§ 2.10 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)rose to move, That the draft regulations laid before the House on 3rd December be approved [2nd Report from the Joint Committee].
The noble Lord said: My Lords, the Government's main objective in putting forward these draft regulations is to safeguard the rights of work-seekers, the interests of hirers and employers and the needs of the private recruitment industry. We are repealing those requirements that now appear out of date and unnecessary, while also introducing new provisions, which address practices not foreseen or not adequately dealt with when the existing legislation was introduced.
The regulations will achieve a number of objectives. They will enable us to help to ensure that agency workers acquire the rights to which they are entitled, to stamp down on abuses, to lift outdated bureaucratic burdens from agencies, to improve the reputation of reputable firms that operate in the private recruitment industry, to protect the interests of hirers, and in turn 1331 third parties to whom hirers may owe a duty of care, and to reduce recruitment costs for employers across the economy.
The Employment Agencies Act 1973 and associated regulations, which govern the conduct of the private recruitment sector, have different definitions for employment agencies which find work for work-seekers with employers and employment businesses which employ workers themselves and then hire them out to act for and under the control of others. Where possible today I will, for ease of reference, use the term "employment agencies" to apply to both.
The Government fully recognise the central role that the private recruitment industry has to play in the modern, flexible labour market. The industry estimates that its total annual turnover is about £23 billion, which reflects the extent to which every part of the economy now relies on the services provided by the industry. The Conduct of Employment Agencies and Employment Businesses Regulations 1976 are the main regulations giving effect to the 1973 Act. Since that legislation was introduced almost 30 years ago, the industry has changed dramatically. These regulations will therefore update, clarify and improve the existing regulations.
There is a continuing need for such legislation. The DTI's Employment Agency Standards Inspectorate enforces the legislation governing the conduct of the private recruitment industry and almost 1,000 of the 10,000 enquiries that the employment agency standards helpline receives on average each year are formal complaints concerning actual or alleged breaches of the legislation by agencies.
I turn to the specific benefits for workers in the new regulations. First, entertainment agencies will no longer be allowed to charge upfront fees before they find work for actors, models and extras. That will prevent the abuse whereby agencies in the entertainment and modelling sectors charge work-seekers a fee but then provide little or no work-finding services. Under the new regulations an agency will be able to receive a fee only out of the earnings that the work-seekers receive for work that the agency has found them. The proposed regulations will also tighten up controls on client accounts so that workers in the entertainment and modelling sectors, whose earnings are paid to their agencies, are properly protected. It will be compulsory for agents handling workers' earnings to operate proper client accounts.
Secondly, on authenticated timesheets, employment businesses will no longer be able to withhold workers' pay purely because they cannot produce an authenticated timesheet. It is clearly not satisfactory that temporary agency workers' earnings can be withheld merely because they are unable to produce a timesheet signed by the hirer. Other groups do not have payment of their earnings made conditional on them producing such a document. However, the regulations allow an employment business to satisfy itself that the worker actually worked for the particular period covered by the timesheet.
1332 Thirdly, agencies will have to obtain information on any health and safety risks known to the hirer and the steps taken to prevent or control those risks. Agencies clearly have a duty of care for their work-seekers and the regulations place a responsibility on the agency for their health and safety.
Fourthly, on temp-to-perm transfer fees, realistic limitations will be placed on provisions in contracts between employment businesses and hirers that prevent temporary workers from taking up permanent jobs with hiring companies, unless a transfer fee is paid to the employment business. Any charge that discourages hirers employing the temporary worker has the effect of limiting labour market flexibility to the disadvantage of both work-seekers and hirers.
Fifthly, there are other transfer fees. Similar restrictions will be placed on terms in contracts that prevent temporary workers being employed by persons to whom the hirer has introduced them and on terms preventing those workers being supplied to the hirer by a different employment business.
We are extending the coverage of these regulations to work-seekers who operate through limited company contractors (LCCs). Many LCCs are highly paid and highly skilled and do not want to be covered by the regulations. In their view, they are operating under a business-to-business contract and do not, therefore, need protections that are designed to safeguard the interests of workers. However, these work-seekers will be able to opt out of coverage by the regulations, but the regulations include protections to prevent more vulnerable workers being forced to opt out.
The net effect of the new regulations should be to reduce recruitment costs for employers across the economy, and to make the labour market more efficient.
Barriers to companies employing temporary workers on a permanent basis will be reduced. That will enable the hirers to employ workers they have previously engaged as temps and whom they know will be suitable. Hirers will also be given the opportunity to have the temporary worker supplied by another employment business, which may be offering a better service or more competitive rates.
Agencies supplying individuals to work with vulnerable persons—for example, children, the sick or the elderly— will be required to carry out additional checks to ensure that the work-seekers are not unsuitable. If new information, which indicates the work-seeker's unsuitability, comes to light, the agencies will be required to withdraw that worker or inform the employer.
This package seeks to establish a modern and forward-looking regulatory framework to ensure that the private recruitment industry has the opportunity to continue to grow and expand its role in the labour market in the future. Outdated bureaucratic provisions will be repealed. For example, there will no longer be a requirement that agencies should provide the DTI with copies of their current terms of business; 1333 or for agencies to check whether young persons have received vocational guidance before they introduce them to employers.
All agencies will be required to check the identity of the work-seekers, to ensure that they have the necessary qualifications and to take all reasonable steps to ensure that the work-seeker and the hirer are aware of any legal requirements to be satisfied to enable the work-seeker to work for that hirer.
The regulations will help make temporary work more attractive to prospective agency workers. The various additional safeguards for temporary workers and removing barriers for temporary workers to move into permanent employment will encourage more individuals to choose to seek temporary work placements. That will enable agencies to offer a better service through wider choice and better-qualified persons to hirers.
The proposed regulations cover a complex set of relationships. We have taken considerable care to ensure that these are the appropriate legislative measures for agencies, and also for the work-seekers and hiring companies that use their services. My department has undertaken three comprehensive consultation exercises since 1999, inviting comments on the proposed regulations. In addition, Ministers and officials undertook a series of meetings with bodies representing agencies and workers and with agencies and workers themselves to obtain more detailed information on the views expressed in those consultations.
These regulations were amended to reflect many of the concerns expressed by the industry in those consultation exercises. The draft regulations have evolved since the first consultation exercise began in 1999. The industry's general impression of the original regulations was that they did not meet the needs of the industry. The department has endeavoured to strike a balance between the sometimes conflicting interests of all parties concerned. The success of those efforts is reflected in the encouraging comments of interested parties published since these regulations were laid last month. I commend the draft regulations to the House.
Moved, That the draft regulations laid before the House on 3rd December be approved [2nd Report from the Joint Committee].—(Lord Sainsbury of Turville.)
§ Baroness Miller of HendonMy Lords, I thank the Minister for his explanation of these comprehensive and complex regulations. I can be brief, both because we have had such a clear explanation from the Minister and because the regulations were the subject of extensive consultation followed by almost an hour's discussion in the 2nd Standing Committee on Delegated Legislation in another place. Although that sounds grand, in fact only 12 honourable Members, including the Parliamentary Under-Secretary of State at the Department of Trade and Industry, were present and the regulations were approved by a vote of nine to three. However, that is what we have.
The Recruitment and Employment Confederation has been instrumental in helping the DTI to create regulations that are not damaging to the industry or 1334 the labour market—not too damaging, that is— although it hopes that we are sending strong signals to other European countries that we have a rigorous regulatory framework that protects agency workers. Despite those hopes, there are strong reservations about some aspects of the regulations, which I shall briefly mention.
First, Regulation 10, the so-called "temp to perm" fees restriction, is incompatible with Article 6.2 of the Agency Workers Directive. Regulation 10 sets a time-limit for claiming a fee. Article 6.2 enables the agency to receive a "reasonable fee" for the loss by what is in effect the poaching of its agency worker. The time-scale is not a reasonable way to define the word "reasonable".
I suspect that when the directive comes into effect, the present definition may be incompatible with it. We may then be faced with revised regulations. It is a pity that the Government did not anticipate the terms of the intended directive. There is no need to rush into the regulations domestically while there is still uncertainty about the directive. To change domestic regulations twice in a short space of time is not good government.
The regulations resemble the curate's egg in that they are certainly good in parts. For example, we welcome the removal of up-front fees for actors, models and extras, who are often vulnerable and prone to be exploited by unscrupulous agencies. It is right that an agency should not be able to withhold pay from an agency worker on the excuse that an authenticated time sheet is not available.
We certainly approve of the responsibility being placed on agencies to obtain information about health and safety. However, there may be problems with the drafting. I should be grateful if the Minister would answer my points in his reply.
Regulation 20 states that where information comes to light that suggests that the work-seeker is not suitable for an assignment, the agency is obliged to inform the client. In the most extreme cases, the agency will be required to terminate the assignment. However, Regulation 20 seems to be at odds with Regulation 28, which states that agencies may not disclose information about work-seekers without their prior consent. There are three exceptions to that rule, but they do not cover the circumstances set out in Regulation 20. There is a danger that in meeting the requirements of Regulation 20, agencies may well find themselves in breach of Regulation 28 and therefore liable to action by the temporary worker.
My honourable friend the Member for North West Norfolk told the committee that he thought that, as a whole, the regulations would enhance the standing of employment businesses and agencies. However, the cloud in front of that silver lining is that, as the Explanatory Memorandum concedes, the one-off administrative costs of the regulations will be £6.2 million and the costs of lost "temp to perm" business will be an annual recurring loss of between £6.1 million and £15.4 million. That is a lot of money for one industry to bear. I cannot see how that will help either the industry or the workers who seek agency work 1335 because for one reason or another they cannot engage in or do not want full-time regular permanent employment.
However, despite those reservations, as the industry either accepts or is at least reconciled to the regulations, we certainly do not oppose them.
§ Lord Sainsbury of TurvilleMy Lords, I thank the noble Baroness for her points. Regulation 10 is complicated but it covers a complicated issue. I could explain that in detail, but it has already been done in another place. We believe that the order is compatible with Article 6.2 of the European directive. In any case, it would be wrong to require that the legislation be brought exactly into line with the directive, when we do not know when it will be implemented.
The express provision of Regulation 20 on disclosing information where it becomes clear that the worker is unsuitable will prevail over Regulation 28, in the same way as the disclosure provisions in the Act prevail. That deals with the two major issues that the noble Baroness raised.
The noble Baroness mentioned the loss of fees. That is a question of the business involved. In this context, one business's loss is another's gain. No doubt, fees will be adjusted to take account of that point. On that basis, I commend the order to the House.
On Question, Motion agreed to.