CBI surveys employment practice

The Confederation of British Industry’s annual employment trends survey, published in September 2004, highlights employer concerns about employment tribunal claims, EU regulation and increases in the national minimum wage.

In September 2004, the Confederation of British Industry (CBI) published the results of its seventh annual employment trends survey, conducted in conjunction with the Pertemps recruitment agency. The survey, carried out in May 2004, reports the responses of 520 private sector employers to a questionnaire that covered a range of labour market issues. Key findings from the survey are outlined below.

Company performance

Half of employers regard 'effective people management' as the key influence on present and future competitiveness, with 'management skills' being ranked as the most important human resources factor. As many companies thought that job security had increased as the number who felt it had worsened - a distinct improvement given the perceptions of a significant worsening of job security reported in 2002 and 2003.

Flexible working

As in the 2003 survey (UK0310102N), part-time working was the most common flexible working practice used by employers (84%), followed by job sharing (38%), flexitime (31%) and career breaks/sabbaticals (20%).

Over the first year’s operation of the statutory right for employees to request flexible working (UK0304104F), effective from April 2003, 77% of employee requests for flexible working were reportedly accepted by employers, 16% discussed and a compromise agreed, and 8% declined. A quarter of firms reported that the legislation had had a 'small positive impact', and 66% that the legislation had had 'no impact' on their organisation.

Most respondents reported that they made little use of temporary agency workers: in 48% of firms, temps made up less than 1% of the workforce and in a further 36% they constituted 1%-5% of the workforce. A total of 60% of employers said that they would reduce their use of agency workers if the proposed EU temporary agency work Directive (EU0410204F) were to be adopted without amendment, 58% said it would increase costs and 47% believed it would impose 'additional bureaucracy'.

Companies reported that 30% of employees had signed an individual opt-out from the 48-hour statutory limit on average weekly working hours. Employers with 50-199 employees had the largest proportion of employees who had opted out (38%). However, the proportion of employees who in practice worked an average of more than 48 hours per week was lower at 20%. A majority of companies (72%) believe that the withdrawal of the individual opt-out (UK0410103N) would have have a (negative) impact on their organisation. Of these, 41% said that the primary impact would be to undermine their ability to meet customer needs, and 20% said it would increase the number of permanent staff employed.

Pay and benefits

The CBI survey found that the national minimum wage was now 'starting to bite' on more employers. A quarter of employers felt that the October 2004 increase in the minimum wage (UK0409108F) would have an impact on them. Of these, nearly half expected a significant one-off adjustment to basic pay rates combined with a significant knock-on effect on costs through maintaining differentials. There were also clear sectoral differences, with concerns about the increase in the minimum wage greatest in the retailing, distribution, hotels and restaurants sectors.

On pensions (UK0301109F), the survey suggests that the trend of employers moving away from final-salary pension schemes appears to have bottomed out, but only 30% of employers reported they provide defined-benefit pension schemes to their employees. Stakeholder pensions were the most popular form of provision (60%), followed by defined-contribution (money purchase) schemes (49%).

Employee consultation

Approaching half (49%) of respondent companies reported they had permanent mechanisms for informing and consulting employees, typically a staff council, compared with 47% in 2003 and 35% in the 2002 survey. A further 20% said they intended to introduce such a structure over the next year. Firms with over 5,000 employees were most likely to have introduced such mechanisms (62%), whereas only 40% of firms employing fewer than 50 staff had done so. The CBI attributes this increase largely to the forthcoming UK implementation of the EU information and consultation Directive (EU0204207F) in April 2005 (UK0407104F).

This year’s survey found that in 57% of firms there was no trade union involvement in their information and consultation structures, compared to 67% last year. The CBI suggests that 'this may be due to the trade unions making a concerted effort to raise their profile with regard to information and consultation. The years 2001 to 2003 saw a steady increase in the percentage of firms who did not have any trade union involvement in information and consultation at a formal level, and this year may be the start of a reversal of this trend.'

Regular meetings with project groups was the most popular direct method of employee involvement, reported by 88% of companies, followed by written methods (eg staff magazines and newsletters) (83%) and electronic communication (67%).

Employment tribunal cases

For the first time the CBI survey asked companies for their views of the employment tribunal (ET) system (UK0410104F). Four out of 10 employers had faced a tribunal claim in the last year. Over a quarter (27%) of these were settled out of court by employers despite legal advice that the tribunal would rule in their favour, and 18% were settled out of court after advice that the company was unlikely to win. A further 24% were withdrawn by the applicant. 23% of cases were won by the employer at an ET hearing. Only 8% were fought by employers at a hearing and lost.

A substantial proportion of employers (44%) said they regarded the ET system as 'ineffective'. Half the respondents said that ETs were 'too adversarial', 30% that they were too costly and 11% that they were damaging to employee relations.

Over two-thirds (69%) of employers reported an increase in 'weak and vexatious' ET claims in recent years, and 44% thought that the introduction of new regulations requiring disciplinary and grievance procedures in all firms - introduced later in October 2004 (UK0408102F) - was unlikely to reduce the number of ET claims.

Workforce diversity

Of employers, 19% had conducted an equal pay audit, 9% planned to do so in the next year and 25% were considering conducting one but had not yet drawn up any firm plans.

Fewer employers than in 2003 reported difficulties in recruiting women (12%), people with disabilities (12%) and people from particular ethnic groups (11%). Two-thirds (68%) of companies that had identified a recruitment problem had responded by actively encouraging applications from under-represented groups, compared with 33% in 2003.

Training and skills

According to the survey, over half of firms had increased their investment in training over the previous year, increased the amount of job-specific training they offered and increased training for transferable skills.

Nearly half of employers (47%) expressed concern at poor levels of school leavers’ basic literacy and numeracy and their wider employability skills. Employers’ three main priorities for improving the education system were to focus on the basics of literacy and numeracy (83%), address teacher shortages and quality of teaching (58%) and improve apprenticeships (56%).

Skill shortages seriously affected almost a quarter (24%) of employers, with shortages most acute in the construction sector. Employing migrant workers appears to be an attractive way for UK companies to meet shortages of both skilled and unskilled labour. The survey indicated that 27% of firms expected to recruit migrant workers from the new EU Member States, 25% expected to recruit from the 15 old EU Member States and 12% anticipated recruiting from outside the EU. Two-thirds of the demand was for skilled and professional workers.

Commentary

The annual CBI employment trends survey provides a useful barometer of current employment practice among UK companies and of managerial opinion on key employment issues. Notable aspects of the survey this year include continued spread of information and consultation machinery ahead of the forthcoming legislation on the issue, and employer concern about the potential impact of prospective regulatory developments at EU level, in particular the draft temporary agency work Directive and proposed changes to the working time Directive. The survey also indicates that more employers are beginning to report difficulties in accommodating increases in the national minimum wage.

Launching the survey, the CBI itself emphasised the findings concerning employers’ lack of confidence in the ET system. The number of ET claims rose by 17% in the year to April 2004, and employers are also critical of the cost and adversarial nature of ET hearings. It remains to be seen whether the new statutory workplace dispute resolution procedures, introduced in October 2004, will have the effect of curbing the level of claims, and whether new rules of procedure, effective from the same date, will improve the handling of ET cases, but on the evidence of the CBI survey, employers appear to be highly sceptical. (Mark Hall, IRRU)