive. Does the Minister believe that the introduction of the directive will make British business more competitive or less competitive? It is quite important.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, we are dealing with the two. I made that clear in my introduction. I was going to come on to defend the protection for part-time workers. Having defended the protection for fixed-term workers I want to defend the protection for part-time workers, which I believe to be helpful to our competitive position.

Perhaps I may take as an example the position of women who want to go back to work after childbearing. There are two basis on which they can go back. First, they can go back on an hourly basis, under which they have no particular rights and do not accumulate pension benefits, holiday benefits and so on. The other basis is for them to go back on one or two days a week—in other words, on a one-fifth or two-fifths time basis. Surely it is much better to be on a proper part-time basis and to continue to pay into a pension and to have proper employment rights than it is to be on a casual labour basis. Surely it is right for all of us, in social, economic and competitive terms, to have a workforce where everyone is protected as far as possible. To have a workforce in which there is an excuse for employers to cut out of protection those who are on fixed-term or part-time contracts is, to my mind, an abuse, whether it is in the public or private sectors. I have no hesitation in saying that it is right that that kind of situation should be dealt with by these regulations.

As to why they cover House of Lords staff explicitly, I understand that the position, particularly with the part-time regulations, is that they have always specifically covered House of Lords staff. There must be something about their conditions of employment which makes them different from others. But if noble Lords really want to know, I shall gladly write to them.

Fundamentally, we are talking about the economy, and in particular about small businesses; and we are talking about the justification for extending employment protection—which is accepted as being correct, right and proper for permanent workers. The costs will be negligible. There will be less impact on small businesses than on larger businesses because they are less likely to employ fixed-term workers, and the benefits to business as set out in the regulatory impact assessment, including the benefits in terms of training, are very significant. I have no hesitation in commending these regulations to the House.

Photo of Lord Rotherwick Lord Rotherwick Conservative

My Lords, before the noble Lord sits down, I was hoping that he might be able to answer my question; namely, which EU member states have not implemented this legislation? He covered the point by saying "nearly all". I realise that it is late in the evening—or getting on for early in the morning. Perhaps he could write to me later and let me know the names of those EU member states.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, it is required of all member states. Every country should have done it by 10th July. I gave the examples of France and Germany, which have already done it. I am not even certain that there is any state that has not implemented the proposal. I shall give the provisional answer that everyone has implemented it, or is in the course of doing so, and if I am wrong I shall write to the noble Lord about it.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, the noble Lord says that the costs of these two statutory instruments to the economy and to business in general will be negligible. I simply cannot believe that. Of course, the costs to big businesses will be higher than those to small businesses, but big businesses can often carry such costs more easily. Before we let these regulations through, we really should have a precise answer and not merely rely on this very coy regulatory impact assessment in the two Explanatory Memoranda. We should know what the cost will actually be to our economy and to business. I cannot believe that it will not be pretty large.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, there are strict rules for what is to be contained in a regulatory impact assessment. It is no good describing it as "coy". A regulatory impact assessment sets out the costs and benefits. The regulatory impact assessment to these regulations does exactly that: it sets out the costs, some of which I have quoted. I have not gone to the extent of quoting the benefits in terms of the inclusion in a coherent and modern labour market of a vast number of people who are on fixed-term and part-time contracts and who are of huge benefit to employers. As an employer, I used to employ people on part-time contracts for exactly the reason that I have set out. It is enormously beneficial to British industry that there should be this addition to the labour force of people who benefit from the protection which exists for full-time and for permanent workers. I commend the regulatory impact assessment which has been published, a full version of which is available on the DTI website. It sets out the costs and benefits and comes to the conclusion—this has to be attested to by a Minister of the Crown—that the benefits outweigh the costs. I stand by that attestation.

On Question, Whether the Motion shall be agreed to?

Their Lordships divided: Contents, 13; Not-Contents, 2.

Division number 7 Private Parking: Ports and Trading Estates — Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002

Aye: 11 Members of the House of Lords

No: 0 Members of the House of Lords

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Photo of Viscount Simon Viscount Simon Deputy Speaker (Lords) 12:18 am, 24th July 2002

My Lords, as it appears that fewer than 30 noble Lords have voted, in accordance with Standing Order 57 I declare the Question not decided and that the debate thereon stands adjourned.