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Contract Workers

Volume 406: debated on Tuesday 10 June 2003

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4.19 pm

I thank the Speaker for allowing me to raise an important subject this afternoon. At the beginning of this month, our Government were one of four who sided with business interests against the EU directive intended to give equal pay and basic employment rights to temporary agency workers. The Department of Trade and Industry objected to the EU temporary agency workers directive, which gives equality of treatment to workers in that category, on the grounds that it believes that there should be a 12-month qualifying period for such rights. In other words, temporary agency workers should get the same rights as their permanent counterparts doing the same job only when they have been in the job for 12 months.

Many Labour MPs will find that approach disappointing, to say the least. It certainly conflicts with the Government's positive record on the minimum wage, which has helped to lift 1.5 million workers off poverty wages; the introduction of the trade union right of recognition, which the trade unions themselves acknowledged as key legislation; the introduction of the working families tax credit, which has helped 1.3 million people to secure an income that is on average £40 a week more than that under the family credit system; and the introduction of the new deal, which has helped to get about 1 million people back into work and secured the lowest unemployment rate for 30 years. Particularly positive has been the impact that we have made on longterm youth unemployment, getting 380,000 young people into work.

From my perspective, it should be a logical step to support the EU temporary agency workers directive as a measure that will give greater security to those in work by giving decent pay and conditions to a significant number of working people. However, that view was not shared by the DTI, because it argued in its submission to Europe:
"The Government remains concerned that the Directive risks decreasing the attractiveness of agency workers to user companies, which might reduce the number of jobs available. It is necessary that the Directive is suitably flexible to accommodate UK practices."

4.21 pm

Sitting suspended for a Division in the House.

4.28 pm

On resuming

My response to the DTI's approach is the view of no less a figure than Polly Toynbee, a journalist for The Guardian, who said:

"It is shocking that a Labour Government has sabotaged equal pay for people doing equal work."
She even went on to describe the DTI's foiling of the EU Directive as "real wickedness".

I know the view that many in Government have of The Guardian and its outlook, and can quote a less contentious critique emanating from Brendan Barber, the TUC General Secretary, who said:
"The government has sided with business interests to 'scupper' the prospect of agency workers getting equal pay and basic rights in the foreseeable future. It is bad for business and unjust for agency workers to be denied protection from sub-standard treatment."
I hope that those words will resonate with many Labour Members and with many people in the world of work.

What is the scale of the issue that we are discussing? Statistics show that in autumn 2002, 1.6 million employees said that they were temporary workers. That amounts to 6.3 per cent. of all employees in Britain. Of those 1.6 million, nearly 300,000 said that their temporary work was undertaken for agencies. I want to focus on that group today.

Agency temps are heavily concentrated in three sectors: banking, finance, business services, which take about 31 per cent.; the public administration of health and education services, which take about 22 per cent.; and manufacturing, which takes about 20 per cent. Those figures may be the statistics, but what is the daily reality for many of the agency workers? I shall illustrate it by setting out the employment conditions that one of my constituents recently described to me. I will call him Mike as I do not want to give his real name for an obvious reason: he would fear for his job if his real name was known.

Mike works for a well-known chain retail outlet. There are both permanent workers and temporary agency workers in his workplace, but the only permanent workers are those who were taken on a long time ago before a trend developed in the firm, as in many others, to take on temporary agency workers. Since he started working at the store six months ago, only temporary agency workers have been employed. No permanent employees have been taken on. The motivation behind the company's strategy is clear. To put it bluntly and straightforwardly, temporary agency workers are much less expensive and far easier to dispose of.

Let us consider Mike's terms of employment in more detail. Unlike that of the permanent employees, Mike's weekly and holiday pay are subject to a set of perverse deductions. The permanent workers have established holiday pay entitlements, but the holiday pay of temporary workers, who are doing exactly the same job, is calculated on the average daily pay for the last 12 weeks. However, days for which temporary workers are not paid are included in that average. Those days include bank holidays, days absent without pay—for instance, when the store instructs the temporary workers that there is no work that day—and days off sick. On top of that, overtime payments, which could increase the daily rate on which the calculations are made, are not counted.

A painful accident at work meant that Mike had a week off, supported by a doctor's note, for which, unlike the permanent staff, he was not entitled to pay. The week off sick therefore reduced his holiday pay by £45. On another occasion, Mike was feeling ill on a Friday at work but persevered and struggled through the clay. With only an hour of the working week left, he decided that since he was now suffering from diarrhoea and having to pause frequently to dash to the toilet, he would go home ill. He was told that if he took the last hour of the week off sick he would lose his whole week's bonus pay—a deduction of £29.40. That bonus was initially portrayed as a pay rise to which a temporary agency worker was automatically entitled after four weeks of service. In reality, however, it can be paid or withheld at the company's discretion.

The store has other methods of clawing back money from the temporary worker's pay packet. When Mike started his job, he was told that employees needed special safety foot wear at work. The footwear was provided but, to the employees' disgust, they found that £19 had been deducted from their pay packets. Job security is crucial for all workers. For Mike, it is only a pipe dream. From day to day and from week to week, temporary employees do not know whether they will still have a job the following morning. No notice is required to end these workers' contract of employment.

Mike had a job when I started my speech a few minutes ago, but there is no guarantee that he will still have that job when I conclude my remarks. In his six months at the store, Mike has seen many temporary employees like himself laid off. He also recounts how many of his colleagues are laid off and then taken on again soon afterwards when there is more work available, in order to cut company costs. He admits that the agency he works for is not as bad as some of the appalling cowboy agencies that he has experienced and others about which he has heard. In Mike's words, as a temporary agency worker:
"I have no job security or rights."
A committed trade unionist in previous employment, Mike regards unions as being of little use in his current job. A union's role is to defend and assert employment rights, but in Mike's situation as a temporary agency worker he has so few rights that there is virtually nothing to defend. Some shop floor trade unionists even look at agency workers as a threat to the terms and conditions that they have won for their members. There are contradictions running through the entire story.

What I have described is the day-to-day reality faced by hundreds of thousands of agency workers across the country. Certain interests boast of their flexible work force. "Flexible", according to Mike, is just a code for no job security or rights, just as in new business speak "downsizing" means redundancies and "outsourcing" is another way of saying privatisation. However, whatever the language used by companies like the one in question, it cannot mask the depressing reality that is the lot of the temporary agency worker.

In Leeds, my home city, we have been having a debate—carried out principally through the columns of the Yorkshire Evening Post—about our two-speed economy. Much of our great city is doing exceptionally well, but significant pockets of it are in danger of being left behind. One of the factors that contribute to that state of affairs is that many citizens are engaged in contract or agency work. In that group it is the young, males over 50—so I had better watch out—and women who predominate. It is clear that they are in danger of being locked into a cycle of low-paid unskilled work with little or no training, or access to it.

I congratulate my hon. Friend on securing the debate, and making a powerful case. He and the Minister will be aware that for the last six years I have made known my concerns about the issues that he has described—low-paid, low-skilled work, and particularly the plight of young people in the labour market. Does he agree that temporary agency work can not only be subject to the kind of abuse that he has described, but can mean that young people do not get the chance to enter modern apprenticeships or the new deal? They just go into the black hole of temporary work, never to emerge; never to get on to the ladder of opportunity that this Government have provided for so many other young people. Agency working is having that impact. Would my hon. Friend support an extension of employment rights, to young people in particular, and stricter regulation of the cowboy agencies that he mentioned earlier, so that we can bring genuine opportunity and equality to the young in low-paid and low-skilled jobs in our communities?

I thank my hon. Friend for that intervention. I fully agree with him I pay tribute to the work that he has done. One of the key pieces of work that I examined was a study that he carried out in his constituency. That study is a model of constituency activism by a Member of Parliament.

A Labour Government should not ignore these working people, and we have to ask ourselves whether the position of agency workers has been helped in any way by the Government's failure to sign up to the EU directive. The answer would have to be that they have not been helped one jot. In arguing that there should be a 12-month qualifying period before agency workers receive equal treatment, the Government would have, in the words of Ms Toynbee, rendered the directive "a nonsense". Many workers are only on three or six-month contracts in the first place and few temporary workers remain with the same employer for the 12 months necessary for them to qualify for equal rights under the Government's proposal.

Mike told me of a fellow employee who had worked for agencies for six years, but never for a 12-month stretch in a single workplace. If the EU directive were shaped as the Government wish, in practice that employee would never have rights equal to that of a permanent employee—whether he worked for the agency for six or 60 years. I fear that such an emasculated EU directive would be far worse than Ms Toynbee's mere "nonsense". Indeed, such a directive, hampered by the kind of qualifying period for which the Government lobbied so hard, could be used irresponsibly by business to avoid giving employees decent pay and protections. Are we to trust that all businesses will be benevolent and refuse the temptation to save money by getting rid of temporary staff before the 12-month period is up and replacing them with new staff on the same derisory terms and conditions?

The Government's approach to the EU temporary agency workers directive is a deliberate and overt rejection of the employment rights of temporary employees. In terms of pay and conditions, it would also create the risk of worsening job security for many employees. It is easy to see how such a system could be used irresponsibly by business to avoid giving employees decent pay and protection.

Like others in the Chamber, am proud to be a Labour MP under a Labour Government under whom an economic strategy moulded by the Chancellor to achieve opportunity and prosperity for all has given rise to the lowest unemployment that we have experienced for nearly 30 years. It is a great contrast to the dark years of Thatcherism, when unemployment exceeded 3 million. We often forget that, but we must continue to remind people. The Conservatives said that it was a price worth paying, but those of us who represent constituents whose lives, and those of their families, were thrown on the scrap heap in the cause of economic dogma know that the misery caused by unemployment is never a price worth paying.

However, even now that full employment is a real and achievable goal thanks to the Government's economic management and ideals of social justice, we must remember what kind of employment people should be entitled to. They are entitled to more than a job with "no security and no rights", as Mike so accurately described, and more than a job whose pay and working conditions seem to have been lifted off the pages of "The Ragged Trousered Philanthropists"—sordid 19th century employment practices embedded in the 21st century.

I want to put a few points to the Minister. I have high regard for him, although I should point out that I am not after a job, temporary or otherwise. First, as anyone can open an agency in the UK, a large number of small outfits open and close every year. The UK has no licensing requirement or requirement to join a professional body that could enforce a code of best practice. Only half of eligible agencies join the main industry-wide body, the Recruitment and Employment Confederation. Will the Minister consider legislation to cover employment agencies, and does he agree with the TUC that the lack of employment protection for the agency workers in the UK is allowing some cowboy agencies to exploit vulnerable workers and undercut agencies that offer decent pay and protection? Does he also agree that the UK economy and work force need fewer agencies that share quality practice underpinned by legal minimums?

Secondly, when the issue of protection for agency workers surfaces again, as it surely will, will the Government place much greater weight on the submissions of the TUC and its affiliated unions? Will they also look at how they can help the unions to organise among that group of workers? I hope that the Minister will agree that the group of workers that we are discussing today get little in the way of favours; the minimum that a Labour Government should bring to their lives is fairness.

4.43 pm

I congratulate my hon. Friend the Member for Elmet (Colin Burgon). Without turning this into a mutual admiration society, I praise him for his interest in these issues. This is an important debate and I am pleased to take part in it.

The terminology is important. I shall speak about employment businesses, because that is the strict legal term that applies to agencies and employers that we are discussing. I want to say a little about what we do to protect agency workers, which is important to place on record, before we come to the important points that my hon. Friend raised, including on the proposed European directive.

There are several estimates of the number of agency workers in this country. My hon. Friend referred to a labour force survey figure of 300,000, and the Recruitment and Employment Confederation says that there are more than 1 million. Our estimate, from important work done by the Department, which has been associated with agency workers for the past 30 years, is that there are about 600,000 agency workers. The number is considerable, and it covers a variety of skilled and unskilled occupations. My hon. Friend the Member for Corby (Phil Hope), who has taken an interest in the issue for many years, will know the diversity involved. That figure includes warehouse operatives and managers, doctors and nurses, porters and IT specialists, young girls going into modelling, people in the acting profession, caretakers and college lecturers. The sector is diverse.

Agency workers have access to core employment rights and statutory social security benefits. Since coming to office, the Government have sought to ensure that all workers receive minimum standards on pay and conditions. Since 1997, we have significantly improved protections for agency workers. The national minimum wage and the right to four weeks' paid holiday apply to agency workers. The so-called rights for whistleblowers in the Public Disclosure Act 1998 apply to agency workers. Agency workers also have the right to be accompanied at disciplinary and grievance hearings, introduced under the Employment Relations Act 1999, and part-time agency workers have the right not to be treated less favourably than similar full-time agency workers.

Agency workers already have the same protection as other workers and employees under existing sex, race and disability discrimination legislation. Our employment status review is also relevant, but we have found that many groups of workers do not realise what rights they have. The Department of Trade and Industry and Government agencies have the job of ensuring that they do.

Since 1976——nearly 30 years ago—a special regulatory regime has been in place to protect agency workers and hirers, and to regulate the operation of the private recruitment industry. That provides specific protections for agency workers in the triangular relationship between worker, employment business and hirer. For example, employment businesses must pay workers on time, regardless of whether they have been paid by the client. Agency workers must not be restricted from taking up direct employment with the hirer, and they must be given written statements on their work and pay rates. Employment businesses cannot charge their workers fees for finding them work.

That legislation is backed up by an inspection regime. The DTI's employment agency standards inspectorate is responsible for enforcing the provisions of employment agencies legislation. The DTI also runs a helpline to which agency workers can report concerns or complaints about the operation of an employment business, and from which they can seek advice on their rights and the protections offered to them under the law. The inspectorate investigates all relevant complaints about employment businesses, and inspectors visit them to ensure that they are complying with the law. When appropriate, the inspectorate will prosecute employment businesses in the magistrates court.

My hon. Friend the Member for Elmet asked whether we could reintroduce a licensing system. It was discarded a while back because it was not effective—people thought that once they were on a list of approved agencies, they could do whatever they liked. However, when we got rid of that system, we introduced a power that allowed the DTI inspectorate to prohibit persons or companies from running an employment agency for 10 years. That is an important measure, although it was seen at the time as draconian. My Department regularly receives letters of thanks—they are pinned up on our office walls—from agency workers who have been helped by our inspectors. That is a little commented on but important part of the DTI's work.

We are reviewing the domestic protections for agency workers, and we have been looking to update the rules on the conduct of employment businesses to make them simpler and to ensure that they reflect modern arrangements. We have also been considering controversial issues such as temp-to-perm fees, and health service agency staff whose health and safety protection was due lo be given by the person for whom they are caring rather than by the agency—an anomaly that we intend to address. We have considered a swathe of issues over the past few years, and I hope that we will be making announcements on them fairly soon.

Agency workers are one of the groups that we are examining as part or the review of employment status. Since last year, we have been looking at the coverage of rights provided through employment relations law. Last July, we published a discussion document to establish whether there were any problems with the current arrangements. We also held a series of round-table discussions to examine the issues in different sectors. Later this year, we intend to publish a document summarising the responses to our discussion document and setting out the way forward.

The problems experienced by my hon. Friend's constituent with regard to job security and not being given adequate notice will not be addressed by the European directive, but could be addressed as part of the employment status review. That issue has been raised with us several times.

The employment status of agency workers is not straightforward. The fact that somebody is an agency worker does not tell us automatically whether they are an employee, with access to a full range of employment rights. As we proceeded with the review, we found that it was even more complex than we thought at the beginning, but we felt that it was worth carrying it out to establish the rights of various groups, including agency workers. We are considering how to improve clarity, and how workers and employment businesses could be given better information on their rights and responsibilities.

Having discussed those issues, I turn to the European directive. The Government have introduced many rights—the right to be accompanied to hearings, the right for part-time workers to be paid the same as full-time workers and protection for workers on fixed-term contracts. In the latter case, we were accused of gold-plating to provide pensions as part of that protection, because the directive did not allow it. How have we turned from Mother Theresa into Vlad the Impaler on the issue of agency workers? Why would we do that? Why would we, to quote Polly Toynbee, engage in such "wickedness". I have written to my good friend Ms Toynbee privately about the matter, because that is a misrepresentation not just of the DTI's position but of that of the Government.

I shall outline our position. The social partners in Europe examined three groups of atypical workers—part-time workers, fixed-term workers and agency staff. The social partners in Europe—employers and unions—agreed to a way forward on fixed-term and part-time workers, and we were happy to implement that in UK law. Indeed, we went further than the law required to cover pensions and other issues.

The social partners could not reach agreement on the question of agency workers, however, and, unusually, the Commission decided to take the matter forward anyway. Countries well known for their protection of workers' rights, such as Denmark, Germany and the Republic of Ireland, adopted the same position as the UK. Why are we all concerned about the issue?

There was an obvious relationship between fixed-term and part-time workers in that they worked for an employer, and we could insist that that employer give them the same terms and conditions as staff on permanent contracts. The agency workers, however, have a triangular relationship. They are paid not by the company that has hired them, but by the agency. In many sectors—health and education, for example—agency workers are paid much more than permanent staff, although in others they are paid less. In the secretarial sector, pay in relation to permanent staff is patchy.

Although we in the UK do not claim to have more employment agency workers than anywhere else in Europe—France and the Netherlands have more—we do not have sectoral pay rates, nor sectoral pay bargaining, as in some other European Union countries. If someone is a secretary in France, wherever they are placed by an agency, they will receive roughly the same pay.

In most other European countries, the big five agencies employ the majority of agency staff. In France, they employ about 85 per cent. of such staff, whereas in the UK the figure is only about 9 or 10 per cent. The remainder are employed by 17,000 small and medium-sized enterprises. We are not anti-SME, but that is the situation that our market is in—SMEs would find it very difficult if they needed somebody quickly. The TUC's own research, published last week, shows that companies make such requests not to cut costs but to cover work. They want to move quickly: 57 per cent. of companies would be deterred if there were any bureaucracy involved, such as having to pin down the exact terms and conditions of the person being replaced, because the directive says that they are to be treated as if they were being recruited directly off the street. That would introduce so much bureaucracy, both for the agency and for the employer, that 38 per cent. of companies would cover through overtime, although we are trying to cut down the long-hours culture in this country, and 17 per cent. would not cover the work at all.

Given what my hon. Friend rightly said about our success at getting young people back into work—the Secretary of State wrote to Brendan Barber a couple of days ago about the problems with the TUC figures—it is undeniable that for people in any industry who have been out of work for a long time in a place such as my hon. Friend's constituency, the employment agency provides a good rung on the ladder and an important first step back into the workplace.

Under the Lisbon process, we are committed to creating 20 million new jobs in Europe by 2010. In the UK, we have already met our target: over 70 per cent. of people who could be employed are at work. We have been tremendously successful, although we are worried about jeopardising that success story.

We proposed that agency workers should qualify for the same terms and conditions as permanent employees after a qualifying period. During negotiations in Luxembourg, we moved from 12 months, as did Denmark, Ireland and Germany. Curiously, there are derogations in the directive for people who categorise us as being against vulnerable workers. There are two: if someone works permanently for an agency—most of our agency staff do not do that; they sign up with two or three different ones—they can be paid less than permanent staff for ever more. That is a derogation that many countries operate. The second derogation also allows workers to be paid less. Ours is the only one that insists that a worker enjoy the same terms and conditions after a qualifying period.

I hope that I have shown that our action is not due to hostility towards a vulnerable group of workers. The employment status review—our review of the existing regulations—suggests that we are not and I assure my hon. Friend that this is an important debate. We are not Vlad the Impaler. We are back to being Mother Theresa, and I hope to convince my hon. Friend of that over the coming months.

Question put and agreed to

Adjourned accordingly at three minutes to Five o'clock