Draft Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 and Draft Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002

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Alan Johnson: I shall try to embrace all the points raised by the hon. Member for Runnymede and Weybridge. His first point almost had me reaching for my Kleenex, because he accused me of indecent haste and made a strange allusion to the Prime Minister's speech to the TUC—which, if I remember correctly, takes place in early September. Our alleged indecent haste is in connection with a European directive that was due to be implemented on 10 July 2001. There was an optional extra year for transposition of the directive, in addition to the initial two years, which allowed us to delay its implementation further from July 2001 to July 2002, and, in common with other member states, we took advantage of that.

We have had two lengthy public consultations on the issue. Indeed, I am reminded that we showed the draft regulations to the Standing Committee on the Employment Bill in January, and the hon. Member for Runnymede and Weybridge put on record his gratitude for that. So now, when the Prime Minister talks to the TUC in early September, the TUC is likely to ask why, after we have had one year extra for transposition—that ran out last Wednesday—fixed-term workers must wait until 1 October to receive protection under the directive. The Prime Minister is therefore likely to have put himself in a worse rather than a better position. We extended the period until 1 October to give businesses 12 weeks to examine the regulations before they are implemented, so the hon. Gentleman's allusion is strange.

Mr. Hammond: When will the guidance to which the Minister referred be published?

Alan Johnson: We hope to have the guidance ready by early next week, so that it can be published well before 1 October.

The hon. Gentleman made his usual reference to TUC muscle. I am sure that the TUC would love to have all the muscle that he attributes to it, but the fact is that it was disappointed with some elements of the implementation of the directive, just as the CBI was happy with our approach in some areas and less happy with our approach in others. We try to take a balanced view, and from the responses that we received, particularly to the latest round of consultation, it seems that we have largely succeeded in that aim.

The hon. Gentleman said that there was not really a problem because our 1998 survey reported that 5 per cent. of fixed-term workers were being paid less money and 10 per cent. did not have access to pension schemes. I would point out, however, that a more recent survey carried out by the TUC in 2001, three years after our survey, which we included in all our documentation, suggested that there was a 47 per cent. gap between the fixed-term workers who were

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receiving the same terms and conditions and those who were not, albeit that that was a fairly broad survey, embracing pay, pensions, training and many other issues. As my right hon. Friend the Member for Rother Valley said in an intervention, that problem must be addressed. Some 1.2 million workers stand to benefit from the regulations and from the part of the Employment Act 2002 to which they relate.

The hon. Member for Runnymede and Weybridge said that we were copping out over pay and pensions, and I want to say a few words about that. The fixed-term workers directive, like the part-time workers directive, is based on article 137(6) of the treaty of Rome. The Government hold the view that that article specifically excludes pay. I quoted it last week, and it excludes pay, strike action and lockouts, which are specifically mentioned in the treaty.

We believe that, like the measures covering the other groups of atypical workers—to use the description employed by the European social partners—neither this directive nor the part-time workers directive that we implemented in 2000 covers pay and pensions. However, we agree that part-time workers and fixed-term contract workers should not be discriminated against in pay and pensions. When they do work that is broadly comparable, for the same employer, they should receive the same rate of pay.

The hon. Gentleman suggested that we should go running off to the European Court of Justice to protest. As I explained to him last week, one cannot go running off to that court until a directive has been implemented. In any case, because we believe that it is right that part-timers and fixed-term workers should receive the same pay and pensions as permanent employees, and in order to preserve the important principle in relation to article 137, we have chosen to implement the directive through domestic legislation.

We had the opportunity, as the hon. Gentleman said, to treat the measures either as a complete package or as a term-by-term comparison. Indeed, the social partners agreement in Europe specifically provided that facility. The hon. Gentleman asked how we were likely to frame the guidance on the package approach. We intend to explain clearly to employers that they will be able to balance a less favourable condition against a more favourable one.

We will include some examples of using the package approach, such as that of the fixed-term employee who is paid the same as a comparable permanent employee—£20,800 per year, or £400 per week—but gets three fewer days' paid holiday than such an employee. To ensure that the fixed-term worker's package is no worse, their annual salary should be increased by the value of three days' holiday pay—£170—to £20,970. A day's holiday pay is worked out by dividing the annual salary by 365. We will include some specific illustrations to help employers to understand the important benefits of the package approach.

Mr. Hammond: The Minister has used a rather easy example. I was really asking whether he would provide any guidance on valuation of pension benefits, which

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the CBI and others have said are difficult to quantify, so it is difficult to make the ''apples and pears'' comparison required under the package approach.

Alan Johnson: The hon. Gentleman asked me for an example and I gave him one. We discussed the pensions issue at some length during the passage of the Employment Bill—which, as it has now received Royal Assent, I should call the Employment Act 2002. Where there is a vesting period, fixed-term contract employees will be liable to the same vesting period as permanent staff, but valuation of pension benefits is difficult because there are a multitude of schemes.

The basic point that we discussed during the passage of the Employment Bill was that often it will not be in employees' interests to pay into a pension scheme when they are employed for such a short time. They would much rather receive that benefit in pay. On the other hand, there are examples such as those given during the passage of the Bill, including that of the worker at the Ritz hotel—the man whom we all wanted to speak to, because he had been mentioned so many times in dispatches. Those examples involved employees who had worked for a company for two, three or four years and who now, under the regulations, would have to work for four years to be given a permanent position. They would have wasted that whole period; they could have been in a pension scheme accumulating benefits, but they were locked out. Employers will have lots of scope to explore the balance between those two issues, particularly as we have included the package approach as well as the term by term approach.

Mr. Hammond: So that the Minister does not fall foul of the rules of privilege, I had better tell him that my recollection is that the hotel was not the Ritz but another prominent London hotel.

Alan Johnson: The Savoy?

Mr. Hammond: It think it was the Dorchester; it certainly was not the Ritz.

Does the Minister not recognise that there is a real issue here? He said that the benefit to a fixed-term employee of the same contribution to a pension fund as that given on behalf of his permanent workmate might not be as great as the cost to the employer of making that contribution. The issue is whether the valuation is based on the cost to the employer or the benefit to the employee. I suspect that in some cases there will be a significant difference, which will be important.

Alan Johnson: I agree; we are looking at the same thing from two different angles. The calculation will be based initially on the cost to the employee: will the fixed-term employee be getting as good a package as the permanent employee? However, objective justification is an important part of the directive and the regulations, because the employer can say that the exorbitant cost of including an individual in the pension scheme for such a short time is a justification for not including him. Such objective justification is quite separate from the package approach. I remember explaining that when debating

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the Employment Act when it was a Bill. I have now explained it again, and I hope that the hon. Gentleman is satisfied with the answer.

The hon. Member for Runnymede and Weybridge went on to speak about the public sector side of the argument. I think that he was drawing a comparison with the Employment Act and our discussion of union learning reps. Today we are dealing with a quite different situation. Opposition Members drew great satisfaction from the fact that we do not have too many union learning reps. However, we have an awful lot of fixed-term contract workers, particularly in education and health, although less so in the latter. As the hon. Gentleman said, many contracts in education are fixed term because academic research is funded only for a certain time. He asked whether, because funding was not available permanently but would run out after a certain time, that would be an example of objective justification for renewals. The answer is yes.

Mr. Hammond: The Minister used the example of a research project with a finite duration. That slightly ducks the issue. The specific question is: if, for example, an NHS trust has obtained modernisation fund money to fund a new post—perhaps a cancer nurse, or a cancer consultant—for two years only, would it be an objective justification for a fixed-term contract that the funding was for a finite period? In effect, will there be a specific public sector justification for fixed-term contracts?

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