SUNDAY WORKING REGULATORY IMPACT ASSESSMENT
Issue
1.To extend to Scotland legislative provision governing Sunday working for relevant shop and betting workers as provided in the Employment Rights Act 1996.
Background
2.Sunday trading and working in Scotland had not been governed by modern statutory provisions before either the Sunday Trading Act 1994 or the Employment Rights Act 1996. The possibility of Sunday trading and working was therefore open to most shops in Scotland, subject to any local licensing requirements - particularly in the case of betting shops. Although the 1996 Act extended to Scotland, the provisions relating to shop workers and betting workers were restricted solely to England and Wales. At the time of the Act, representatives of large retail outlets and relevant trade unions drew up a voluntary agreement. This was intended to provide the same degree of protection, on a non-statutory basis, for relevant workers in Scotland as would apply in England and Wales.
Current Position
3.Generally speaking, the voluntary arrangement in respect of shop and betting workers in Scotland has operated satisfactorily. However, the Government has had increasing concerns about the capacity of the non-statutory approach to guarantee equality of treatment as between relevant shop workers in Scotland compared to the rest of the country. Precise terms and conditions of employment are governed by contracts. However companies in Scotland are basically in the position of being able to require Sunday working and by the same token, workers have no automatic rights to opt out of Sunday working for religious, family or any other reasons.
4.There has been some evidence that the voluntary arrangement may be under pressure which makes it hard for management and workers alike to reach agreements that protect individuals in Scotland from compulsory Sunday working. There may be many who are perfectly willing to be rostered for work on Sundays and at weekends and management are obviously free to adjust contracts with individuals for that purpose. Employers must always act reasonably under the terms of general dismissal legislation. Nonetheless they would be within their rights in certain circumstances to dismiss any employee if they judged that resistance to Sunday working was having an adverse effect on the company or business and there was not otherwise any inhibition upon working arrangements reflected in an existing contract. In effect, employers in Scotland are in a position of being able to require Sunday working and employees having no legal right to opt out for religious, family or any other reason. This means a risk of discrimination against Scottish workers as compared to those in England and Wales. The sole exception to this is where a contract guaranteed that the employee would never be required to work on a Sunday.
5.Ministers have considered carefully representations received from the trade unions, local MPs in specific instances where employees have lost their jobs basically on a refusal to be rostered for Sunday working. There is some evidence therefore that the voluntary arrangement may no longer afford adequate protection for individuals, as it does not have the force of law. Moreover, it may also be subject to local interpretation and variation in a way that gives individuals more or less protection depending on where they happen to live or work.
Coverage and timing
6.The 1996 Act applies to Scotland, but the provisions relating to shop betting workers are expressly excluded. The Government has launched a consultation about extending the relevant sections of Part 4 of the 1996 Act and certain provisions of Part IV of the Act to persons in Scotland who would otherwise fall into the definition of shop worker or betting worker in Sections 232 or 233 of the 1996 Act. It is intended that the provision would apply to shop and betting workers in Scotland whether or not they are employed under a contract of employment which was entered into before or after the date of commencement of the new legislation.
Objectives
7.To ensure an equal degree of protection for workers in the retail and betting sectors in Scotland in line with that afforded to workers in England and Wales, including a better balance between work and family life and observing the principle of non-discrimination. A recent DTI Work-life Balance survey showed that flexible working hours are more important than money for nearly a third of people looking for a new job.
Options
8.The Secretary of State for Scotland, in consultation with the Secretary of State for Trade & Industry, decided to launch a consultation exercise to seek views on the case for extending the current legal provisions in the 1996 Act to Scotland. The consultation is not directly linked to David Cairns' Bill but it will help inform the context within which parliamentary consideration of his initiative is conducted. The deadline date for responses to the consultation is Friday 14th March 2003.
9.In the consultation document four options were identified:
i. To leave the legislative protection for shop and betting workers in Scotland unchanged;
ii. To opt for a stronger voluntary code;
iii. To draw up a code of practice which employers and unions could adopt; and
iv. To extend legislative provision governing Sunday working for relevant shop and betting worker as provided in the Employment Rights Act 1996 to Scotland.
10.The Secretary of State for Scotland considers the extension of legislative provision governing Sunday working for relevant shop and betting workers to Scotland an important step in bringing parity to workers in Scotland, and bringing an end to the risk of discrimination against Scottish workers. Employment legislation is GB wide and equality of treatment should not be decided on where a person lives. There is recent evidence that the voluntary agreement no longer affords adequate protection for individuals, as it does not have the force of law. For example, a large retailer in Scotland sacked 11 female employees who refused to agree to renegotiate their contracts of employment to include Sunday working. Over and above these 11, a further 60-70 employees agreed to be rostered for a Sunday in the absence of any form of re-dress, other than the process of unfair dismissal. For this reason, seeking legislative change was considered an appropriate policy response.
11.There is a careful balance to be struck between effective protection for workers and placing unnecessary regulatory burdens on businesses in Scotland. Ministers wish to allow employers and employees to be able to reach agreement as to what are the right arrangements for them, consistent with a framework of minimum standards of protection for workers.
Benefits
12.Whilst the DTI's Work-life Balance campaign does not single out the benefits of not working on a Sunday, the overall objective is to help employers provide people with more choice and control over their working hours. An on-line vote on the DTI website showed 90% of people who had logged onto the site agree that they work more efficiently when they have had a proper break at the weekend. Work-life Balance policies have been proven to reduce staff turnover, reduce absenteeism, maximise available labour and help retain valuable employees (DTI Baseline Survey 2000). Research by the Joseph Rowntree Foundation found that having a broad range of work-life balance strategies increased productivity with different working practices associated with different levels of improvement in performance. For example, a work-life balance strategy can be designed to assist with issues such as religious observance; transport and travel to work; caring responsibilities and participation in arts, sport and education amongst others.
13.The number of women in Scotland's labour market is increasing and there are clear differences in the way that women and men work. Only 7% of male employees' aged 16-64 work part-time compared 43% of women in the same age group. Women form over 70% of administrative, personal service, sales and customer service occupations. 60% of the employees currently working in the retail and betting sectors in Scotland are women. Caring and domestic responsibilities have remained largely the responsibility of women. This can place women at a serious disadvantage when entering or moving within the labour market. In addition to more flexible working practices, including the right to opt out of working on a Sunday could in effect keep staff turnover lower, thereby reducing the costs of recruitment and retraining.
14.The proposed legislation may result in better working time conditions for people in the retail and betting sectors, depending on their individual circumstances. As a result more people may enter the labour market into jobs in these sectors due to more flexible working time conditions. As mentioned in paragraph 12 above, the benefits of work-life balance policies can be realised by both employers and employees.Existing protection has ensured that employees in Scotland are provided with basic minimum rights through a legal framework, providing minimum standards combined with flexibility for employers - but a level of protection that differs from England and Wales. The benefits of extending legislative provision include a better balance for workers between work and home, greater choice over hours worked and a more committed workforce.
Costs
15.There are costs as well as benefits associated with extending legislative provision to Scotland although these are inevitably more difficult to quantify. The 1996 Employment Rights Act applies to Scotland, but the provisions relating to shop and betting workers do not. The general right not to be dismissed unfairly remains in position for workers in Scotland as elsewhere. However, the qualifying period necessary to claim unfair dismissal is one year; the English and Welsh exceptions creating a deemed unfair dismissal in Section 101 do not apply. A Scottish shop worker or betting worker must therefore go through the procedure set out in the Act to prove his/her dismissal was unfair.
16.In relation to Employment Tribunal cases in Scotland, it is not possible to identify cases which may have been brought about as a result of changes to employment contracts which may have involved disputes over Sunday working. Cases are not categorised in such a manner as to divulge this information. However, there have been 3,782 cases of unfair dismissal in Scotland in the last financial year at an average cost of £12,500 each. Extending protection to workers in the shop and betting sectors in Scotland could lead to a reduction in the number of cases brought before a tribunal and therefore a reduction in the associated costs. A proportion of any savings would also be realised by employers who would contest fewer cases of unfair dismissal through the tribunal system.
Risks
17.Employers in the retail and betting sectors have the option of recruiting more staff to cover for employees who opt out of working on a Sunday, or can offer part-time workers additional hours to maintain workplace flexibilities which may dampen any increase in salary costs. At present we cannot quantify these effects and therefore cannot predict the overall effect on the retail and betting sectors in Scotland. However, the scope for adjusting staff hours to suit some change in existing Sunday working patters would seem perfectly possible for most businesses, without significant ongoing costs.
Numbers benefiting and estimated compliance costs
18.Estimating the number of shop and betting workers benefiting from the extension of legislative provision and any associated compliance costs is difficult because of the novelty of the regulations. In addition, the effect of utilising the flexibilities cannot be easily estimated. Moreover, the sectors are fairly small in comparison to the total workforce numbers across Scotland (betting and retail accounts for only 12% of the total Scottish workforce). Obtaining accurate estimates of numbers of workers benefiting is difficult from official sources. No straightforward indication can be given as to the numbers of workers in these sectors who already work or have worked on a Sunday, but might choose to opt out should legislative change be adopted. Equally this is the case for the numbers who have never previously worked on a Sunday, but if asked would either opt out or consider accepting Sunday as part of their working week.
Numbers benefiting
19.The Spring 2002 Labour Force Survey (LFS) shows around 264,000 workers in Scotland in the retail and betting sectors covered by the 1996 Act. They are employed in around 19,810 enterprises. 97 per cent of these are classified as small enterprises of fewer than 50 employees. Although all 264,000 would benefit from the proposed changes to the legislation, a significantly lower number are expected to be interested in opting out of Sunday working. The Survey indicates that some 147,800 workers in these sectors already work or have at some time worked on a Sunday, leaving the remainder never having worked on a Sunday.
20.People who are strongly disposed not to work on Sundays are very likely to have avoided employment in the retail and betting sectors. At the same time employers may already be accommodating a percentage of staff who currently work in these sectors and prefer not working on a Sunday. Of the 147,800 workers who already work or have at some time worked on a Sunday, it may be prudent to assume that somewhere in the range of between 5 and 20 per cent might opt out if the choice were available. As with the legislation in England and Wales, where an employee falls within the scope of a protected worker as defined in the Bill and opts out of Sunday work following the commencement date of the Bill, the employer will have no legal obligation to provide alternative weekday working. Thereby any associated salary costs would be transferable.
Compliance cost estimates
21.The costs fall into two distinct categories - one-off and continuing. On the first, management time should be costed to reflect assessment of the impact of the new legislation. In round terms using an average of 1 hour per manager in each of the enterprises in the sector (19,800), the total costs would be £455k (the equivalent of £22.98 per enterprise), using New Earnings Survey data for management salaries in retail, and is basically an opportunity cost. It seems highly unlikely that net additional expenditure would be incurred as part of the learning time for mangers. However, the legislation will require employers to give written notice to employees in post after the commencement date of the legislation of their rights as regards Sunday working. We estimate that the preparation and distribution of the notice prescribed in the legislation would be in the region of £250,000 (equivalent to £12.63 per enterprise).
22.A number of factors must be taken into account in calculating continuing costs for businesses from a new law on Sunday working. Many will be totally unaffected, while others may face the possibility of having to make noticeable adjustments to their current working arrangements and practices. Some of those changes may involve little cost whilst others could be more substantial. On the whole, the actual changes required will be limited, because for the most part employers in these sectors will be able to adjust staffing levels in a number of ways (i.e. by re-allocating duties, by increasing the number of hours worked by part-time workers, by adjusting work rotas etc.). In a sector where the annual staff turnover is 40 %, scope must exist over time to identify new employees willing to undertake Sunday working. Moreover, even in cases where a recruitment need was identified, the actual effects should result in a minimal cost burden on business.
23.This leaves therefore cases where an employer is required to take on extra staff because there is no scope, for whatever reason, to re-allocate Sunday hours within the existing workforce. Using a low, medium and high estimate of numbers or workers who might choose the Sunday opt-out facility, drawing on average earnings for sales assistants and betting workers, the following totals emerge. The base figure is the 147,800 workers who work or have worked on a Sunday:
5 per cent would equate to costs of approx. £685k (£34.59 per enterprise);
10 per cent would equate to costs of approx. £1.29 million (£65.15 per enterprise); and
20 per cent would equate to costs of approx. £2.57 million (£129.80 per enterprise).
As employers would not be obliged to make up the hours foregone, these costs would be largely met by internal adjustment.
Potential savings
24.As detailed in paragraph 16 above, the extension of said legislation could result in a reduction in the number of cases for unfair dismissal brought before Scottish tribunals. Using the assumptions in paragraph 18 where the betting and retail sectors make up 12% of the total Scottish workforce, it would be fair to say that 12 % of the unfair dismissal cases could come from these sectors. Giving a figure of potentially 454 cases of unfair dismissal in the last financial year alone. Using the last financial year figures as a benchmark, potential savings could be made in employment tribunal costs. For example, if between 1-5% of these 454 cases was brought about by a dispute over working on a Sunday, potential saving of between £62k and £288k could be made (equivalent to between £3.13 and £14.55 per enterprise).
Impact on Small Businesses
25.Small firms (those with less than 50 employees) currently make up 97 per cent of the betting and retail sectors in Scotland and employ 31 per cent of the total labour force in the sectors. It is therefore likely that around 31 per cent of the compliance costs will fall on small firms. The Small Business federation has been consulted on the proposals and will receive a copy of the RIA. We therefore estimate the total costs of extending the legislative provision to small forms in Scotland as follows:
Competition assessment
26.A competition filter has been applied and the results showed there is unlikely to be a negative competitive impact from the new regulations. As detailed in the guidance, a detailed competition assessment is not required. The proposed regulations should not affect the structure of competition in the sectors affected. This view is based on the likelihood that the number of employees who would opt out of Sunday working is expected to be relatively low. Employers in the sectors would be able to adjust to the loss of some Sunday workers either by reallocating duties to existing staff or recruiting part time staff. These changes by business should not result in significant costs and whilst larger firms might be better placed to meet recruitment costs, it is not likely that the costs would be sufficiently high enough for smaller businesses for there to be an impact on competition. If extended to Scotland, they will apply throughout Great Britain and therefore should not affect the relative position of companies in tradable sectors. This assessment will be kept under review as work progresses.
Securing compliance
27.The new provisions will provide workers in the relevant sectors with entitlements which could be enforced by complaint to an Employment Tribunal if denied.
Contact point and date:
Anne Armstrong
Home and Social Division
Scotland Office
0141 242 5949
anne.armstrong@scotland.gsi.gov.uk
Annex A
Definitions and assumptions used in calculating numbers who benefit and
compliance costs
1.The numbers of workers affected and the cost to employers of the new provisions have never previously been estimated for Scotland separate from England and Wales. It has not been possible to obtain a copy of the Regulatory Impact Assessment in 1993/4 for England and Wales. It has therefore not been possible to use the same methodology and assumptions as the previous RIA.
2.Estimates have been based on data available from the Spring 2002 Labour Force Survey (LFS), the New Earnings Survey (NES) 2002 and from Scottish extracts from the Inter Departmental Business Register (IDBR). LFS 2002 data gives a more timely estimate of numbers affected whilst NES 2002 and IDBR data sheds some light on the likely compliance costs. Based on 2002 data, the estimated compliance costs have been calculated using an average of 1 hour per manager, multiplied by the number of enterprises in the sector (19,800), multiplied by the average sales managers hourly salary (£22.96). This gives a total cost of approx. £455k. Using the same formula this figures could fall to £442k for small enterprises.
3.The legislation will require employers to give written notice to employees in post after the commencement date of the legislation of their rights as regards Sunday working. An estimate of the costs for the preparation and distribution of said notices as prescribed in the legislation would be in the region of £250,000, assuming £1 per written notice for 250,000 employees.
4.The estimated number of workers benefiting from the new provisions and the hourly wage rates are derived mainly from the Spring 2002 Labour Force Survey allowing compliance costs to be estimated. The figures from these sources relate to "employees" rather than "workers" as these surveys do not use this concept. The term "employees" is likely to define a narrower group than "workers" and therefore it is possible that for this reason this RIA slightly underestimates the number of people benefiting from the legislation.
5.In all it is estimated that 264,000 workers are in the sectors that will be covered by the legislation. This estimate was calculated by finding the number of employees from the 2002 Labour Force Survey in the betting and retail sectors using the relevant Standard Industrial Classification codes.
6.The 264,000 estimate includes all employees in the betting and retail sectors. However, in practice 56 per cent (147,840) of the total employees in these sectors already work or have at some time worked on a Sunday. Thereby, we estimate that a significantly lower number from these 56 per cent could opt for a more flexible-working pattern, excluding Sundays. Again these figures have been taken from the spring 2002 Labour Force Survey.
7.People who are strongly disposed not to work on Sundays are very likely to have avoided employment in the retail and betting sectors. At the same time employers may already be accommodating a percentage of staff who currently work in these sectors and prefer not working on a Sunday. Of the 147,800 workers who already work or have at some time worked on a Sunday, it may be prudent to assume that somewhere in the range of between 5 and 20 per cent (8,000 - 30,000 people) might opt out if the choice were available.
8.For the purposes of costs New Earnings Survey 2002 data has been used to calculate the gross hourly rate of pay for managers in the retail and betting sectors, who we have assumed would be most likely to assess the impact this new legislation would have on their business. Caution should be exercised when looking at these estimates as they are UK wide figures. Salaries in these sectors may differ in Scotland.
9.Compliance costs have taken into account that 97 per cent of the businesses in the sectors were classed as small enterprises. Using this percentage 19,216 businesses have been categorised as small enterprises as compared to 19,810 enterprises in total in the sectors. Small firms in Scotland employ 31 per cent of the total labour force in the sectors. It is therefore likely that around 31 per cent of the compliance costs will fall on small firms.
10.Again for the purposes of costs, New Earnings Survey 2002 data has been used to calculate the salary implications where an employer is required to take on extra staff because there is no scope, for whatever reason, to re-allocate Sunday hours within the existing workforce. The costs have also been calculated using an average 7 hours per employee, paid at time and a half premium for a Sunday, plus on-costs for National Insurance (£15.00), using an estimate of low, medium and high impact and using the base figure of 147,800 workers who work or have worked on a Sunday. A lower salary figure of £8.16 has been used for small enterprises, with the same formula and same estimate of low, medium and high impact. Caution should be exercised when looking at these estimates as they are UK wide figures. Salaries in these sectors may differ in Scotland.
11.Using LFS 2002 data 56 per cent of the total number of employees in the betting and retail sectors in Scotland usually work or have worked on a Sunday. Therefore, it is assumed that employers will not, in general, have difficulty in arranging working patterns to ensure that Sunday working is done by those employees who are willing to do so.
Scotland Office
6 February 2003