FINAL CONSULTATION ON THE DRAFT FIXED TERM EMPLOYEES (PREVENTION OF LESS FAVOURABLE TREATMENT) REGULATIONS 2002

Introduction

Notes

Summary of Regulatory Impact Assessment

Regulatory Impact Assessment (118Kb) 

Regulations (57Kb)

INTRODUCTION

The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 will prohibit employers from discriminating against fixed term employees. The Regulations also aim to prevent abuse arising from the use of successive fixed term contracts and improve access to permanent jobs for fixed term employees. The Regulations transpose the European Union Directive on Fixed Term Work, as well as making additional provision, in particular to prohibit discrimination in relation to pay and pensions. The Regulations will be made under a provision in the Employment Bill.

From March to May 2001 the Government held a public consultation on the implementation of the Fixed Term Work Directive. The Government response to the public consultation, which summarises views received, and the policy options chosen, is now available from the DTI website or alternatively by calling DTI Publications on 0870 1502 500 for a copy.

The purpose of this document is to give interested parties a further opportunity to comment on the draft regulations before they are brought into force. The Government intends to do this by 10 July 2002, in accordance with the transposition deadline in the Directive, once the Employment Bill has received Royal Assent and the Regulations have been laid.

This document consists of explanatory notes which summarise the proposed changes to the current legal position, the draft regulations and a summarised version of the Regulatory Impact Assessment (RIA). (A full version of the RIA (118Kb) is also available from the DTI website or alternatively call DTI Publications.) A Welsh language (25Kb) version of this consultation paper is available and we can provide large print and taped versions too – please contact Verona Bailey (below).

Your response to this consultation document may be made publicly available in whole or in part at the Department's discretion. If you do not wish all or part of your response (including your identity) to be made public, you must state in the response which parts you wish us to keep confidential. Where confidentiality is not requested, responses may be made available to any enquirer, including enquirers outside the UK, or published by any means, including on the internet.

Comments on the Regulations should be sent by 15 April 2002 to:

Verona Bailey                                    email: Verona.bailey@dti.gsi.gov.uk
Department of Trade and Industry
UG82
Employment Relations Directorate
1 Victoria Street
London SW1H 0ET

NOTES

These notes are not exhaustive. They cover the main requirements of the Government’s proposals on fixed term employees.

Prohibiting less favourable treatment

Fixed term employees will have the right not to be less favourably treated than comparable permanent employees, unless the less favourable treatment is justified on objective grounds. The right applies both to less favourable treatment in relation to contractual terms (including pay and pensions) and to other detrimental treatment by the employer. The right applies only to treatment on the ground that the employee is fixed term.

Comparators

The treatment of any fixed term employee will be compared to that of any permanent employee who does the same or similar work for the same employer in the same establishment, or in a different establishment if no there is no permanent comparator in the same establishment.

Objective justification and the employment “package”

An employer will be able to treat fixed term employees less favourably than comparable permanent employees where the treatment is objectively justified. Whether treatment is objectively justified will depend on all the circumstances of the particular case. However, the regulations will provide in particular that less favourable treatment in relation to particular contractual terms will be justified where the fixed term employee’s overall package of terms and conditions is no less favourable than the comparable permanent employee’s.

Qualifying periods, training and employment opportunities

A fixed term employee will have the right not to be treated less favourably than a comparable permanent employee, in particular, in relation to

• Any qualifying periods for benefits,

• Opportunities to receive training, and

• Opportunities to secure permanent employment with the employer. 

In order to be able to exercise the latter right, a fixed term employee will have the right to be informed by the employer of available vacancies in the establishment.

To comply with the law:

• Employers should not treat fixed term employees less favourably than comparable permanent employees unless:

• The treatment is for a reason other than the employee being employed on a fixed term basis, or

• The treatment is justified on objective grounds.

Enforcement

Fixed term employees may complain to an employment tribunal that they have been:

• Treated less favourably than a comparable permanent employee; or
• Subjected to detriment on certain grounds associated with asserting their right not to be treated less favourably than a comparable permanent employee.

Written Statement

Fixed term employees will have the right, on request, to receive from their employers a written statement giving the reason for any less favourable treatment they believe has occurred. This statement must be supplied within 21 days of the request and will be admissible in evidence in proceedings under the regulations.

Preventing the abuse of the use of successive fixed term contracts

The use of successive fixed term contracts will be limited to a maximum of four years, unless their use for a longer period is objectively justified. This statutory limit can be displaced by collective or workplace agreements which, in order to prevent abuse, specify a maximum duration of successive fixed term contracts, a maximum number of contracts, and/or objective reasons justifying renewals of fixed term contracts. Agreements may provide for contracts to be renewed in excess of the limit where it is objectively justified to do so.

If a fixed term contract is renewed in breach of the limitation, the term of the contract limiting it to a fixed term will become invalid. The contract will be regarded as a permanent one.

Successive fixed term contracts will be affected by this provision of the regulations where the employee has been continuously employed (as currently defined in the Employment Rights Act 1996) throughout the series of contracts.

There will be no limit on the length of a first fixed term contract.

Fixed term employees will have the right to receive from their employers a written statement, either confirming that their contracts are to be regarded as permanent, or giving reasons why it continues to have effect as a fixed term contract.

Service on successive fixed term contracts before the regulations come into force will not count.

To comply with the law:

• Fixed term employees should not be employed on a series of successive fixed term contracts beyond 4 years unless this can be objectively justified or a collective or workplace agreement has agreed otherwise.

Amendments to primary legislation

The regulations will amend provisions in the Employment Rights Act 1996 and Social Security Contributions and Benefits Act 1992 which currently treat fixed term employees less favourably than comparable permanent employees in some circumstances as follows:

Removal of redundancy waiver

Fixed term employees on contracts of two or more years will no longer be able to waive their statutory right to receive redundancy payments if they are made redundant at the end of their contracts. This will apply to contracts signed, extended or renewed after the regulations have come into force.

Task contracts

The Employment Rights Act 1996 will be amended so that where a contract of employment terminates automatically on the completion of a particular task or the occurrence or non-occurrence of a particular event, the termination will be classified in law as a dismissal. This will give employees on such “task contracts” a number of statutory rights, on the same basis as employees working under permanent contracts or other types of fixed term contracts. These rights include:

• The right not to be unfairly dismissed.

• The right to a written statement of reasons for dismissal.

• The right to statutory redundancy payments.

Notice periods

The Employment Rights Act will also be amended so that employees on task contracts expected to last 3 months or less have the rights to minimum notice periods on the same basis as permanent employees and those on other fixed term contracts. Currently, extra qualifying periods are imposed in relation to these particular fixed term employees.

Guarantee payments, medical suspension and statutory sick pay

Fixed term employees will have the right to receive guarantee payments, payments on the grounds of medical suspension, and statutory sick pay, on the same basis as permanent employees. Currently, extra qualifying periods are imposed in relation to some fixed term employees.

Who is affected?

The Regulations will apply to all employees with fixed term contracts except: apprentices; some people employed on training programmes supported by the government or European Social Fund; and agency workers (employees employed by an employment business to work for a third party employer). They will also apply to Crown servants (except members of the armed forces), Parliamentary staff and police officers.

REGULATIONS CONCERNING THE EC DIRECTIVE ON FIXED TERM WORK — REGULATORY IMPACT ASSESSMENT
(Please note that a full version (118Kb) of this RIA is available on the DTI website) 

Summary 

Issue

The growth of fixed term contracts (FTC) in several European countries has led to concerns that workers on FTC may be less favourably treated than workers on open-ended contracts.

Fixed term work

Based on information from the Labour Force Survey we estimate that the number of people working on FTC in the UK is between 1.1 and 1.3 million and has increased by approximately 7% between 1994 and 2001. The public sector uses proportionately more FTC than the private sector and accounts for just under half of the total. The public sector also accounts for over 70% of fixed termers who have been in their jobs for over two years. Long FTC (over two years) are rare in the private sector. About 50% of seasonal and 37% of casual employees are in the distribution, hotels & restaurant sectors.

Objectives & options

The aims of the European Framework Agreement on Fixed term Work are to: (a) improve the quality of fixed term work by ensuring the application of the principle of non-discrimination; and (b) establish a framework to prevent abuse arising from the use of successive fixed term contracts. We have carried out a cost/benefit analysis of the options set out in the main text of the consultation document.

Benefits

We estimate the total benefits of the proposals:

• 25,000 - 53,000 employees will benefit from proposals to end discrimination by £75 - 172 million.

• Improved access to training could benefit fixed term employees by £39 - 73 million and could have benefits to business of £23 - 146 million per year from increased productivity.

• There are savings to the taxpayer estimated at about £5 million per year due to changes in the Statutory Sick Pay provision.

• Measures to prevent abuses of FTC could benefit 5, 000 - 13,000 fixed term employees by £6 - 16 million.

• Removing the redundancy waiver for fixed term contracts could benefit 43,000 - 120,000 employees by £28 - 77 million.

There may be other benefits, such as greater job security or greater willingness to work on a FTC, that are difficult to quantify.

Compliance costs

The policy costs are largely the converse of the benefits, plus some additional employer National Insurance Contributions (NIC). We estimate:

• Non-discrimination in benefits will cost £88 - 193 million.

• Increased access to training for fixed term employees could cost £39 - 73 million.

• Additional costs from paying all FTC employees Statutory Sick Pay after day one of their employment are estimated to be up to £7 million per year.

• Measures to restrict abuses could cost £7 - 18 million (including costs for objective justification).

• Removing the redundancy waiver could cost £28  - 77 million.

• One-off administration costs for the implementation of the measures for business could be around £2 million.

The majority of costs and benefits are annually recurring.

Small businesses

Fewer small businesses than larger establishments use FTC and when they do they are less likely to discriminate, so the effect on them is unlikely to be significant.

Other costs

There could be additional costs from Employment Tribunal applications of about £1.4 million for employers and £0.4 million to the Employment Tribunal Service. Additional costs will arise to the Advisory, Conciliation and Arbitration Service (ACAS).
 

Draft Regulations (57Kb)

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Last updated 21 January 2002