Business Secretary Vince Cable yesterday (6 October 2014) launched a wide-ranging employment review to help clarify and potentially strengthen the employment status of up to a million British workers.
He also outlined proposals to simplify and boost the national minimum wage for apprentices, making apprenticeships an even more financially attractive route for young people deciding whether to go into full time employment or to earn whilst they learn.
This follows the recent review and upcoming legislation of zero hours contracts, which revealed that an increasing number of people in the UK who could be on ‘worker’ employment contracts which have fewer basic rights (such as unfair dismissal or maternity pay) than the vast majority of people who are on ‘employee’ contracts.
In many instances workers are not aware of their employment status and therefore what employment rights they are entitled to. Many employers are also unsure what rights their workforce is entitled to, running the risk of legal challenge if they get something wrong. As a result, government is also unable to collect meaningful data and get a complete picture of the overall workforce.
Business Secretary Vince Cable said: “One of the most striking features of our recession has been the high levels of employment that our workforce has maintained during some very trying times. Employers were resourceful in the jobs they continued to offer and employees remained flexible in the work patterns and pay they agreed to. That was the right thing to do at the time to keep Britain working.
“However now the economy is firmly on the road to recovery, it is important that the fruits of the recovery are shared by all. Some types of contracts which offer fewer employment rights, and which were never designed to be widely used, have become much more commonplace. As the economy recovers, it is right to explore giving a silent minority of workers the security and rights enjoyed by the majority of employees. Confident, secure employees spend money, which is ultimately good for UK plc.
“Currently, many individuals cannot be certain what their employment status is until they are at an employment tribunal. If they are a ‘worker’, it is at this point they could realise they do not have any legal protection if, for example, they are seeking a claim for unfair dismissal.”
Pay rise for apprentices
Based on the current national minimum wage rates for 16 to 17 year olds, the proposal would give around 31,000 apprentices in the first year of their programme a pay rise of more than £1 an hour, rising from £2.73 to £3.79 per hour.
The new policy, which will be presented to the Low Pay Commission (LPC) in the coming weeks, would create a single national minimum wage rate for 16 to 17 year olds in employment and for all apprentices in the first year of their programme.
It will also make it easier for employers to understand and comply with minimum wage law, streamlining the number of minimum wage rates employers have to contend with down from 4 to 3. At the moment the rate an apprentice is paid is dependent on their age and how long they have been on their apprenticeship. It can often be difficult for employers to understand, risking non-compliance.
Business Secretary Vince Cable said: “With the economy on the road to recovery, all workers – including apprentices – should be able to share in the proceeds of growth. We want apprenticeships to remain an attractive option for young people deciding whether to earn whilst they learn or go straight into employment.
“This is why I propose putting apprentices on a level playing field with young people entering the labour market. Applied to current minimum wage rates, this would be an increase on first year pay of over a third, as well as simplifying a pay structure that all too often catches employers out.”
Katja Hall, CBI Deputy Director-General, said: “Apprenticeships are a vital route for young people to get a step on the career ladder and are part of the answer to solving the UK’s skills crisis.
“Yet too few apprenticeships at the moment go to the young and relatively unskilled. Companies already pay their share into training, so raising the cost of taking these young people on would be unwise and put off many smaller firms from getting involved.
“Business wants to maintain a flexible labour market that delivers for both employees and firms because it creates new jobs and helps people get into work.
“Companies and workers value the range of flexible employment practices on offer and we should seek to preserve this, but both parties should be clear about their rights under the terms of contracts and any examples of poor practice should rightly be rooted out.”
Susannah Clements, CIPD Deputy Chief Executive, comments: “We welcome a full review of employment status. The job creation performance of the labour market in recent times has been extraordinary, and our flexible labour market has been an important factor in this.
“However, we know from our research that as a result of piecemeal changes to employment laws over a period of time there is significant uncertainty on the part of many employees and workers, and among some employers on the issue of employment status and associated employment rights. Greater clarity on employment status and consideration of a simplified ‘one stop shop’ approach to enforcement will help reduce legal ambiguity and support better work and working lives.”
“With regard to the national minimum wage for apprenticeships, it is important to note that most employers pay above the statutory minimum wage for apprentices in any case, particularly in higher skilled roles.
“We also advise employers to increase the pay of apprentices as their training progresses, and thus their capabilities and performance increases. However, there are some sectors where apprentices are paid at the apprenticeship minimum wage – currently set at £2.73 per hour. There is a business case for paying all apprentices above this current base minimum, as our research suggests that apprentices who are better paid are more likely to remain with the firm that has invested in their training.
“We are supportive of the proposal for the Low Pay Commission to recommend increasing the minimum wage for apprentices. They are best placed to make a full recommendation, taking into account any impact on access to the labour market.”
TUC General Secretary Frances O’Grady said: “This is the right thing to do for both young workers and the economy and will help encourage more young people into apprenticeships. We also need to crack down on those employers responsible for illegally underpaying more than a quarter of apprentices and must raise the quality of apprenticeships to make them higher skilled.
“The TUC has been calling for a review of bogus self-employment and the abuse of employment contracts for many years. This review is welcome, if long overdue, but it will need teeth to crack down on the widespread abuse of many vulnerable workers and achieve real reform.”