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Brexit and the impact on employment rules and skills shortages

Brexit and the impact on employment rules and skills shortages

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The ECA’s 2016 Brexit survey, conducted with SELECT and BESA shortly after the EU referendum, confirmed the concern of many contractors about employment legislation stemming from the EU and the aspiration for improvements in a number of areas.

Employment legislation imported from Europe has been overlaid on the UK’s system of established legislation and voluntary collective agreements that have evolved over many years.  This latter point is particularly true of the electrical contracting industry and the employment rules contained in the Joint Industry Board agreement, along with other collective agreements used more widely in the building services sector. In simple terms, this has created a ‘square peg in a round hole’ approach to legislation, which in some areas has been arguably unhelpful and unnecessary.

An example of this is the implementation of the EU’s Posted Workers Directive, which requires the application of National Minimum Pay in the UK. This may have undermined the strong ‘benchmarking’ effect of the collective agreements on rates of pay for skilled tradespeople such as electricians covered by the JIB Agreement on much higher pay rates.

However, the extent to which sweeping changes to employment legislation are needed is probably fairly limited - it is questionable whether there is a need for wholesale reform. Potentially necessary changes could centre on strengthening the existing legislation on Posted Workers and amending the Working Time Regulations (WTR) and the Agency Workers Regulations (AWR).

The Working Time Regulations

The WTR are likely the source of many of the changes to employment legislation desired by employers, who are often critical about their lack of clarity, additional administrative burden and cost.

Some of the main areas for change could include:

  • calculation of holiday pay – the inclusion of overtime (other than contractually required) is an aspect that requires review following European Court of Justice (ECJ) rulings that overtime, bonuses and commissions should be included in holiday pay.
  • accrual of annual leave while on long-term sick leave, maternity leave and parental leave.
  • the conditions required for an opt-out from the 48-hour week.
  • simplifying the rules around carry-over and payment in lieu of unused leave.

The Agency Workers Regulations

While the AWR seeks to ensure equal treatment for agency workers doing the same job as direct employees, there appears to have been unintended consequences from the regulations in the electrical contracting and wider construction industry, manifested in widespread avoidance of the regulations.

The reason for this in the electrical contracting sector is probably a consequence of its fast moving, peripatetic nature. Relatively short-term contracts obtained at short notice are fairly typical. The duration of these contracts often does not neatly fall into the 12-week period after which equal treatment under the rules applies. There is a need for much more flexibility to encourage suppliers to work within scope of the regulations.

Another factor to consider is the uncertainty about the validity of the assumption that “equal treatment” on the same terms and conditions as long term directly employed operatives is what agency workers actually want. In electrical contracting, agency workers often prefer the flexibility of working in this way and are likely to receive higher levels of take-home pay in compensation for any loss in standard terms and conditions.

Implications for the Supply of Skilled and Professional Staff

The number of companies in the engineering services sector reliant on EU migrant workers is very low at just five per cent, according to the Brexit survey mentioned earlier. However, within this overall picture, there are much higher requirements for migrant workers amongst larger contractors (≥20 per cent).  Other evidence suggests that many of these individuals will be professional staff where the EU is the biggest foreign supplier.

Our sector is more secure with regard to ensuring the supply of skilled tradespeople through apprentice training than many other sectors, although still more has to be done to increase the numbers in training.  There appears to be a much higher risk when it comes to the supply of professional staff where the EU is an important source of any shortfall.

The implications of this is that the UK Government and employers will need to make an immediate step change with regard to the training of professional staff in most construction disciplines within the UK, in the event that the free movement of such labour is restricted in future.  For many reasons, not least the uncertainty that exists as a consequence of the introduction of the government’s apprenticeship training levy earlier this year and other changes in the arrangements for training, it seems questionable whether this ‘step change’ will be achieved in the short to medium term. The government’s Brexit negotiators will be aware of the need for a trade-off of some kind on the free movement of labour, if strong economic growth is to be maintained.

While Brexit clearly offers some opportunities to revisit and improve employment law, the government has been clear that it does not intend to use the process to reduce employee and worker rights. As a result, any proposals to improve employment law will need to be considered carefully and communicated effectively to government and other key stakeholders to ensure fairness for employees and employers, and a level playing field for direct and indirect employment.