Employment Bill

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Alan Johnson: I have listened to those arguments. The hon. Member for Runnymede and Weybridge comes at this point from a different direction than we do. I do not want to send Members Opposite into fits

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of apoplexy, but the amendment would probably not comply with the directive. However, let us deal with it on the basis of the arguments.

The amendment refers to a period in excess of two years. Last week, the Government circulated to Committee members draft regulations, which suggest a four-year limit on the extension of contracts. We can argue about two or four years, but the right place to deal with the issue is in regulations, not the Bill. He also talked about putting things into plain English, but inserting the phrase

    ''the nature and characteristics of permanent employment''

would be a recipe for far more complicated regulations.

The hon. Gentleman talked about the spirit behind the amendment. However, the regulations already achieve his aim and in a way that meets the needs of different sectors without unnecessary complexity. We intend the regulations to ensure—this is the major point, which we mentioned in the previous debate—that fixed-term employees are not employed on a long succession of fixed-term contracts as a substitute for a permanent post. That is our objective.

The power already allows us to define successive fixed-term contracts and to limit their use to prevent abuse. As I said, the draft regulations, on which we are consulting, suggest that the limit should be four years unless the use of such contracts can be objectively justified beyond that point.

Judy Mallaber: What might constitute objective grounds? Various issues have been raised with me, particularly by the Association of University Teachers. As we know, fixed-term contracts are endemic in further and higher education. One example is someone who has been employed for many years but cannot get a permanent contract, because he cannot get a research grant to do the work that will prove he is qualified for a permanent contract. Equally, he cannot get a research grant because he is on a fixed-term contract. What objective grounds will there be for still allowing such a situation? That person is stuck: he will never get a permanent contract because of the terms that the university imposes on researchers.

Alan Johnson: I am enormously grateful to my hon. Friend for asking that question; I thought that it might arise at some point. The phrase ''objective grounds'' is also used in the part-time workers directive, under which a part-time worker cannot be paid a different rate unless there are objective grounds for doing so. In one case involving a part-time worker and performance-related pay, it was established that there were objective grounds.

I think that, in the previous debate, the hon. Member for Runnymede and Weybridge talked about an organisation or charity having funding for a specific period and the possibility of objective grounds. It is difficult for me to place every eventuality on the record, because the situation depends on the circumstances that apply at the time. However, in the sector mentioned by my hon. Friend, I think that the directive will resolve the issues. The employer will have

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to start by asking himself whether he is using fixed-term contracts as a substitute for permanent employment. His objective grounds must be able to stand up, particularly at a tribunal if the case ends up there. We should not spend our time considering examples of objective grounds. The directive allows for that, and we are implementing the directive. Over time, we shall see that the clause works well.

We shall make provision for a limit to the duration of successive contracts, but it will be four years rather than two. As I said, that should be done in regulations rather than the Bill. Adding a provision to limit the use of successive fixed-term contracts only where the employment has the nature and characteristics of permanent employment would result in regulations that were either vague or extremely complicated. If the regulations simply repeated the requirement, employers and employees would be left to work out what the ''nature and characteristics'' of permanent employment might be. Specifying what was required would produce complex and inflexible regulations. The provision is unnecessary in any case, because the draft regulations provide that fixed-term contracts may be renewed beyond the statutory limit if their use can be justified. That ensures that where employment is of a genuinely fixed-term nature, employers and employees can continue to agree fixed-term contracts.

The mechanism in the draft regulations for preventing abuses of fixed-term contracts takes into account the diverse use of successive fixed-term contracts in different sectors. We appreciate that they are used in a wide variety of sectors that range from catering to construction. We had already accepted that separate arrangements needed to be made in the theatre and in sport. It should be possible to tailor the part of the regulations that limits the use of successive fixed-term contracts to match the requirement of different sectors. The clause and the regulations allow employers and groups of employees to agree an alternative mechanism for preventing abuses of successive fixed-term contracts by means of collective or workplace agreements that can displace the statutory mechanisms. The agreements must specify the duration of successive fixed-term contracts and the objective reasons for their renewal. Nevertheless, the industry and the work force are entitled to draw up such agreements according to the sector in which they work.

We believe that the regulations are sufficiently flexible and that we have adopted the right approach. I understand the points made by the hon. Members for Runnymede and Weybridge and for Hertford and Stortford, but we would do employers a disservice if we accepted the amendment.

Mr. Hammond: I do not disagree with much of what the Minister said. When I moved my amendment, I should have said that it was tabled before he issued the draft regulations to members of the Committee. I erred on the side of caution in my attempt to table a consensual amendment that might catch his attention. I could have included four years instead of two years.

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The Minister has reassured me that the intention is to deal with abusive cases, and the draft regulations show that the number of such cases should be relatively small. As far as I can see, nothing will stop an employer who is intent on avoiding permanent employment from employing a succession of people under fixed-term contracts. The restriction will be against employing the same person on successive short-term contracts, but it will be impossible to stamp out all practices that the Minister does not like. One must take a pragmatic approach, and the evidence of the problem is small. However, the Minister's approach will deal with the bulk of it, and I shall be happy to withdraw the amendment.

The Minister said that employment that had the ''nature and characteristics'' of permanent employment was difficult to define in regulations. That may be so, but it is an awful shame that something that is a common-sense definition that we can all understand apparently cannot be translated into legislation. Sometimes the common-sense definition works, rather than the tightly defined legal definition through which someone finds a loophole precisely because it has been so tightly defined. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Norman Lamb: I beg to move amendment No. 215, in page 47, line 33, at end insert:

    ''(1A) For the first two years of an employee's fixed term employment the regulations will not apply to occupational pension schemes.''

Clause 45 goes further than the fixed term directive requires because it extends the remit of the legislation: fixed-term employees cannot be discriminated against in their pay and pension benefits. I appreciate that the first draft of the provisions did not cover those benefits, and was changed by the Government. We welcome that, but recognise that the inclusion of pension benefits could create unnecessary costs for employers. Employer organisations have expressed concern about that. We support measures that encourage people to invest in second-tier pension provision. We welcome the fact that the Government are legislating to improve workers' rights to access occupational pension schemes.

The situation for fixed-term employees is more complicated. Under clause 45, employers must provide all fixed-term employees with access to occupational pension schemes. However, if scheme members leave with less than two years pensionable service, they have no statutory rights to future benefits or to transfer value. The employer is not obliged to do anything with the contributions that it pays in, but any employee contributions would have to be returned.

The CBI has pointed out that the majority of fixed-term workers are employed for less than two years. In such cases, employers would be required to provide access to an occupational scheme that would carry administration costs, but have no benefit to employees. They would not see their money grow because it would remain static in the fund and be returned to them on leaving employment. They would

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be better off investing elsewhere, without expense to the employer. To override that problem, the CBI has suggested a two-year exemption before fixed-term workers were brought into the scheme, which is the purpose of the amendment. That is not an ideal solution, because it would mean that any fixed-term worker remaining for more than two years would lose out on two years of contributions. We are keen to stress the difficulties that employers might face concerning the rights to occupational pensions for fixed-term employees who leave after less than two years of employment. The benefit to the employees would be non-existent and they would be better off not being part of such a scheme.

The amendment is a probing one, but employers and employer organisations are concerned about an extra administrative burden that carries no benefit for employees.

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