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GOVERNMENT
RESPONSE TO THE BETTER REGULATION
TASK FORCE'S REPORT: Employment Regulation: Striking a Balance
The
Government welcomes the Task Force’s
report.
The
Task Force’s report provides a valuable contribution to the debate on the
effectiveness and impact of employment regulation and will provide a stimulus
for improvements and further initiatives. As the Task Force acknowledges, the
Government has already done much to improve the quality of policy making and has
a range of work under way on a number of areas covered by the recommendations in
the report.
The
Government believes that social justice and economic progress go hand in hand.
Since 1997 the Government has introduced greater rights in the workplace to
establish fair standards for employees and prevent good employers being undercut
by the bad. At the same time the Government has achieved the lowest levels of
unemployment for 26 years and employment has reached a record level, up over 1.5
million since May 1997. This shows that there is not a contradiction between job
creation and greater rights at work.
The
Government has recently set out its vision for labour markets in two
complementary papers. Full
and Fulfilling Employment
 (250Kb) outlines three goals for the labour
market: more jobs, better jobs, (including choice and diversity) and high
performance workplaces. Towards
Full Employment in the European Union analyses recent
performance of EU labour markets and sets out the challenges facing them in
meeting the 2010 employment targets and in moving towards our long-term goal of
full employment.
To
achieve these goals the Government will need to take account of the waves of
change that are taking place in our economy and society; changes in the roles
and aspirations of women, the relationship between work and family, the increase
in life expectancy and an increasingly diverse workforce and pattern of working
hours. The Government will need a framework that supports these social changes.
It will look to non-regulatory means to develop the framework, but where it
needs to will regulate in ways that also support full employment and higher
productivity. The Government has already shown that it is willing to consider
alternatives to regulation. For example, the Employment Act 2002 places emphasis
on better workplace procedures and early settlements. However, there will be
regulation when non-legislative approaches cannot or do not work.
As the
Report says 40 per cent of UK employment regulation is based on European
Directives, therefore the Government welcomes the European Commission’s Action
Plan on Better Regulation which was adopted on 5 June 2002. It represents an
important step toward simplifying and improving Europe’s regulatory
environment.
Improving
the regulatory environment is essential for businesses across Europe,
particularly SMEs. It is central to the EU’s goal of becoming the most
competitive and dynamic knowledge-based economy in the world. Better regulation
is a priority for the UK government and an agenda that we have been actively
pursuing.
The
measures, once implemented, will constitute a cultural shift in policy-making at
the European level. Processes, such as integrated impact assessments and minimum
consultation periods, will improve the ways in which the Commission develops
policy proposals and legislation. The Government is particularly pleased at the
Commission’s commitment to assessing the impact of proposed policy measures.
The adoption of an evidence-based approach to policy-making has extremely
positive implications - producing appropriate, proportionate and well-crafted
policy solutions to real-world problems. The UK Government attaches great
importance to the complete and swift implementation of the Action Plan on Better
Regulation, and looks forward to playing an active part in monitoring its
implementation.
Although
this report focuses on employment regulation, it has broader implications since
some of the recommendations apply more widely. In drafting its response, the
Government has tried to indicate what applies only to those who have an input
into employment legislation and what applies to policy makers and regulators in
all Departments. In the latter case, co-ordination will be provided from the
centre of Government.
The
Report makes twelve recommendations. The remainder of this response considers
each of these in turn.
Specific
Recommendations
Better Policy Making
Recommendation
1: Alternatives to State Regulation
(a)
The DTI should expand the role of its regulatory impact unit to ensure that
policy officials in the DTI considering employment regulation options carry out
a full analysis of the alternatives to state regulation to meet a policy
objective and identifying unintended consequences
1(a).1
The Government accepts this recommendation.
1(a).2
There are two recent examples of where this approach has been put into practice,
since the Task Force published its report. The discussion document on employment
status includes a specific question on what non-legislative approaches could be
used to address problems that might arise from any lack of clarity in employment
status. In its consultation document on implementing the Information and
Consultation Directive the Government asks how best to promote information and
consultation among SMEs by non-legislative means and welcomes views on this from
consultees.
1(a).3
Better regulation is a key issue for the DTI.
Following the Department’s recent review, the DTI has reinforced the
message that alternatives to regulation and better regulation will be a major
focus for all policy development in the Department. A new cross-DTI project team
has been created specifically to consider how the Department should challenge
existing and future legislation as well as how to ensure all policy makers fully
consider alternatives to regulation at the outset of the policy making process.
1(a).4
The better regulation project team’s work will consider every stage of
the policy making process – from conception, both in Brussels and the UK,
through development of the implementation strategy, to delivery on the ground.
The work will be broken down into six separate, but interrelated, areas:
strengthening regulatory challenge; improving policy processes; engaging more
effectively with stakeholders; delivering better regulation on the ground;
increasing our influence on European developments; and promoting alternatives to
regulation. The
core team will draw on expertise from across the Department and from the
Regulatory Impact Unit in the Cabinet Office to identify potential changes that
could be made at the very beginning of policy development to ensure that all
possible options are fully considered.
1(a).5
The project team has begun working with policy makers on promoting
alternatives to regulation and building expertise within the Department on the
non-regulatory ways in which policy goals might be attained. It is important that the impact of this work on Departmental policy
making should be properly evaluated and the team would welcome a meeting with
the Task Force or its representatives to discuss the approaches that might be
taken to achieve this.
1(a).6
The team will also examine the regulatory impact assessment (RIA) process
in DTI and the quality and quantity of information contained within it. We note the Task Force’s comments on including serious analysis of
non-regulatory alternatives in the RIA and the team will give this particular
consideration as their work progresses, including requiring more rigorous
assessments of current business practice in different sectors. All RIAs are
published.
1(a).7
Regulation is not the only means of stimulating change in the labour market, and
it may not always be the most effective or efficient means. Nor is legislation
generally capable on its own of changing workplace cultures or correcting every
potential unfairness and injustice in the labour market.
1(a).8
The limitations of regulation illustrate the need to have a broad portfolio of
tools to bring about change. DTI already has in place a programme of
non-legislative work, with the policy objectives of spreading best practice and
partnership in the workplace and of closing the Gender Pay Gap. These are listed
in detail in the Appendix to this response.
1(a).9
It is important to choose the right policy tools to tackle the problems
being addressed. Where
unacceptable standards of behaviour are involved, there is often a clear case
for legally binding minimum standards. Where the policy objective is to improve employment and productivity
through more widespread use of best practice, i.e. raising current practice to
best practice, then the case for non-regulatory interventions is much stronger.
1(a).10
The Small Business Service
is currently strengthening its guidance to policy makers on the Small Firms’
Impact Test - the "litmus test". The Small Firms’ Impact Test is a
means of gauging the expected impact of different proposals on small firms to
help policy makers identify effective and efficient solutions to mitigate them.
It involves consulting a representative sample of small businesses at a very
early stage in policy development. Through these discussions, policy makers can
explore how policy proposals will impact on smaller businesses in those sectors
most likely to be affected and explore alternative approaches. The Small
Firms’ Impact Test is intended both to help answer the question of whether to
act, and, if action is necessary, to assess a range of approaches to
implementation - principally to help identify the least burdensome and least
costly ways to achieve the policy objectives. The DTI and SBS, working with
Cabinet Office, will be consulting on the Small Firms’ Impact Test from this
summer, with the aim of incorporating guidance on it in the revised Cabinet
Office's guidance 'Good Policy Making: A Guide to Regulatory Impact Assessment'
to be issued by the end of 2002.
(b)
DTI should ensure that there is independent expert input into the process of
considering alternatives to state regulation
1(b).1 The
Government agrees with this recommendation. The DTI better regulation project is
actively considering ways in which independent expert assistance could be built
into the policy making process. Amongst
other options, the team is evaluating the relative merits of consulting an
expert with knowledge of a specific policy area or a panel of experts, who could
consider non-regulatory alternatives more widely.
The Government will report back on progress in this area to the Task
Force in six months’ time.
1(b).2
Following the DTI Review, William Sargent, currently head of
the Small Business Council, will take on an enhanced role as the “independent
voice for small firms”. He will provide advice and comment on Government
policy as it concerns small businesses, but look particularly into regulations
that impact significantly on small firms.
(c)
Other Departments and Agencies with an interest in employment issues should
learn from the DTI’s lead
1(c).1
The Government will watch with interest to see how the expanded role of
the DTI regulatory impact unit develops and will consider how best any good
practice identified could be applied in other Departments and Agencies. It will
report back to the Task Force annually.
1(c).2
All the main regulating Departments have Regulatory Impact Units which
share information and experience. The DTI will feed relevant lessons and good
practice from its better regulation project into this network. The Cabinet
Office Regulatory Impact Unit co-ordinates its Departmental equivalents and
issues guidance on best practice. Its role is to work with government
departments and agencies to help ensure that regulations are fair and effective.
1(c).3
The Cabinet Office Regulatory Impact Unit is in the process of updating
its guidance for Departments and Agencies on Regulatory Impact Assessments. This
will include strengthened guidance and signposting on alternatives to regulation
and will be subject to full public consultation during the summer.
1(c).4
ACAS produces a number of codes of practices, some with statutory
backing, which are a valuable model of alternatives to regulation.
1(c).5
The Health and Safety Executive has produced guidance, as an alternative
to regulation, in addressing the issues of Directors’ responsibilities for
health and safety and health and safety in Annual Reports. The effectiveness of
this approach will be reviewed.
Recommendation
2: Common commencement dates for employment policy changes. The DTI and
other Departments and Agencies should as far as possible group together
commencement dates of employment policy changes, starting with the DTI
2.1
The Government accepts this recommendation in part.
2.2
As the Report recognises, there would be difficulties with the
implementation dates for European legislation. Unless flexibility is retained,
this could mean European legislation being implemented before required
deadlines. There is also sometimes a need to amend regulations quickly in light
of decisions made by the European courts or infraction proceedings by the
Commission. Also for different employers there will be different times of least
inconvenience, for instance schools around the start of the academic year.
2.3
However, the Government understands the concerns underlying this
recommendation and agrees it is sensible to group commencement dates on
employment regulation. DTI intends to consult business, employee organisations
and other Departments on the best way to meet these concerns, including how to
handle European legislation, and publish a response by the end of the year. The
Task Force will be sent a copy of the consultation
document.
2.4
Where changes are introduced by independent bodies such as the
Agricultural Wages Boards, the Government has no authority to influence
decisions on implementation dates. However the Agricultural Wages Boards have
tried in the past to adopt common implementation dates, e.g. in relation to
increases in the National Minimum Wage, wherever possible and the Government
would expect this to continue in the future.
Recommendation
3: Understanding small business. Civil servants that deal with aspects of
employment law should spend time understanding how regulations impact on small
businesses. Each Department should include a section in their Annual
Report on how they are meeting this recommendation
3.1
The Government accepts this recommendation in relation to DTI and will
explore how the benefits of the DTI’s experience can be shared with other
Departments. The SBS too has a commitment
to promote the understanding of small-business concerns in policy-making and
challenges all Departments to take account of the needs of small businesses.
It will report on progress in its Annual Report and ensure the Task Force
receives a copy.
3.2
The DTI has a long-standing secondments programme whereby its staff spend
time in the private sector and private sector individuals spend time in the
Department as part of a two way programme aimed, among other things, at enabling
DTI to understand how business functions. One of the outcomes of the recent
Departmental Review is that all members of the Senior Civil Service in DTI are
now required to spend at least one week in the year in an external organisation.
The first year of this scheme runs to April 2003, after which there will be an
evaluation of the attachments. It is hoped that a reasonable proportion of the
DTI Senior Civil Service will spend their week in an SME as opposed to one of
the large private sector concerns.
3.3
The Government maintains regular links with organisations representing
small firms. It has also set up the Small Business Service to represent the
views of small firms in Government. It is an essential part of the role of all
staff in the SBS to maintain regular contact with its small business customer
base and be innovative in doing so, through non-executive directorships,
interchange activities and regular company visits. In SBS' s first year all
staff visited an SME, even if their work was essentially internal to the SBS.
SBS is working to see much higher levels of engagement in the future. As
reported above, there is already a section in the SBS annual report that updates
progress being made in this area.
3.4
ACAS field staff are in constant contact with SMEs through their programme of
small business seminars.The ACAS helpline is widely used by SMEs and is another
useful means of contact.
3.5
There is also a Government-wide initiative called
Interchange
which
promotes and encourages the exchange of people and good practice between the
Civil Service and other sectors of the economy. Interchange can take many forms,
including secondments, mentoring, non-executive appointments and joint training
opportunities. Most organisations of any size from anywhere in the country can
take part. Interchange helps the Civil Service to be more outward looking and
makes government departments and agencies more aware of their customers needs.
Every government department has an Interchange manager who liaises with the
Cabinet Office. Information on the programme and contact details for all
Departments can be found on the Cabinet Office website.
3.6
The Department for Work and Pensions is working to establish employers as
key customers across the full range of its activities, as work is the first and
best way of tackling poverty and sustaining economic growth. The Department has
already begun work on assessing the general impact of its business on employers,
alongside setting out an engagement strategy for Ministers and senior officials.
Part of this strategy includes the exchange of staff and the use of business
mentors.
3.7
The Inland Revenue Business Support teams feed back on a monthly basis
issues which have been raised by businesses at their visits. The head of Inland
Revenue’s Regulatory Impact Unit will shortly be spending a week on attachment
to a small business.
3.8
The Health and Safety Executive already reviews its small firms
activities on an annual basis, elements of which are reflected in The Health and
Safety Commission’s annual report.
Recommendation
4: The impact of employment legislation. The DTI should review, by
December 2002, the current state of research in employment matters to establish
whether there are gaps in its understanding of the direct and indirect effects
of employment legislation on large, medium and small firms
4.1
The Government accepts this recommendation. DTI will commission an
independent expert to commission an initial scoping study, to report by December
2002.
4.2
The DTI has already commissioned research undertaken by the University of
Warwick to provide a detailed qualitative picture of the impact of employment
legislation on the employment decisions and practices adopted by small firms,
including assessing the direct and indirect costs and benefits of compliance or
non-compliance with the legislation. The study focuses on both new and
long-standing employment legislation and will be published later this year.
Recommendation
5: ‘Stress test’ regulations by sector and size. All new regulations
should be tested, to indicate the industry sectors and size of business on which
it will have the most impact, when the regulatory impact assessment is carried
out. Existing regulations should be tested when reviewed
5.1
The Government accepts this recommendation in part.
5.2
The existing Cabinet Office RIA guidance says that policy makers should
identify the sectors most affected by any new regulatory proposal. It also
requires the impact on small firms to be addressed and the Small Business
Service to be consulted if the proposals affect small firms. The Cabinet Office
will make this requirement clearer and more explicit in the revised guidance to
be issued later this year. This will help policy makers to better identify and
address the impact of proposals on particular sectors and industries, and
revisit those impacts when reviewing existing regulations.
Better
Information and Advice
Recommendation
6: Demand led guidance. Guidance on employment regulations, in any format,
should tell employers how to deal with a situation – for example, using a
question and answer format – rather than give a detailed description of what
the regulations say. All guidance intended for small firms should follow
the SBS guidelines
6.1
The Government agrees with this recommendation.
6.2
It shares the Task Force’s concern that information on employment
regulations should meet the needs of small firms, and specifically that it
should follow the SBS guidelines for Departments on how to write guidance to
small firms, “How to get the message across”, and tell employers how to deal
with a situation. The
DTI is working with SBS and ACAS, as the key source of expertise on employment
advice and problem solving, to develop more coherent and accessible information
advice and guidance, looking initially at the changes to be introduced by the
Employment Act. A user panel has been set up and the Task Force’s specific
recommendations are included in this work. They will also consider how sectoral
differences in employment legislation can be accommodated.
6.3
The SBS and ACAS joined forces in February 2002 to prepare a pack of
Employment Guides for Small Firms. These are very brief and are based on the
Q&A format. Over 330,000 of the 16 SBS Factsheets which make up part of this
pack have been distributed to date.
6.4
The Inland Revenue uses a range of communication methods in its Employer
Programme. The Q and A format recommended by the Task Force is used where the
situation is appropriate and works well. The Inland Revenue also offers
step-by-step guidance in some situations where it is more useful and better
received. The production of demand led guidance is one of the key objectives of
the Inland Revenue’s Better Guidance Programme, which has just begun. Lessons
learned will be reported and shared with other Departments in due course.
6.5
The Report mentions the DTI’s TIGER
website (Tailored Interactive Guidance on Employment Rights), which is
designed to provide a user-friendly guide through UK employment law. It
currently provides employers with a quick way of calculating minimum wage
entitlement and a module on maternity rights is expected to be added in summer
2002. Over the next few years, TIGER will expand to cover other aspects of the
law.
6.6
The Government cannot direct independent bodies such as the Agricultural
Wages Boards or the Information Commissioner to prepare guidance or to put that
guidance in any specific format. But the Government expects bodies to take the
Government lead and adopt best practice in this area. The Government will
monitor progress on this to ensure this important recommendation is followed
through.
Recommendation
7: CD Rom on employment rights. The Government should develop an
interactive CD Rom for employers by April 2003. The CD Rom should be free, and
either updated remotely or a new CD Rom sent out once a year
7.1
The Government agrees with this recommendation in principle and will
undertake some work to establish the benefits of implementation. It will report
back to the Task Force in 2003.
7.2 The Inland Revenue already
produce an updated CD-ROM each year for every employer which replicates the
printed material in the annual Employer’s pack. This CD-ROM currently contains
detailed information which employers need on tax codes and Budget changes to tax
rates, and further enhancements are under development such as training material
for inexperienced employers. The DTI and the Inland Revenue will jointly
consider users’ views on this and how the CD-ROM format might be developed
into an interactive CD-ROM on employment rights.
Recommendation
8: Simple employment law factsheet. Business Links should send all first
time employers a simple employment law factsheet and an interactive CD Rom.
The employer contacting the Inland Revenue should initiate despatch of these.
8.1
The Government accepts this recommendation. The Government agrees that
all employers should have access to a simple guide to employment regulation. For
the past year, Business Links has produced an Employment Law Update which has
been sent to employers along with the Inland Revenue’s Employer’s Bulletin,
which goes out three times a year.
8.2
The Government has already begun a consultation on a comprehensive
strategy for startups. This includes the issue of how new businesses can be
provided with better quality information on how regulation will affect them. The
Task Force’s recommendation will be implemented as part of this wider project,
which is due to develop an initial resource pack for employers by April 2003,
also involving ACAS as providers of expertise and follow-up capability through
their Helpline. In the mean time, the DTI will consult the Inland Revenue and
SBS about how best to ensure all new employers receive a copy of the SBS leaflet
“Employing Staff”.
Recommendation
9: Advice visits to employers. ACAS should:
(a)
Provide their seminars to businesses with fewer than 5 employees for free
9(a).1
The Government accepts this recommendation in part. The Government will ask ACAS to pilot providing free places to
businesses with fewer than 5 employees to these seminars and will take into
account all costs and benefits to employers, employees and Government in
assessing any pilot.
(b)
Pilot the provision of one-to-one free employment law advice visits to employers
of less than 50 employees, and if found useful, rolling out national provision
of this from April 2003
9(b).1
The Government accepts this recommendation in part, dependent on the
success of the pilots and being able to complete this within the suggested
timetable. In assessing any pilot, the Government will take into account all
costs and benefits to employers, employees and Government. One aspect of the
piloting process will be to consider whether the visits should be free or
subsidised.
Recommendation
10: Shared HR resource. The Government should run a range of pilots, with
different providers and funding methods, for a shared HR resource for small
firms. The pilots should run until the end of 2003, and the successful
model rolled out nationwide in 2004
10.1
The Government agrees with this recommendation.
10.2
It will consult a wide range of organisations with an interest in
business support, including the Small Business Service and the Learning Skills
Council, with a view to running a number of pilot schemes within the target
dates suggested by the Task Force.
Dispute
Resolution
Recommendation
11: Access to mediation. ACAS should pilot a mediation service for businesses of
less than 50 employees. If successful, the service should be either free or
subsidised
11.1 The Government accepts this
recommendation and is intending to pilot the provision of mediation by ACAS. The
Government will take into account all costs and benefits to employers, employees
and Government in assessing any pilot. This proposal is consistent with DTI’s
overall policy on alternative dispute resolution, which DTI will be developing
further over the rest of this year. This
is unlikely to restrict the provision of Alternative Dispute Resolution services
to the public sector.
11.2
The pilot will provide access to mediation in cases of dismissal or a
grievance involving a statutory right such as sex or race discrimination.
Recommendation
12: Earlier access to arbitration. ACAS should pilot an arbitration
service for businesses of less than 50 employees. Arbitration should be
made available without a tribunal application having to be made. If successful,
the service should be either free or subsidised
12.1
The Government considers that existing services largely satisfy this
proposal.
12.2
ACAS has an arbitration scheme which is free to all businesses - albeit
currently limited to unfair dismissal cases. The Government is working with ACAS to extend the
provision to cover claims that employers have failed in their new duty
(effective from April 2003) to consider requests to work flexibly from parents
of young and disabled children. The
scheme is not suitable for all types of complaint, for example those concerning
European-derived rights, where an appeal route is necessary.
12.3 The ACAS
Arbitration Scheme is not limited to those who make an application to an
employment tribunal. It is
available, if the parties agree, for those cases where the applicant maintains
that something has happened to them that could be the subject of an application.
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APPENDIX
DTI’s
Programme of Non-legislative Work
1.
Spreading best practice and partnership in the workplace
A
1.1 The
Partnership at Work Fund is a grant award scheme to
encourage the development of workplace partnerships between employers and
employees. This approach can be used to address specific employment or business
issues; for example bullying, absenteeism, low productivity or work organisation
- or it can be at the core of an organisation's overarching cultural change.
A
1.2 To date, there have been four calls for
applications. Overall, a total of 160 projects across all four rounds are now
receiving (or have received) some £5 million in public funding. This money is
more than matched with contributions from the organisations themselves. In
December 2001 the DTI announced a further £20 million funding for best practice
initiatives, which includes the Partnership Fund.
A
1.3 The aim of the Work-Life
Balance Campaign is to persuade employers to introduce ways
of working which meet the needs of the business and customers while
simultaneously improving the work-life balance of their employees. The Campaign
is not prescriptive but encourages employers to implement policies and practices
over and above the legal requirements which support their business as well as
improving the balance their employees can get between work and the rest of their
lives. The Campaign is directed at employers in the public, private and
voluntary sectors and intended to benefit all employees whether or not they have
caring responsibilities. To date, 233 organisations have received funding
through the Work-Life
Balance Challenge Fund.
2.
Closing the Gender Pay Gap
A
2.1 In 2001, the
Government commissioned Denise Kingsmill to conduct a Review
of Women’s Employment and Pay. This report was published in
December 2001 and circulated widely. It
outlined what action businesses and others can take to close the pay gap and
improve women’s participation and advancement in the labour market.
A
2.2 The Government
welcomes the Kingsmill proposal that Human Capital management information be
part of the mandatory requirements in company’s Operating Financial Reviews.
The Government is working with the Accounting Standards Board who are taking
forward work on human capital management as part of an update of existing
non-statutory Operating and Financial Review.
A
2.3 The Government has
appointed a group of Fair Pay Champions from business and trade unions to help
with the drive towards achieving equal pay through the promotion and sharing of
good practice in their sectors. These Champions will drive forward action by
developing activities in their sectors to encourage employers to find out the
scale and nature of the equal pay issues including through the use of equal pay
reviews. They will seek to influence employers to tackle these issues and also
encourage companies to take action to implement the results of those reviews. We
have also made extra funds available to trade unions for training around 500
representatives in equal pay issues in the workplace - in particular to equip
them to work with employers in conducting pay reviews.
A
2.4 The Government has
also provided funding for the Equal Opportunities Commission to develop an Equal
Pay Review Model. A key objective of the Model is that
it will be capable of being used by organisations of every size and in all
sectors, across England, Scotland and Wales, as a stand-alone tool, unaided by
external specialist support.
A
2.5 The
Castle Awards, launched by the Women and Equality Unit
in March 2002, are part of the Government's programme of action to address the
persistent inequalities in pay between women and men. The award scheme is
designed to recognise excellence in employers who are working to address equal
pay issues. The awards are also a powerful tool for raising awareness about best
practice. The scheme will highlight what employers need to do, and demonstrate
the value to their organisations, of working towards achieving equal pay. The
Secretary of State wrote to the FTSE100 firms in May 2002 promoting the Castle
Awards in order to identify best practice on equal pay and employment. Many of
these firms are already leading the way on addressing equal pay and the Castle
Awards will give recognition to this positive work.
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