Download Local Government (Access to Information) Act 1985

Communities and Partnerships Overview and Scrutiny Committee
Meeting to be held on Thursday 18 January 2007
Part 1- Item No. 3
Electoral Division affected:
All
Short-Term Contracts of Employment
Contact for further information:
Stephen Dean, 01772 551888, Economic Development, LCDL/OCE
Executive Summary
There are economic benefits to short-term contracts, however there is a risk that
both economic and social costs more than offset these benefits. Lancashire is
recognised as a higher than average user of short-term employment contracts and
their use is particularly high in the public sector nationally.
Recommendation
It is considered that the primary area to focus upon is the broader worklessness
agenda that tackles the core problem and not potential incidental issues. The
County Council is directly engaged in addressing the worklessness agenda on a
number of fronts. Continued focus on this is recommended.
Background
Introduction
The Communities and Partnerships Overview and Scrutiny Committee 2006/07 Work
Plan includes an item on short-term contracts. The Committee requires a report on
the social and economic impact of the lack of security of employment for a large
number of people in Lancashire. This report should also seek to consider what is
being done to address the impacts of short-term contracts of employment. Shortterm contracts are effectively fixed-term contracts and include temporary
employment.
Short-Term/Fixed Contracts of Employment
The Fixed-Term (prevention of less favourable treatment) Regulations 2001 are
aimed at preventing less favourable treatment of fixed-term employees. No
minimum limit as to what constitutes a fixed-term employee has been set, so it could
include employees on very short-term contracts. The DTI indicates that around 1%
(250,000) of the workforce are on very short-term contracts (less than 3 months).
-2A temporary worker, if employed for long enough (generally over 12 months), even
through an agency, may be able to claim permanent status and if so will be entitled
to compensation when the employment comes to an end. These regulations came
into force October 2002.
National Context
In response to the above legislation in October 2002, the Department of Trade and
Industry commissioned a report on the growth of Fixed-Term Contracts (FTC).
Based on information from the labour force survey it was estimated that the number
of people working on FTC in the UK is between 1.1 and 1.3 million. The report
concluded that FTC employment showed an increasing trend and that the public
sector uses proportionately more FTC than the private sector. The public sector also
accounts for over 70% of fixed termers who have been in their jobs for over two
years.
The report also highlights that 54% of temporary employees are women and that
members of ethnic minorities are more likely to work on a temporary basis than white
employees. The report suggested that in general FTC’s suit both the employer and
employee and help promote a flexible labour market, which allows the economy to
adjust more rapidly to changes in demand and reduce skill mismatch. The changes
in protection through the 2002 legislation could make job seekers less inhibited
about taking on fixed-term work, knowing that their rights are secured.
One important part of the legislation was removal of the redundancy waiver. This
now means that employees of over 2 years duration may not be forced to sign away
their right to redundancy payments at the end of their contract. Also once a
temporary worker has reached 12 months employment, possibly even through an
agency, they have employment protection rights covering unfair dismissal and
redundancy for example.
Lancashire
The statistical evidence at a sub-regional and district level is not comprehensive and
trends or ‘hot spots’ are difficult to comment upon due to sample size. However,
Lancashire is traditionally thought of as having above average numbers of people
working on a short-term or temporary basis, in part because of the structure of many
of the industries in the area. For example, the Lancashire coastal resorts, including,
particularly, Morecambe, produce significant numbers of seasonal employment
related to the Tourism sector. Elsewhere in Lancashire there is an above average
representation of businesses that, by their nature of fluctuating demand, also have a
need for the short-term, temporary workers. Examples include the horticultural
sector in West Lancashire, mail order/home shopping, contract packaging activities,
security and industrial/officer cleaning. There is also a registered demand in tour
operators and some clerical occupations in a number of government agencies such
as the Department for Work and Pensions.
Furthermore it is notable that many parts of Lancashire have flows on and off the
unemployment register that are significantly higher than those nationally. This is a
-3reflection, in part, to of the prevalence of lower value-added activities with a higher
demand for a flexible workforce. Many people in Lancashire find it relatively easy to
get a new short-term job and thus leave the unemployment register, but then rejoin it
again fairly quickly. This is one of the reasons why Lancashire has relatively low
rates of long-term unemployment compared with national statistics. This is in
addition to the labour-intensive nature of a significant part of local economic activity.
The numbers of people recorded as, ‘employed by an employment agency’, has
increased by 46% to 9,000 in Lancashire over a seven year period. This compares
with a 14% increase nationally over the same period. Reliable statistics for the
County are difficult to obtain, however it is estimated that Lancashire has 25,000
flexible workers.
Economic Impacts
Whilst the DTI suggest that generally short-term contracts benefit both the employer
and employee, the legislation in 2002 indicates concern at some imbalance in
benefit. Equally, the negative impact on losing trained and skilled individuals at the
conclusion of a short-term contract is recognised by the business community. There
is therefore less reliance on FTC’s in the private sector. However the ‘try before you
buy’ opportunity is a positive aspect and one which may increase the opportunities to
support active job seekers.
The most significant economic impact seems to arise from:
1. Low and irregular incomes causing problems with obtaining a mortgage
2. Restrictions on benefits, firstly due to timing as benefits are not paid
immediately when a contract ends and secondly with repayment often being
demanded on commencement of a new short-term contract
3. Tax coding tends to be continuously on an emergency basis, usually resulting
in a short-term overpayment of tax
4. Insecurity in employment increases pressure to relocate and reduce skills
resource in an area.
Social Impacts
The social impacts are less tangible and difficult to evaluate. However, the pressure
to move area to capture short-term employment does not support communities.
Equally, these pressures may also require family units to live apart to take advantage
of immediate opportunities. Where an individual resists these pressures, there is a
tendency for longer periods of worklessness and possibly increased claims for
incapacity benefit or other benefits. It should be noted that many people enjoy the
flexibility of temporary working and this was particularly highlighted by the DTI.
Where the disruptive nature of short-term contracts increases worklessness, there is
a direct link to health and broader welfare issues. Although this impact is of
considerable importance, not all can be attributable to flexible working. However the
Index of Deprivation 2004, when comparing Lancashire in absolute terms to
Liverpool, is not severe, there are significantly greater impacts relatively on health.
On key measures such as life expectancy, disability, mental health and low birth
-4weights, Lancashire has much poorer outcomes than might be expected merely on
evidence of deprivation alone. Low wage and temporary employment are
contributory to these equations and therefore tackling all of the factors takes on even
greater importance.
The core underlying issue remains the high prevalence of poorer quality (low value
added) economic activity and opportunities in the County. The latest Gross value
Added (GVA) figures released in December 2006, show Lancashire GVA per head is
85% of the UK average (83% if you include the Unitary areas).
Clearly the issues and consequences of flexible and casual working are likely
to remain an important area to focus on for the immediate future.
Tackling the issues
Agency
Actions
Job Centre Plus
Increased
focus
on
reducing
worklessness with targets set for
incapacity benefit claimants
Increased focus on worklessness agenda
in the Regional Skills Strategy
Regional
model
includes
specific
business support in disadvantaged
communities. Strong focus on ethnic
minorities and women for example.
Regional Economic Strategy 2006 has a
vision of high employment rates and
elimination of low employment.
Local Area Agreements, Local Enterprise
Growth Initiative.
Strong focus on
permanent
sustainable
employment
working with disadvantaged communities
Excluding temporary staff working in
schools the County Council spends £6
million per annum on short-term
temporary contracts. This is currently
being reviewed under the Lancashire
Efficiency Initiative (LEI)
Under the equality and diversity agenda
a number of initiatives are being explored
to meet performance targets across all
Directorates. These initiatives focus on
ethnic minorities and disabled people
where current information indicates a
higher than average number of shortterm temporary contracts of employment
Learning and Skills Council
Business Link
North West Development Agency
Lancashire County Council
Lancashire County Council
Lancashire County Council
-5Key Challenges
There are commercial and operational benefits in both the public and private sectors
that encourage and support short-term contracts. These include staff flexibility,
project delivery, cost efficiencies, cash management and family/life balance. Whilst
recognising such benefits, it is increasingly appreciated that there is a counter
balance of both social and economic problems including loss of skills and mortgage
constraints. Management of this balance may possibly only be effective with a focus
on tackling worklessness rather than short-term contract issues.
Therefore it is suggested that the key challenges for the County Council and partners
are as follows:
1. Ongoing review and management of short-term contracts of employment
within the County Council (lead: Corporate Personnel)
2. Ongoing development of programmes to tackle worklessness in the
Lancashire Local Enterprise Growth Initiative (lead: Lancashire County
Developments Ltd (LCDL))
3. Develop initiatives to support the County Council’s Equality and Diversity
agenda (lead: Corporate Personnel supported by LCDL)
4. Develop cross cutting themes under LAA with vulnerable neighbourhoods for
example. (lead: LCDL and Adult and Community Services/Safer and Stronger
Communities LAA block).
Advice
Discussions held with and information provided by Corporate Personnel, Legal
Services, LCDL and Planning Economic Intelligence. Summary of comments have
been incorporated in the report.
Alternative Options to be Considered
None recommended
Implications
None
Local Government (Access to Information) Act 1985
List of background papers.
DTI Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations
2002. Report available at:
http://www.dti.gov.uk/employment/employment-legislation/employmentguidance/page18475.html)