[ Focus: Brexit special ]
The impact of Brexit on employment law and the supply of workers By ALEX MEIKLE, ECA Director of Employment and Skills
NIROWORLD / SHUTTERSTOCK
T
he ECA’s recent Brexit survey, conducted with SELECT and BESA, confirmed the concerns many contractors have about employment legislation stemming from the EU and their aspirations for changes in a number of areas. In recent decades, employment legislation imported from Europe has been overlaid on the UK’s system of established legislation and voluntary collective agreements that have evolved over many years. This latter point is particularly true of the electrical contracting industry and the employment rules contained in the Joint Industry Board agreement, along with other collective agreements used more widely in the building services sector. In simple terms, this has created a ‘square peg in a round hole’ approach to legislation, which in some areas has been arguably unhelpful and unnecessary. In some respects, it could be argued that certain EU directives have actually contributed to an undermining of the standards that were already in place. An example of this is potentially the implementation of the EU’s Posted Workers Directive, which requires the application of National Minimum Pay in the UK. This may have undermined the strong ‘benchmarking’ effect of the collective agreements on rates of pay for skilled tradespeople, such as electricians, covered by the JIB Agreement on much higher pay rates. The EU’s Agency Workers Directive has compounded this unwelcome effect on collective agreements in the electrical and wider construction industry, as it has had the unintended consequence of encouraging the development of various ‘avoidance’ vehicles for engaging and paying UK workers outside its scope. This has resulted in a plethora of models of suspect self-employment, personal service companies and so on, which have presented significant challenges to the tax authorities.
32 ECA Today Winter 2016
Access to the EU Market To retain access to the EU market while achieving changes to UK legislation will likely require a trade-off
Retaining access to the EU’s Single Market was another of our members’ top Brexit aspirations. Yet to retain access to the EU market while also achieving changes to UK legislation derived from EU employment law will likely require a tradeoff. However, the extent to which sweeping changes to employment legislation are needed is questionable and there is limited need for wholesale reform. Such changes that are necessary should potentially centre on strengthening the existing legislation on Posted Workers and amending the Working Time Regulations (WTR)* and the Agency Workers Regulations (AWR).
The Working Time Regulations
While the AWR seeks to ensure equal treatment for agency workers doing the same job as direct employees, there appears to have been unintended consequences in the electrical contracting and wider construction industry. As indicated earlier, this may be manifested in widespread avoidance of the regulations. The reason for this being an issue in electrical contracting is probably a consequence of the sector’s fast moving, peripatetic nature. In essence, relatively short-term contracts obtained at short notice are fairly typical. The duration of these contracts often does not neatly fall into the 12week period after which equal treatment under the rules applies. There is a need for much more flexibility to encourage suppliers to work within scope of the regulations. Another factor to consider is the uncertainty about the validity of the assumption that ‘equal treatment’ on the same terms and conditions as long term directly employed operatives is what they actually want. In electrical contracting, agency
*The Working Time Regulations were brought in under EU health and safety law, but in practice they mainly cover aspects which are much more akin to employment law.
Implications for the Supply of Skilled and Professional Staff
What effect will Brexit have on our sector in the next five years on employment policy and legislation Very positive Slightly negative
The WTR are likely the source of many of the changes to employment legislation desired by employers, who are often critical about their lack of clarity, additional administrative burden and cost. Some of the main areas for change could include: ■ calculation of holiday pay – the inclusion of overtime (other than contractually required) is an aspect that requires review following European Court of Justice (ECJ) rulings that overtime, bonuses and commissions should be included in holiday pay. ■ accrual of annual leave while on long-term sick leave, maternity leave and parental leave. ■ the conditions required for an optout from the 48-hour working week. ■ simplifying the rules around carryover and payment in lieu of unused leave.
workers often prefer the flexibility of working in this way and are likely to receive higher levels of takehome pay in compensation for any loss in standard terms and conditions.
The Agency Workers Regulations (AWR)
Slightly positive Very negative
11% 4%
No change Don’t know
15%
Conclusion
7%
28%
35%
Source: ECA/BESA/SELECT Brexit survey, August-September 2016
The number of companies in the building engineering sector reliant on EU migrant workers is very low at just five per cent, according to the Brexit survey mentioned above. However, within this overall picture, there are much higher requirements for migrant workers amongst larger contractors (more than 20 per cent). Other evidence suggests that many of these individuals will be professional staff where the EU is the biggest foreign supplier. This sector is much more secure with regard to ensuring the supply of skilled tradespeople through apprentice training, although much more has to be done to increase the numbers in training. There appears to be a much higher risk when it comes to the supply of professional staff where the EU is an important source of any shortfall. The implications of this is that the UK government and employers will need to make an immediate step change with regard to the training of professional staff in most construction disciplines within the UK, in the event that the free movement of such labour is restricted in future. For many reasons, not least the uncertainty that exists as a consequence of the introduction of the Training Levy and other changes in the arrangements for training, it seems questionable whether this ‘step change’ will be achieved in the short to medium term. The government’s Brexit negotiators will be well aware of the need for a trade-off of some kind on the free movement of labour, if strong economic growth is to be maintained.
While Brexit clearly offers some opportunities to revisit and improve employment law, the government has been clear that it does not intend to use the process to reduce employee and worker rights. As a result, any proposals to positively change employment law will need to be considered carefully and communicated effectively to government and other key stakeholders to ensure fairness for employees and employers, and a level playing field for direct and indirect employees. The electrical contracting industry has a proud and successful tradition of securing high standards through collective bargaining via the JIB. This model has stood the test of time, and indeed the JIB was created before the UK joined the EU, and will continue after the UK has left. Moving forward, the ECA will continue to uphold the JIB model as a progressive outlet for constructive partnership between employers and their employees.
Winter 2016 ECA Today 33