Survey highlights employer responses to recession and employment regulation

The Confederation of British Industry’s latest employment trends survey, published in November 2009, provides data on employer views and policies on a range of industrial relations issues. Respondents expressed concern at the volume of employment regulation and the implications of the Directive on agency work. However, most felt that the potential withdrawal of the individual opt-out from the 48-hour weekly working limit was unlikely to have a detrimental impact on their organisation.

In November 2009, the Confederation of British Industry (CBI) published the results of its annual employment trends survey (10Mb PDF), conducted in conjunction with the Harvey Nash recruitment and information technology (IT) group. The online survey, carried out in August to September 2009, analyses the responses of 243 employers across all sectors of the economy, 90% of whom were in the private sector. In terms of company size, 11% of respondents employed 5,000 or more staff, 30% employed 500–4,999 persons, 11% employed 200–499 workers, 22% employed 50–199 persons and 26% employed fewer than 50 staff. This article gives an overview of the report’s main findings.

Labour market conditions

A substantial minority of employers (37%) said they were operating a recruitment freeze – a notable fall from the 61% who reported doing so in an earlier CBI survey carried out in April to May 2009 (UK0907039I). Similarly, fewer employers – at 36% compared with almost two thirds (62%) in the previous survey – reported that they had made changes in working patterns in response to the downturn or intended to do so within the next six months. The most prevalent changes made involved:

  • reducing paid overtime (54% of those employers taking action);
  • encouraging more flexible working (50%);
  • reducing the use of temporary agency workers (38%);
  • increasing the use of fixed-term employment contracts (33%) – which constitutes a notable rise from the 14% reporting such a change in the earlier survey.

The CBI notes that ‘extreme moderation on pay’ remains the norm. Asked about their plans for the next pay review, 47% of employers said they planned a pay freeze (a slight fall from the earlier survey), 11% planned a general increase below the rate of inflation and 2% planned a ‘negotiated reduction’ in pay. One fifth of the employers planned a general increase in line with inflation.

Impact of employment regulation

Over two thirds (67%) of respondents saw the ‘current burden of employment regulation’ as a serious threat to labour market flexibility, and 70% felt it would continue to threaten flexibility and competitiveness in the future. These figures are both three percentage points higher than those in last year’s survey (UK0810059I).

Temporary agency work Directive

Large majorities of respondents thought that implementation of Council Directive (2008/104/EC) on temporary agency work (EU0811029I) would lead to ‘additional bureaucracy’ (79%), ‘extra costs’ (79%), a ‘reduction in flexibility’ (70%) and a ‘reduction in the use of temporary workers’ (70%). The employers’ concerns about the implications of the agency workers legislation were also at a higher level than those recorded by last year’s survey.

Working time

The survey shows a mixed picture regarding the use of the individual ‘opt-out’ from the 48-hour limit on weekly working hours. While just over half (53%) of employers reported that none of their employees had signed an opt-out, over a quarter (27%) said that 75% or more of their employees had done so. Almost one third (30%) of employers reported than none of their employees regularly worked more than 48 hours a week, while 59% said that under half their employees did so. The CBI commented that these results showed the opt-out was needed in order to provide flexibility to react to fluctuations in demand rather than reflecting an embedded ‘long-hours’ culture. The proportion of employers who believed that the potential withdrawal of the individual opt-out would have a significant or severely detrimental impact on their organisation was 35%, down from 40% in the previous year

National minimum wage

Companies were asked about the likely impact of the GBP 5.80 (€6.40 as at 10 December 2009) national minimum wage (NMW), effective from October 2009 (UK0906019I). One fifth of the respondents (22%) indicated that the increase would have an impact on them – broadly the same proportion as for the previous year’s increase. Of these, over half (53%) said that the increase would mean a basic pay rise to ensure compliance, but with no knock-on impact on differentials (up from 48% in last year’s survey). Over a quarter (27%) said that the increase would also have a knock-on impact on pay differentials further up the pay scale (down from 44% last year). More than one third (37%) of affected employers said that the move would lead to increased prices, and 17% indicated that it could lead to a reduction in the number of employees to offset higher costs and/or raise productivity.

Flexible working

As in previous years, part-time work was the most common flexible working practice, reported by 83% of respondents. The next most prevalent category of flexible working was teleworking/working from home (66%), followed by flexitime (48%), career breaks/sabbaticals (38%) and job sharing (32%). The single biggest growth area of flexible working was teleworking, which was up by 20 percentage points from last year’s survey.

With regard to the operation of the statutory right for employees to request flexible working arrangements (UK0702019I), 93% of requests from parents had reportedly been accepted by employers. Of these, some 71% were accepted formally, 10% informally and 12% resulted in a compromise; a further 7% of the requests were declined. A similar proportion of requests from carers of adults, at 94%, had reportedly been accepted by employers; of these, some 55% were accepted formally, 20% informally and 19% on a compromise basis, while 7% of the requests were declined.

Almost two thirds (62%) of the employers surveyed said they offer the right to request flexible working to all employees. A further 7% extended the right to request flexible working to certain specific groups in addition to those covered by the statutory provisions.

Some 69% of companies indicated that the right to request flexible working arrangements had had a positive impact on employee relations. A further 63% of respondents reported a positive impact on recruitment and retention, and 41% a positive impact on absence rates. However, one in five employers (20%) reported a negative effect on labour costs, and 16% a negative impact on productivity and customer service.

Workforce diversity

Some 32% of employers responding to the survey reported having a formal diversity policy, while 45% had no formal diversity policy but did have equality practices in place. A further 10% of employers surveyed reported that they had ‘taken positive action’ to achieve a more diverse workforce, whereas 5% indicated that they ‘[lacked] the resources to take positive action’ and 3% that they ‘[lacked the knowledge of what positive action would be appropriate’. Larger companies were more likely to report formal diversity policies than smaller ones.

Equal pay audits

A quarter (25%) of employers surveyed had conducted an equal pay audit in the past three years (compared with 32% last year). An additional 9% of respondents (the same as last year) planned to do so in the next year, and 6% were considering conducting one but had not yet drawn up any firm plans (down from 26% last year). Over half of all respondents (51%) said they had ‘not considered conducting an equal pay audit’, while 9% had ‘considered conducting an equal pay audit but decided there were more effective options available’.

Half of the large employers in the survey (those with 5,000 or more employees) had conducted equal pay audits, compared with 18% of small and medium-sized enterprises (SMEs) (those with fewer than 200 employees).

In the context of proposals in the government’s Equality Bill (UK0905029I), which would require companies to report publicly on their gender pay gap, the survey asked whether companies calculated their average gender pay gap. Only one in 12 companies (8%) reported doing so, while 12% indicated that they calculated their gender pay gap by pay band or other divisions. Some 43% of respondents ‘[saw] no value in calculating the gender pay gap’ and 27% reported using ‘other methods to promote gender equality in pay’.

Default retirement age

With the government planning a review (UK0908019I) of the current default retirement age (DRA) provisions in the Employment Equality (Age) Regulations 2006 (UK0603029I), the survey asked employers whether they operated a DRA and what the impact of removing it might be.

Almost two thirds (65%) of the respondents said that their organisation operated the national DRA of 65 years of age. A further 4% reported they had a DRA under 65 years, while 1% had a DRA over 65 years of age. Some 30% of respondents had no DRA. Most employers with a DRA felt that removing it would have either ‘no impact’ (25%) or only a ‘minor impact’ (47%). However, 23% forecast a ‘significant impact’ and 5% a ‘severe impact’. The impacts expected by the most respondents were as follows:

  • increased uncertainty in workforce and succession planning (67%);
  • the increased use of performance management for older employees (57%);
  • a rise in the number of age-related discrimination claims (40%).

Not all employers believed that the impact of removing the DRA would be negative. One third of respondents (32%) said it might lead to the increased take-up of flexible retirement packages.

Employment tribunal cases

The survey found that more than one third (34%) of employers had faced an employment tribunal (ET) claim in the last year. In over a quarter of cases (26%), ET claims were subsequently withdrawn by the applicant. The same proportion of cases (26%) was reportedly settled ‘out of court’ by employers, despite legal advice that the tribunal would rule in their favour. A further 24% of cases were settled after advice that the company was unlikely to win. Under one fifth (18%) of cases went to an ET hearing and were won by the employer. Only 6% were fought by employers at a hearing and lost.

Most employers (84%) reported that ‘no change’ had, as yet, resulted from the new legal framework for dispute resolution, introduced in April 2009 (UK0907049I).

Mark Hall, IRRU, University of Warwick

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