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Chartered Institute of Personnel and Development (CIPD)

Pat McFadden MP,  Minister for Business, Innovation and Skills
London,  06 February 2008

I’m very pleased to be here this morning.

Today I would like to set out the government’s approach to employment law.

This is important because it is about the rules in the workplace. It is about both the rights of employees and about the overall dynamism and culture of enterprise in the economy. It touches both on the quality of life of individuals and says something about the kind of society we want to be.

Let me be clear. The Government wants Britain to be an open dynamic risk taking economy, where businesses thrive and where employees have every chance to make the most of their working lives. And where things go wrong or people find themselves badly treated, we want means of redress that are fair and accessible.

Our approach so far

So what, first of all is the big picture, the overall context?

It is that compared to a decade ago there are more than three million more people in work and they all enjoy greater employment rights than they did a decade ago.

We have quite rightly introduced important reforms, such as the minimum wage, extended paid leave and measures to help families cope with the responsibilities of work. But we have always remembered the importance of flexibility in our economy and our labour market, always mindful not to erect barriers into work that would make employers fear hiring people, fear risk taking, hesitant about the enterprising spirit that is vital to any thriving economy.

And that approach has helped produce results. We have one of the highest employment rates in the world combined with the highest average take home pay in the OECD.

How our economy has changed since 1997

We are all acutely conscious today of the changes that greater global competition brings. I believe Britain’s globalisation optimism – our determination to seize the chances it offers – stands us in good stead. The countries that will prosper in this era are those that reach out and make the most of the interconnectedness and interdependency that characterises today’s world – not those that try to retreat from change or insulate their markets from its effects.

Prioritising more jobs over new laws

The best employment policy is one that allows the economy to remain strong and successful and helps businesses to keep creating more and more jobs.

With that in mind, we should make it our priority to ensure there are no barriers preventing people getting into work or moving between jobs. At the very least, we must ensure that employment laws do not make it harder.

We have four key areas to consider.

i) Rights and responsibilities

First, we must examine the role of government in the workplace.

In particular, there is a need to update and improve the way we think about rights and responsibilities at work.

In future, beyond minimum standards, we must place increasing emphasis on government creating the opportunity for workers and businesses to work out what is best for their own circumstances.

This already has its basis in our ‘right to request’ legislation. Giving employees the right to ask, but also crucially ensuring businesses retain the right to say no - if it’s not compatible with the needs of the business.

And what we are finding is that far from settling on the legal minimum, a great many employers are seizing this chance to maximise talent – whether by enabling parents to work flexibly or providing training to up-skill their workforce.

Government’s role is to ensure that the dialogue happens – not to mandate either side on what should be done. That is why we have announced we will extend the right to request flexible working to the parents of children aged 16 and under, and are proposing the right to request time to train.

ii) Boosting business success by engaging employees

Secondly, we must encourage more effective engagement between businesses and employees.

The Institute for Employment Studies and Work Foundation’s recent report “People and the Bottom Line” provides the most compelling evidence yet of the business success that results from companies taking steps to get the best out of their workforce.

It suggests that if a business increases investment by around ten per cent across areas such as skills, employee engagement and making sure that each job fits the particular talents of the employee - it could secure an increase in gross profits per employee of over £1,500 per year.

And government has sought to address this by creating a right for employees to be consulted about major changes in their organisation, through the Information and Consultation Regulations.

That has been a step forward – but change is not always about new laws or directives. It’s about the culture of how we do things and we want to better understand what drives some businesses to engage with their workforce and invest in their people more than others.

And of course there is a legitimate question here about whether, and in what form, government involvement could help.

iii) Effective enforcement

Thirdly, we have to recognise that injustices remain in the 21st Century. For most people, work is a positive experience but there are dark corners of the labour market and there can be mistreatment of workers.

Again, the way to deal with that is not always by passing new laws but also enforcing properly the laws we already have. I believe all workers – whether they are confident or not, fluent in English or not – as long as they are working legally in the UK they are entitled to the rights that Parliament intended.

So for example, the new Employment Bill now before Parliament, will more effectively deter the minority of employers who flout the law and underpay their staff. There will be expanded powers for the enforcement agencies and tougher penalties for breaking the law.

Not every business which finds itself in breach of the rules gets there deliberately. Sometimes business wants to comply but is not always clear what is demanded. That is why we are working - with the CIPD as one of our key partners - to improve the content, delivery, awareness and management of government guidance and tools on employment law generally. The aim is to increase business confidence and encourage compliance. But this is also a major part of our commitment to reduce the administrative costs on business. Because there are a lot of businesses paying for external advice in this area when they probably don’t need to. And by doing a better job of giving people simple, clear advice on how to comply we aim to save employers £365m a year by May 2010.

I mentioned earlier that injustices do remain. There are dark corners of the labour market, with practices that no one should be subject to and we want to respond to this situation. And working with unions, business and other government agencies, we have created the Vulnerable Worker Enforcement Forum to help us target and tackle workplace abuses.

The Forum’s final report is due out soon. I don’t want to pre-empt the recommendations but our message will be clear: we are going to come after rogue employers; we want to make it easier for workers subject to abuse to report those abuses and we want to ensure the proper enforcement of the laws that Parliament has passed.

iv) Consumer power

Finally, there is the enormous and often untapped power of those who actually buy the goods and services our workforce produces.

Consumers are increasingly showing that they will buy products and services that go beyond the legal minimums if they are given the information to choose.

Earlier this week I presented the Business Commitment to the Environment awards. These awards are business awarding other businesses who have gone the extra mile for the environment. The ingenuity, creativity and enthusiasm of the companies represented shows not only that companies want to do the right thing but that they can also grow their business and their profits at the same time.

And the urgency with which some companies have addressed accusations that they were making use of sweat shop conditions abroad shows the power of consumers to force change.

Another example is the Fair Tips campaign run by Unite and the Daily Mirror which is about giving people information on whether the tip they leave actually gets to the staff who serve them.

Tipping is quite a complex matter because of the numerous arrangements in place. We are aware of concerns around the use of tips in the payment of the national minimum wage and we are reviewing the arrangements that are currently in place.

We have already been in discussion with key stakeholders across the hospitality industry to get a better understanding of the different approaches to tips. In light of this, we are currently considering a range of options to deal with this issue.

And the success of this campaign can offer valuable lessons, as we consider whether we can do more to recognise consumer power in the years ahead.

If our mission over the last ten years has been to create basic standards of protection, our mission over the next decade must be to find new ways to help employers and working people achieve more than the minimum.

I am grateful for the help and advice that CIPD continues to give BERR.

Together, we can help lay the foundations for even greater prosperity and fairness in the years ahead.

Thank you.