2. In this response, we use the phrase ‘atypical workers’ to cover individuals who do not satisfy the common law and statutory definitions of an employee and who are homeworkers, casual workers, agency workers or labour-only subcontractors.

How the manufacturing industry uses atypical workers

3. The use of atypical workers is a well-established practice in the manufacturing industry. Many EEF member companies use a wide variety of agency workers, casual workers, homeworkers and labour-only subcontractors. They are used for many different reasons. For example, they are often used to cover seasonal changes and fluctuations in demand, whether for the number of workers or type of skills required. They are also used to cover absences of permanent employees due to maternity leave, sickness absence and holidays etc. In addition, there are many occasions when atypical working, such as homeworking, particularly suits the requirements of a certain process. The type of atypical workers used ranges from relatively low skilled workers to highly skilled technical and professional workers. They are used for periods ranging from a day to 12 months or more. Many atypical workers in the industry are paid at higher rates than permanent employees.

Detrimental effect on business

4. We strongly believe that extending statutory employment rights to atypical workers will seriously damage businesses in the manufacturing sector. Not only will it increase the costs and administrative burden of using such workers, but it will limit the flexible way in which employers can use them – the main reason for using such labour. A large proportion of our members face significant peaks and troughs in demand and, when an order is received, time is usually of the essence. They need to be able to increase their headcount or bring in individuals with specialised skills very quickly, but cannot afford to retain the extra labour once demand drops off. The same applies when seeking cover when permanent staff are absent.

5. We are seriously concerned that altering the status quo will make businesses that use atypical workers uncompetitive, that it will increase the flow of manufacturing work outside of the UK and that it will force some companies to close down part or all of their operations. This is particularly so given the current economic climate, when many manufacturing companies are operating on extremely low margins and are already struggling to compete with products made abroad. There is also a risk that making atypical workers more expensive and less flexible will increase the use of illegal ‘black market’ labour by less scrupulous employers.

6. The Discussion Document indicates that the number of people affected by an extension of employment rights is likely to be low. However, this may mask the fact that some businesses rely very heavily on atypical workers and will be very affected by an extension of rights to them. Businesses which are very reliant on atypical workers are often those which operate on low margins and which can least afford the additional costs that are likely to ensue from an extension of employment rights to them.

Existing rights sufficient

7. Atypical workers already have the protection of key employment rights, such as the right to be paid a minimum wage, to receive paid holiday and not to be discriminated against. They are also covered by health and safety legislation. In our view these rights are sufficient. It is our impression that concerns surrounding the working conditions of atypical workers often relate to companies failing to comply with their existing legal obligations to such individuals, rather than the type of rights actually available to them.

Choosing atypical work patterns and the obligations of atypical workers

8. It is misleading to typecast atypical workers as vulnerable or exploited. Many are better paid than permanent workers and it is the experience of EEF member companies that many atypical workers choose atypical work patterns because it enables them to work where and when they want to, thus enabling them to achieve a better work life balance. Whilst this is particularly true of highly skilled and highly paid agency workers or labour only subcontractors, it is equally true for many other atypical workers.

9. In our view, individuals should be free to negotiate their own contractual terms. It is not the case that the differences between employee and an atypical worker are mere technicalities. The obligations of an atypical worker to the work provider are significantly less onerous than the obligations of an employee to his or her employer. For example, an atypical worker does not have to accept work if offered, does not have a duty of trust and confidence and does not have to give statutory notice. Given that minimum safeguards are in place (see 8 above), if a person wishes to forsake certain benefits of being an employee in return for, say, a higher salary and the flexibility to decide not to work on a particular day or in a particular place, he or she should be able to do so. In addition, the EEF is aware that a number of individuals choose atypical work patterns as a way of re-entering the labour market after periods of absence, for instance, following looking after young children, unemployment or illness.

Changes to the nature of the relationship

10. If atypical workers are given rights similar to those of employees, it would be inequitable if their duties to the work provider did not also increase. In any event, work providers will no doubt increase their expectations of atypical workers’ commitments to them and the terms and conditions that they are prepared to offer will alter. Either way, the flexibility inherent in the atypical worker’s relationship with his or her work provider - which benefits both the work provider and atypical worker - will be limited by an extension of employment rights to atypical workers. In addition, it is in the best interests of both business and individuals for there to be variety in the types of work relationships available. In our view, extending statutory rights to atypical workers will reduce these distinctions to the detriment of both.

Decreasing demand for atypical workers

11. Extending statutory employment rights to atypical workers will limit their flexibility and make their use more costly both in terms of money and management time. If companies have similar obligations to atypical workers as they do to employees, there will be little incentive to use them, especially if the obligations of atypical workers to their work provider are not also increased. Where they can, organisations may well choose to use their own workforce to cover absences and meet fluctuating demand by increasing hours. However, in many cases this will not be possible and, as described at 6 above, they may be forced to stop certain operations or outsource work outside of the UK. As well as reducing demand for atypical workers and therefore opportunities for flexible working, these factors are likely to deskill the flexible labour market.

Case by case approach

12. It is our view that the status quo should be maintained. However, if the application of certain statutory employment rights is to be extended, the different categories of atypical workers should be considered separately. The status quo should only be altered if there is compelling evidence that particular categories and sub-categories of atypical workers would actually benefit from specific additional rights in practice. It should be remembered that, where there is mutuality of obligation between the parties, sufficient control etc, a homeworker, casual worker, agency worker or labour only sub-contractor will be held to be an employee with all the consequent rights and obligations that that entails.

13. It would be inappropriate to extend statutory employment rights by providing that particular categories of atypical workers should in future be treated as employees or workers. Such an approach would not sit easily with common law and would fail to recognise the important practical differences in the relationship between an atypical worker and the work provider and an employee and employer.

14. In our view, the only workable way of extending rights would be to consider whether there are any specific groups of individuals who would benefit from being granted particular rights which are currently only available to employees. For instance, a homeworker who does piece work may need a different type of protection to a teleworker. A casual or agency worker who works for a few days for an organisation may need to be considered separately to one who has a long history of working for an organisation.

15. In addition, in most cases, the operation of the rights themselves would need to be modified. For example, time-off rights such as the right to take time off for public duties or for antenatal care would not be appropriate for homeworkers or casual workers who are not required to work at particular times. However, it may be possible to make out a case that such individuals should not suffer a detriment if they do take such time off. It would not be appropriate or practical to extend other rights to certain types of atypical workers. For example, guarantee payments would not be appropriate for atypical workers where the work provider has no ongoing obligation to provide work. How would maternity, paternity and adoption rights, including pay, work for homeworkers who share the work out to others and are not guaranteed work from week to week in any event?

Clarity of law

16. Whilst we agree that the existing law on who is an employee or a worker can be confusing, we are concerned that attempts to alter it will simply provide new areas of uncertainty which will themselves become the subject of litigation. The only workable way to extend the scope of employment rights would be to give carefully defined groups of people additional modified rights (see 15 above). However, it will be extremely difficult to come up with effective definitions of such groups given that the working patterns of atypical workers, even within one category such as homeworkers, vary so enormously. Even if foolproof definitions were found, businesses and tribunals would still be faced with very complex issues relating to the nature of any entitlement where working patterns are complex and sometimes unique. Another focus of litigation would no doubt relate to the difficult question of continuity of employment where work patterns are not straight-forward.

17. In our view, difficulties caused by existing areas of uncertainty are not enough to justify yet another legislative change, with its consequential detrimental effect on business and individuals, especially when it is very likely that one set of uncertainties will simply be replaced by another. It should be noted that it will inevitably be more difficult for SMEs to understand and comply with complex new employment rules and to absorb the financial and administrative costs of implementing any changes.

Agency workers

18. Agency workers should be excluded from this review. They are currently being looked at in relation to the controversial European Commission proposal for a Directive on the working conditions of temporary (agency) workers. This Directive is likely to alter their position significantly. In addition, the Government is looking separately at the Conduct of Employment Agencies and Employment Business Regulations. A cohesive approach is needed in relation to the treatment of agency workers under UK law. Business must not be faced with three potentially incompatible pieces of legislation about agency workers in as many years.

19. One of the main issues with agency workers is who, if anyone, is the employer. If the status quo is to be changed, in our view, the only practical solution is for the agency and not the client company to be the employer.

20. For further details on the EEF position in relation to agency workers, please see the attached copy of our response to the DTI Consultation on the Commission Proposal for a Directive on the Working Conditions for Temporary (Agency) Workers.

Further consultation

21. If, having considered the responses to this consultation, the Government is minded to make changes to the status quo, we would urge it to consult again with business on any specific proposals. There will also need to be detailed regulatory impact assessments produced for each category of atypical workers.