CBI survey highlights adverse impact of recent employment legislation

In September 2006, the Confederation of British Industry published its latest employment trends survey, covering a wide range of industrial relations issues. Employers report that employment regulation introduced over the past five years has had a major adverse impact on them and that they expect this to get worse.

In September 2006, the Confederation of British Industry (CBI) published the results of its ninth annual employment trends survey, conducted in conjunction with the Pertemps recruitment agency. The survey, carried out in May 2006, records the responses of over 500 employers across all sectors of the economy, 12% of which were public sector employers. The survey covered a range of labour market issues, including employers’ views on the operation and impact of key legislative measures. Its main findings are summarised below.

Influences on competitiveness

The largest proportion of the respondents (40%) chose ‘effective people management’, from various factors suggested, as the key influence on competitiveness. ‘Management skills’ were ranked by 52% of those surveyed as the most important specific human resources factor.

Employment regulation

Employment regulation introduced over the past five years is reported to be having a major adverse impact on employers, with 78% of respondents complaining about the time spent on administrative compliance and 64% expressing concern about the amount of senior management time such regulation demands. Respondents expected the impact of regulation to worsen rather than improve over the next five years.

Asked how confident they were ‘that the government will deliver on its promise of deregulation and simplification over the next five years’, only 2% replied that they were ‘confident’; meanwhile, 38% answered that they were ‘not very confident’ and 28% replied ‘not confident at all’.

Pension provision

Only 32% of private sector companies now offer defined benefit pension schemes to their employees, compared with 54% in the 2002 survey. By contrast, over three quarters (82%) of respondents in the public sector offer a defined benefit scheme. In the private sector, stakeholder schemes and occupational defined contribution schemes are the most common forms of pension provision, offered by 46% and 41% of private employers, respectively.

Working time

According to the 2006 survey, an average of 30% of employees had signed an individual opt-out from the 48-hour limit on weekly working hours, compared to 36% of staff in 2005 (UK0510102F). However, the proportion of employees who in practice regularly worked more than 48 hours per week was lower than 30%, at 19%, although this represented an increase of three percentage points on the 16% recorded in 2005. Employers with fewer than 50 employees had the largest proportion of employees (36%) who had opted out of the 48-hour limit.

A substantial number of companies (42%) believe that the potential withdrawal of the individual opt-out (UK0506104F) would have a significant or severe detrimental impact on their organisation, while 55% of companies felt that this would have no impact or only a minor impact. Of those enterprises indicating that removal of the opt-out would have a significant or severe impact, 33% stated that the primary impact would be to undermine their ability to meet customer needs.

Flexible working

As in last year’s survey, part-time work was the most common flexible working practice used by employers, at 88%. This was followed by job sharing (48%), flexitime (44%) and career breaks or sabbaticals (29%).

With regard to the operation of the statutory right for employees to request flexible working, in force since April 2003 (UK0304104F), 94% of employee requests have reportedly been accepted by employers – 62% were accepted formally, 20% informally and 12% resulted in a compromise – while 6% of the requests were declined. In 2006, 43% of employers reported that the legislation had had no impact on their organisation, compared with 52% of those surveyed in 2005. The proportion reporting a negative impact fell from 26% in 2005 to 20% this year, while 29% of respondents reported that the legislation had had a small positive impact, compared with 20% in 2005.

Temporary agency workers

Temporary agency workers represent on average 5% of employers’ workforces, but with some sectoral variation. Energy and water supply operations use the most temporary agency workers (9%), while companies in banking, finance and insurance use the least (2%).

Migrant workers

Over one fifth of employers expected to recruit from abroad in the next year – 21% of those surveyed stated that they would hire workers from among the 15 ‘old’ EU Member States, 22% of respondents planned to recruit from the new Member States that joined the European Union in May 2004, and 10% of employers would look for staff from outside the EU. A clear link emerges between the size of organisation and recruitment of migrant workers – the larger the company, the more likely it is to hire employees from abroad.

Employee consultation

In relation to the impact of the Information and Consultation of Employees Regulations, which came into force in respect of undertakings with 150 employees or more in April 2005 (UK0502103N), 57% of respondents reported that they had permanent mechanisms for informing and consulting employees, such as a staff council, compared with 47% of companies in last year’s survey. A further 12% of employers stated that they intended to introduce such a structure.

Employers with 5,000 or more employees were most likely to have introduced such mechanisms (85%), compared with 51% of those with 50–199 staff. The CBI comments that employers are ‘stepping up to the challenge posed by the new law’. Employers were also asked what their employees’ key priorities were with regard to information and consultation during 2006. These were identified as: terms and conditions of employment, cited by 70% of respondents; business developments (61%); pensions (43%); and training (40%).

Working with trade unions

Asked about their expectations in respect of ‘union attitudes in the workplace’ over the coming year, employers were generally positive: a substantial majority expected trade union relationships to be ‘cooperative’ or ‘balanced’. Nevertheless, 20% of respondents expected ‘adversarial’ relations with workplace union representatives, while 22% of employers expected such relations with local union officials and 26% of those surveyed expected the same with national union officials – an increase in each case from last year.

The survey also enquired on what issues employers negotiated with and consulted recognised unions. Unsurprisingly, pay (72%), working hours (60%) and holidays (53%) were the most common issues for negotiation. Relatively few organisations negotiated on pensions (16%) and training (11%), although consultation on these issues is more widespread, at 52% and 57% respectively.

Employment tribunal cases

Nearly four out of 10 employers (37%) had faced an employment tribunal (ET) claim in the last year. A quarter (25%) of these were settled out of court by employers despite legal advice that the tribunal would rule in their favour, and 23% were settled out of court after advice that the company was unlikely to win. A further 18% were withdrawn by the applicant. Just over a quarter (26%) of cases were won by the employer at an ET hearing. Only 9% were fought by employers at a hearing and lost. These figures are similar to those in last year’s survey.

As in 2005, a substantial proportion of employers (41%) noted that they regarded ETs as an ‘ineffective way of handling employment disputes’. Over half (57%) of respondents believed that ETs were ‘too adversarial’, 27% reported that they were ‘too costly’ and 16% considered that they were ‘damaging to employee relations’.

Views were mixed on the statutory dispute resolution procedures introduced in 2004 (UK0408102F), with 42% of employers agreeing that the new procedures have been beneficial in solving workplace disputes, up from 30% last year. However, 73% of respondents did not think that the new regulations had been beneficial in terms of reducing administration, and substantial minorities felt that the regulations had failed to reduce the number of ET claims (41%) and the number of weak or vexatious claims (44%).

Workforce diversity

A quarter (27%) of employers had conducted an equal pay audit in the past three years, 8% of respondents planned to do so in the next year and 27% were considering conducting one but had not yet drawn up any firm plans. Large employers with 5,000 or more employees were more likely (58%) to have conducted an equal pay audit than smaller companies. Public sector organisations, at 51%, were also more likely to have carried out such an audit, compared with 23% of private sector enterprises.

Asked about what would help them to achieve a more diverse workforce, 48% of respondents indicated ‘more applicants from disadvantaged groups’ and 26% suggested ‘improved skill levels among disadvantaged groups’.

Training and skills

High proportions of employers were dissatisfied with the business awareness (70%), self-management (65%) and foreign language skills (61%) of school leavers. General employability and knowledge about the chosen job or career were also identified as problem areas by a majority of respondents – 52% in each case. Nearly half of respondents were not satisfied with school leavers’ basic literacy and use of English (45%), or with their basic numeracy skills (44%). Employers were generally more satisfied with the skills of graduate recruits, but again key areas of concern were foreign language skills (48%) and business awareness (45%).

The number of employers reporting skills gaps and shortages has dropped slightly since last year. Overall, three out of 10 employers reported that the shortfall in skilled labour has had a serious impact on recruitment. However, most employers (82%) reported being affected by skills gaps among their existing employees.

A substantial majority of employers (83%) in the survey stated that they provided some form of training, with training to enable their employees to do their current job being the most popular type (78%), followed by training to improve the quality of services or products (64%), and training to strengthen leadership and management skills (63%).

Mark Hall, IRRU, University of Warwick

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