§ 12.30pm
§ Mr. Phil Hope (Corby)Thank you, Mr. Deputy Speaker, for giving me the opportunity to initiate this debate. I raised the problem of employment agencies in my constituency in my maiden speech some nine months ago, and it seems only fitting that we should debate the subject again after the excellent Budget of my right hon. Friend the Chancellor of the Exchequer.
I thank Corby borough council, local employers and schools in the constituency for their work to tackle the problem. I am keen to use this opportunity to describe the problems we face in Corby and to make some suggestions to the Minister of State of ways in which to tackle the issue nationally.
I agree with the words that the Minister spoke in Manchester earlier this year to the Institute of Personnel and Development, when he stated that the Government's intention was to promote skilled, adaptable and motivated employees. He said that the Government's concept of flexibility was qualitatively different from that of the previous Government. That meant that this Government believed that the work force should be adequately trained and continuously developed, and should receive guaranteed minimum standards, enjoy equality of opportunity, be fully involved in achieving business objectives and build their own feeling of job security in the process.
We in Corby share that view, and we are delighted that a review is taking place of employment issues and the employment status of agency workers. I hope that this debate will be an opportunity to contribute to the review that the Department is undertaking. However, the starting point is grim; we have a long way to go.
An employment agency supplies temporary workers to local companies. The Employment Agencies Act 1973 and the subsequent regulations govern their operation. However, working for an employment agency can be a nightmare.
A good example involves John, who was 16 when he worked for an agency. He used to do the twilight shift at a sandwich-making factory from 5 o'clock to 10 o'clock at night. He would go to school during the day and, at 5 o'clock, begin his shift. He would do that on Monday, Tuesday, Wednesday, Thursday and Friday—five nights a week. Not surprisingly, John did not do awfully well at school.
Jane and Sarah, two young women who are older than John, had an appalling introduction to the world of work when they left school. Over one 10-day period, the agency bus—which employment agencies use to pick up workers at 6 o'clock in the morning, for example—failed to pick them up for their assignment. During the same period, they were given a night shift for which they were totally unprepared; they were told simply to be there. One night, they were left to walk home from the factory because the agency bus did not turn up to pick them up. One evening, they had to work a 13-hour shift, which is simply unacceptable. They were promised compensation; that promise was broken.
Ann, a mature worker whose income was the only money going into the family, worked for four days on a five-day assignment, but could not work on the fifth day. 1246 Her contract said that she would be penalised for not turning up, and she was: by being paid only £1 an hour for each of the 35 hours that she had worked that week. Harsh penalty clauses directly affected her ability to feed her family. Frankly, the 1930s queue at the factory gate has been replaced by the 1990s queue for the agency bus.
House of Commons Library research estimates show that, nationally, there are some 10,000 agencies, covering every sort of employment. In 1995, it was estimated that some 880,000 people were placed in temporary jobs each day.
§ Mr. Andrew Reed (Loughborough)I particularly thank my hon. Friend for raising this debate today; 880,000 people is a significant number. Does he accept that there are examples of the problem in places such as Loughborough, where hotels that have not sold enough beds overnight send employees back home? Is that the sort of thing that he wants raised in the debate? Will that not ensure that we can raise the profile of those people, who have genuine commitments in terms of bills, but who are turned away from work each day just because there is not enough work for them on that particular day?
§ Mr. HopeI thank my hon. Friend for that intervention. That is exactly the sort of problem that exists not just in Corby, but elsewhere. I dare say that, as we speak, the 1995 figure is getting worse. It would not be surprising if today, in Corby and throughout the country, more than 1 million people are going to work on an agency contract and not on a proper employment contract.
A 1997 survey by the Northamptonshire chamber of commerce, training and enterprise in Corby showed that 50 per cent. of medium firms had used agency labour in the past three years, and that 81 per cent. of large organisations had used such labour.
We estimate that nearly 3,000 people a year in Corby get work through one of the 20 employment agencies in a rather small town. Agency working has become endemic; it has become the norm for young people starting work for the first time. It has almost become the way in to work for most people seeking jobs.
There are reasons for that. Agency working is high in Corby—and perhaps elsewhere in the country—because of the diversity of its local industry, much of which is in the food processing and manufacturing sector. Many businesses in that sector have fluctuating work force demands because of changing markets, seasonal demands and so on.
Companies stopped using overtime to deal with those fluctuations, and began to take agency staff on poorer contracts to cope with those changes. Therefore, the pressure has grown in Corby for a largely low-skilled labour force, who are available seven days a week, work a variety of hours and can be hired or fired at will. We have now reached saturation point. Most of the workers—manual or skilled—have signed up with agencies, which means that they have cornered the market, and companies cannot get the labour they require.
The point about agency working is how exploitative it is. In Corby, working for an agency usually means no sick pay, no holiday pay, and poverty wages of £2.50 an hour. One agency boasted in an advertisement that it was the 1247 highest-paying agency in the area, at £3.75 an hour. Of course, there is no job security—a job one week, and no job the next.
§ Mr. David Drew (Stroud)I welcome the debate that my hon. Friend has secured. May I share with him a problem that I had in my constituency?
One of my major employers signed an agreement with an agency and, over time, it decided that the people the agency had employed were worthy of being taken on permanently, yet the agency said that it had an agreement with the company, and refused to release those workers. Thankfully, pressure was brought to bear, and the agency eventually agreed that it would end its contract with both the company and the people with the agency; but it shows the problems where people are prevented from taking permanent jobs because of an agency's actions.
§ Mr. HopeMy hon. Friend is absolutely right. I have experience of exactly the same problem. Agencies charge what is called an introduction fee. If the agency worker is offered a permanent contract in a company, the agency demands a fee of about £300 to release the individual from his or her contract to take up the permanent contract with the company. That is a straight exploitative practice that we should try to end.
There are other forms of abuse. As well as having no sick pay or holiday pay, earning poverty wages and enduring those blockages to getting a permanent job, workers sometimes have to pay for their own factory overalls, or for cleaning them—all out of the poverty wages that they receive.
We also see confusion over responsibility for health and safety checks. Agencies are supposed to screen workers before placing them with food manufacturers or processors. However, the agencies' quality checks are not always as they should be, which can put at risk not only the agency worker but the consumer of the product that the company sells.
Bad practice, of which I have mentioned some examples, is rife, yet few agencies have been prosecuted, and even fewer closed. The regulatory framework of the 1973 Act is so minimalist that practically anything goes.
It is not only individuals who are affected; the impact on the local economy is profound. Agency work has created a culture which allows people to drift, in which work is not secure or well paid, and which stores up problems for the future. In Corby we are developing a low-wage low-skill economy; we even see people's skills deteriorating rather than improving as we would like them to.
That can lead to a downward spiral. Other employers are not attracted to the area because of the effect that bad practice has on the labour market, and we also see the depression of other wage rates because agency wage rates are low. There can be a climate of fear; I cannot emphasise that fact too much. Ordinary workers in the factories are threatened that, if they do not abide by what the company says, their jobs will be given to agency staff—and agency staff will not complain, for fear of being victimised and never being offered an agency contract again.
Young people, in particular, are victims of those circumstances, and a damaging culture affecting them is growing up. Their working hours are clearly interfering 1248 with their school work and educational performance. Older students working twilight shifts, and night shifts at the weekends, are lowering their educational performance and expectations. I believe that there is evidence that agency working can also be an incentive to truanting for younger children. In one school in Corby, the head teacher conducted a survey that revealed that 79 per cent. of the sixth form, and 39 per cent. of year 11 students, were working for employment agencies.
Those figures are huge, and they represent a desperately poor introduction to the world of work, because there is no proper training and no career path. I have seen evidence, which I have been exposing to the local press—I have also forwarded examples to the Minister—of abuse of the regulations governing under-age working, night working and so on.
Companies in Corby have complained to me about young people having the wrong attitude to work, saying that they do not have the work ethic that young people used to have. However, some companies are breeding that poor work ethic by using agencies that give young people the experience of starting work with poor pay, no job security, no loyalty and no prospects.
Families are affected, too. Families now relying on agency work rather than permanent contracts have to survive on low wages, and they cannot plan for the future, because of job insecurity. They have no income to cover for periods of sickness or holidays, or for children being ill, or even to save up for their pensions. They have no rights over their working hours, and no opportunities to progress and develop. I have seen examples of men and women who have been working for agencies for years. They may gain skills, but they do not gain the qualifications that they need to progress.
Companies use agency labour because they believe that it saves them money, and the problem of having to recruit. However, in Corby the 1997 survey showed that at least half the companies that used employment agencies were dissatisfied with the quality of people they were getting. That is not surprising. The over-reliance by companies on employment agency labour means that business efficiency suffers. The people they take on are, through no fault of their own, less reliable and less efficient. They also show less commitment—inevitably, because they are always being moved from one factory to another—and need greater investment if they are to progress.
Even more worrying is the impact on Government policy. The new deal for young people will be undermined if young people are excluded from the quality jobs and training on offer because they are taking up poor-quality agency assignments. Our "fairness at work" proposals will all be undermined if agency workers are excluded from the measures.
Our social exclusion strategy, too, will be undermined; wages will be low, insecurity will be high, and the general downward spiral of poor jobs, low skills and lack of personal development will get worse. That all reinforces an anti-learning culture that is the reverse of what we need to promote our social exclusion strategy.
What will be the role for employment agencies in future? At its best, the employment services sector has a significant contribution to make to businesses, by acting as a responsible partner offering a strategic contribution to human resource planning, and as a "best practice" employer of a flexible work force.
1249 However, a deregulated labour market that allows unscrupulous agency practices and businesses to flourish must be dealt with. We need action to control the cowboys who simply break the rules, as well as to deal with those who conform to the bare minimum standards. Crucially, the Government need to act to avoid the creation of a two-tier work force that would undermine the strategy for improving employment standards, and thus the nation's economic performance.
It is in the national interest that all parts of the work force have access to minimum standards of employment protection and benefits, and to training and development. Flexibility in business needs to be matched with responsibility.
I have some suggestions about the way forward, to which the Minister may consider responding. I believe that we need a comprehensive audit of what is happening in employment agencies. I have already given some figures, but the Department of Trade and Industry workplace industrial relations survey of 1997 will focus on people employed as the staff of an employment agency but not on the hundreds of thousands of people who are taken on on agency contracts.
There is an urgent need for a review of the scale and impact of employment agency working on families and communities, on the economy and on the implementation of wider Government initiatives. I ask the Government to consider undertaking that audit. We could use the skills and resources of the health and safety inspectorate, or perhaps of the local trading standards officers, who in Corby have been helpful in raising awareness of abuse. Perhaps we could use the Audit Commission. We have the resources, and we could do a comprehensive survey.
We should extend legal protection to agency workers. That should be a vital part of our strategy. I ask the Government to consider ways of applying the new legislation already planned, in such a way as to help agency workers. For example, the statutory minimum wage would, at a stroke, reduce much of the abuse of agency workers. The European directive on part-time workers' equal status, the working time directive, the young workers directive and the social chapter, taken together, could help to deal with the problems.
We are looking forward to seeing the fairness at work legislation on union recognition. There are examples of agencies such as Manpower, which is a national employment agency with a properly negotiated recognition agreement with the Transport and General Workers Union. Perhaps we could ensure that employment agencies are included within the ambit of the recommendations. We should certainly seek to outlaw zero-hours contracts.
Even that will not be enough. The current regulations under the 1973 Act, which is now 25 years old, specifically do not include terms or conditions of employment. In practice, anyone can walk in off the street, put a board up in a shop window and start an employment agency. Such cowboy agencies are giving the better agencies a bad name.
I believe that it is in the interests of the good agencies to have a proper system of licensing, standards and regulation. I ask the Government to consider developing 1250 new standards of operating guidelines to regulate the industry, drawn up in consultation with all the relevant organisations.
Let us see some operating guidelines that cover wages, statutory sick pay, holiday pay, guaranteed minimum hours, proper job descriptions, parental leave and union recognition, as well as outlawing harsh penalty clauses and introduction fees, and making training an essential part of an agency contract. They should also provide for reference checks to ensure that young people are not working under age, and that, if young workers are at school, the school is fully informed about the work they are asked to do.
We need to take forward a variety of strategies. I should like local authorities to follow the example of Corby borough council, which is leading the way locally in drawing up fair employment charters in collaboration with local businesses and employment agencies. Perhaps local authority trading standards officers could be given the function of monitoring and enforcing the law and the regulations, and of promoting good practice.
Could the Government encourage businesses to recruit young people as permanent staff through the modern apprenticeship system, rather than as agency workers? Perhaps we could encourage more businesses to make their production plans more effective, so that firms can have a trained, flexible work force committed to one company. We could also ask the Department for Education and Employment to publish guidelines for schools to combat the effects of agency working, and to promote a proper balance of work and study for students.
It is 25 years since the law governing employment agencies was created, and now we need new and modern employment laws for a new and modern Britain.
§ The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)I am grateful to my hon. Friend the Member for Corby (Mr. Hope) and to other hon. Members for raising the issue of employment agencies in the labour market and specific related concerns, both in their own constituencies and wider afield. In the time available, I shall try to deal with most of the points raised by my hon. Friend the Member for Corby. I undertake to write to him on the matters that I do not deal with in this debate—in which he has given a powerful and sometimes moving description of the world of work for many people in Britain who work in agencies.
Agencies play an important role in a well-functioning and flexible labour market, but some operators give the industry a very bad name. I shall take the opportunity provided by this debate to say something about that matter.
In Committee on the National Minimum Wage Bill, I said that agency working can provide legitimate access to labour markets. In the best examples, it can provide flexibility for employers and employees in the arrangements they make with one another. I do not oppose agency working or its growth in the labour market, provided that it is not used to undermine employees' access to basic minimum standards.
As my hon. Friend the Member for Corby said, a variety of problems can be experienced by agency workers, including low pay, lack of holiday entitlement, 1251 poor training and absence of sick pay. Some of the better agencies already offer workers those entitlements, but regrettably many do not. The Government have already embarked on our programme to ensure that all workers receive the minimum standards to which they are entitled. When I say "all workers", I include those who work for agencies.
My Department's employment agency helpline has received more than 10,000 public inquiries annually, about 10 per cent. of which are from workers who have experienced problems so serious that a formal investigation by my Department's inspectorate has been necessary. One third of the cases involved a failure, or an apparent failure, to pay workers correctly or on time. A further third of complaints investigated were either of a general nature, or involved issues related to the written terms of a contract or the lack of a contract.
In recent years, some agencies—such as ABC Contracting Services—have had a practice of putting workers on penalty-pay contracts, in which those who become sick or absent for other reasons are paid as little as £1 per hour for work they have already done. That is not an acceptable practice, or the type of behaviour that gives industry a good reputation. Such practices damage or destroy the industry's reputation.
Standards of a few agencies are unacceptably poor. Last year, for example, a complaint investigated by myself involved a worker who had been underpaid in the constituency of my hon. Friend the Member for Corby. Despite assurances that the matter would be corrected, the agency had to be approached by my Department several times before it eventually paid the worker the money that he was owed.
Such poor standards are simply unacceptable. My Department is determined to enforce the provisions of the Employment Agencies Act 1973 in agency standards, and we shall regularly bring prosecutions in magistrates courts to do so.
Two cases that were heard earlier this month included one in which the agent was both fined and ordered to pay a worker unpaid earnings, with interest, totalling more than £3,700. Another case heard this month involved a company illegally charging workers fees for work-finding services. A fine of £5,000 was imposed in that case for only two offences. Current prosecution levels are greater than at any time since the legislation came into force in 1976.
My Department can also apply for orders prohibiting—for up to 10 years—unsuitable persons from running agencies. The first six such applications were obtained during the latter part of 1997, and ranged from periods of three years to the 10-year maximum. Another seven such cases are currently before industrial tribunals. I can announce today that several more cases are in the pipeline.
In addition to investigating public complaints, my Department conducts proactive checks on specific concerns. We make periodic unannounced enforcement checks—sometimes targeted on agencies in specific towns—of agencies' compliance with the legislation. In Corby, on 9 December 1997, 20 such agencies were visited by a team of six of my Department's inspectors. Some of the agencies were found not to be complying properly with the regulations, and have been instructed to take corrective action.
1252 I make it quite clear to the House that the Government will not tolerate the type of worker abuse uncovered in such cases. Most reputable operators and trade associations, such as the Federation of Recruitment and Employment Services and the Agents Association, welcome our tough approach.
Other measures—such as introduction of the working time directive, which will be implemented by 1 October 1998—will ensure that agency workers receive three weeks paid annual leave. Agency workers will also, of course, be covered by the national minimum wage. Young workers, and agencies, will also be covered by the young workers directive.
Much of the regulatory framework applying to the industry is now 20 years old. Since coming to office, we have intended to consult on updating that framework. More resources are now being applied to the matter, and we hope shortly to publish a consultation document. I am sure that the views expressed in this debate will be considered in that consultation process.
The employment status of some groups of workers is another specific concern. Some employers have attempted deliberately to make employment status unclear, to avoid employment or other legislation. For some months, my officials have been reviewing employment status issues involving various groups of workers whose position is less than clear, including agency workers. The review is almost complete, and we shall shortly consider what action to take on the issue.
The practice of some employers to contrive in creating a bogus self-employment status—so that workers are denied their rights—cannot persist. Confusion in employment status is not only unhelpful to workers, but, equally important, costly for British business. Good employment practices—in which employers invest in training and education, and in skilling, upskilling and re-skilling—should not be undermined by poor employment practices in the workplace, in the labour market or in the provision of goods and services.
Employers require a level playing field in competition. However, as bad employers have been able to undermine the ability of good employers to compete by paying low wages, some employers have engaged also in contractual arrangements with their employees that are based not on improving service quality but on the downward spiral of poor pay, poor conditions and poor training, and on little or no investment in the work force.
Britain must have a high-value economy based not on the lowest common denominator of poor standards but on investment and the highest possible standards. Employers and employees have an obligation to each other. The employee has an obligation to the success of the enterprise in which they work, and the employer has a responsibility towards the employee. Partnership is the only way forward for successful businesses in the United Kingdom. The Government will respond to unfair competition that is based on unfair practices by providing minimum standards for all workers in the labour market.
The "Fairness at Work" White Paper will state our plans for achieving decent minimum standards at work while maintaining a flexible labour market and improving competitiveness. Central to the White Paper is the implementation of our manifesto commitment on union recognition. The White Paper's inclusion of other issues will be decided soon. We have considered many representations on those issues.
1253 Once the White Paper is published, I am sure that my hon. Friends will be assured that the Government—with industry and trade unions—are searching for a vastly different system of co-operation in the workplace, and want development not only of minimum standards of care and duty to employees but investment in the workplace that involves both employers and workers, to ensure the success of those companies.
§ Mr. Phil Sawford (Kettering)I note and welcome my hon. Friend's statements that the regulations—which are now 20 years old—should be reviewed. The main issue is enforcement. My hon. Friend the Member for Corby (Mr. Hope) was correct in his constructive suggestions on how the regulations might be properly enforced. However, I think that a third aspect of the matter is dissemination of information—finding ways in which we can get the message explaining their rights to agency workers.
Will the Minister consider establishing an information programme, so that people working in agencies know where and to whom they can take their complaints if they feel that their rights are being breached? It is an essential part of the enforcement process.
§ Mr. McCartneyWe already do that. That is why the hotline receives more than 10,000 inquiries a year from agency workers who want sound advice and assistance. In addition, on the implementation of the national minimum wage, significant resources will be made available to ensure that employers and employees know of their obligations and rights in respect of the legislation. Every time that we provide new minimum standards in the labour market, it will be our intention to provide information for employers and employees to ensure successful implementation of legislation. I thank my hon. Friend for his comments.
Any hon. Member who has evidence of potential or actual breaches of health and safety issues relating to young people working illegally in the labour market should let me know about it. The Health and Safety Executive will take immediate action to rectify the situation.
§ Mr. Deputy Speaker (Mr. Michael Lord)Order. We must move on to the next debate.