UK: Employment Implications

Last Updated: 24 February 2014
Article by Finlay McKay

"We will work with the STUC and the business community on mechanisms to formalise the relationship between government, employer associations and employee associations with a particular focus on encouraging wider trade union participation and in recognition of the positive role that can be played by collective bargaining in improving labour market conditions."1

The White Paper states that "evidence from the OECD shows that stronger trade unions tend to reduce inequality in labour income and ensure a more equal distribution of earnings."

Stronger trade unions may result in increased trade union membership. This is in stark contrast to recent downward trends throughout Europe. Union membership in the UK has almost halved since the 1970s. Collective bargaining through trade unions still features prominently in the public sector. However a CIPD report suggests that only 6% of private sector workplaces with 5 or more employees currently engage in collective bargaining.

"In an independent Scotland we will consult on the best form of employee representation on company boards."2

Giving employees a greater voice in the workplace is a central theme of the White Paper. The above wording is highly significant. The Scottish Government "will consult on the best form of employee representation" suggesting that employee representation at board level would be inevitable in an independent Scotland. The White Paper highlights that in 14 of the 28 EU member states workers have the right to be represented on company boards. These countries have adopted different models in line with their own circumstances and cultures. No such right exists in the UK. There are a small number of European Works Councils in the UK which are limited to providing employee representatives with information and consultation rights for some multi-site European employers.

More detail on the Scottish Government's thinking is contained in another paper– "Building Security and Creating Opportunity: Economic Policy Choices in an Independent Scotland"3 –This discusses the impact that Works Councils have had on wage inequality. Whilst many European countries consult through Works Councils these take many different forms. However whilst the Scottish Government does not promise to introduce any particular model it concentrates on considering German Works Councils which are the most powerful in Europe. German Works Councils operate the policy of "co-determination." This provides Employee representatives with a role in the management of the employer. The importance of this role varies from state to state. However shareholders remain the ultimate decision makers. In Germany a two tier board system exists which, if replicated in an independent Scotland, would significantly change the structure of how companies are managed. Employee representatives on Works Councils are not necessarily trade union members as they represent all employees. The balance between increased trade union participation and other forms of employee representation would need to be carefully thought out in any consultation process.

"The current Scottish Government plans to reverse "recent changes" introduced at Westminster which reduce key aspects of workers' rights."4

A number of reforms have recently been introduced to reduce the statutory protections offered to employees. The minimum period of collective consultation in a redundancy was halved from 90 to 45 days where there is a proposal to dismiss 100 or more employees in a 90 day period. This change would be reversed by the Scottish Government in the event of Independence. Many UK wide employers currently restructure their organisations on a UK wide basis. If an employer was to implement collective redundancies in an independent Scotland and in the rest of the UK then this would result in different consultation periods operating north and south of the border.

The Scottish Government will also abolish the new "employee shareholder" status which enables employees to sacrifice some employment rights (e.g. the right to claim unfair dismissal) in return for shares in their employer. The repeal of this provision is unlikely to be controversial as its introduction has been heavily criticised.

It is unclear what other "employer friendly" reforms would be abolished. For example Employment Tribunal fees paid mainly by employees were introduced in July 2013 (and are currently the subject of a High Court challenge). Likewise reducing an employee's length of service to one year to bring a normal unfair dismissal claim could be on the agenda. The White Paper does list "access to Employment Tribunals" as a key employment issue. However, it later states that, in relation to employment tribunals, "The laws that are in place immediately before independence would remain in place on independence. After that, decisions...will be made by the Parliament and Government of an independent Scotland."5

"Greater action needs to be taken to improve female representation and diversity on company boards.6The Scottish Government will consult on a target for female representation on company – and public boards - and, if necessary, we will legislate as appropriate."7

The glass ceiling at board level for female representation has been the subject of much debate in the UK. It is no surprise that this issue features in the White Paper. The UK Government has set a target of 25% for FTSE 100 board members to be female by 2015, with the current figure being around 19%. What is unclear, however, is the extent to which any necessary target would apply in Scotland. The UK target currently applies only to FTSE 100 companies and the parameters for such a target in Scotland would require careful consideration. Another controversial issue is the idea of a quota of females on company boards. The EU is currently in discussions with a view to implementing a 40% female quota for non-executive directors in public companies. The Scottish Government would, of course, be required to comply with any such EU legislation if an independent Scotland is granted membership.

"The Scottish Government believes that it is absolutely vital for our economy and for our society that work pays, and that work pays fairly. The living wage and minimum wage will be central elements of our employment policy."8

The White Paper places great emphasis on both the national Minimum Wage and the Living Wage. The Scottish Government indicates a continuing commitment to the Living Wage principle in the event of an independent Scotland. It currently pays this to many public sector employees on a voluntary basis. It also states that the national Minimum Wage would rise at least in line with inflation in the event of a 'Yes' vote.

The Scottish Living Wage is £7.45 per hour (rising to £7.65 in spring 2014) compared to the National Minimum Wage for adults of £6.31. Moving forward, the treatment of these two distinct benchmarks in the event of a 'Yes' vote will require a great deal of thought. A new Fair Work Commission would be set up to advise the Scottish Government on the Minimum Wage, whilst the Poverty Alliance would deliver a Living Wage Accreditation Scheme to encourage private companies to pay such a wage to-its employees. In the long run, it is clear that the Scottish Government is looking to significantly increase the number of private companies that will pay the Living Wage to their employees.

Footnote

1 Taken from page 102 of the White Paper: Our priorities for action

2 Taken from page 102 of the White Paper: Our priorities for action

3 Published by the Scottish Government on 19th November 2013 http://www.scotland.gov.uk/Publications/2013/11/2439

5 Taken from page 315 of the White Paper: Q&As - 62. Would laws around unfair dismissal, employment tribunals, industrial relations and trade union rules change in an independent Scotland?

6 Taken from page 102 of the White Paper: Employee representation

7 Taken from page 103 of the White Paper: Employee representation

8 Taken from page 103 of the White Paper: Employee representation

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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