Fixed-term Employees (Prevention of Less Favourable Treatment) (Amendment) Regulations 2008

rose to move, That the draft regulations laid before the House on 2 July be approved. The noble Lord said: My Lords, I am happy to confirm to noble Lords that these provisions are compatible with the European Convention on Human Rights. The purpose of these amending regulations is straightforward. They restore eligibility for statutory sick pay to agency workers who have contracts of three months or less. That eligibility was removed as a result of a Court of Appeal decision in 2007. In making this amendment, we are restoring the original intention of changes made in 2002. Specifically, the regulations revise the wording of Regulation 19 of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, in order to ensure that agency workers are not excluded from the changes made to statutory sick pay by the regulations. That would take effect from 27 October 2008. Noble Lords may be wondering why a Work and Pensions Minister is introducing amending regulations under the Employment Act, which might normally fall to colleagues from the Department for Business, Enterprise and Regulatory Reform. However, I am proposing these changes with the agreement of BERR Ministers, because they introduce a change for statutory sick pay, responsibility for which rests with the Department for Work and Pensions. Before going further, it may be helpful if I set out some brief background information about statutory sick pay and how the various legislative changes relate to the regulations. The Social Security Contributions and Benefits Act 1992 makes provision for a minimum payment to be made to workers who are unable to work due to sickness, provided they meet the entitlement conditions. Statutory sick pay is payable to anyone who is classified as an employed earner for national insurance purposes. Agency workers may be categorised as employed earners for those purposes. If that is the case, they become liable to pay national insurance contributions in the same way as other employed earners and should have the same opportunity to qualify for all statutory payments, including statutory sick pay. Employers meet the cost of statutory sick pay, although some are entitled to a government rebate if they experience unusually high levels of sickness absence. The Employment Act 2002 and the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations removed working practices or legislation that treated people with fixed-term contracts less favourably than those with permanent contracts. As a result, a restriction which prevented people with contracts of three months of less from receiving statutory sick pay was removed. Thereafter, people who had contracts lasting three months or less became eligible for statutory sick pay in the same way as other workers. The change in 2002 was introduced on the basis that it would remove the three-month barrier to statutory sick payment for all those who would qualify for entitlement. However, an employment agency subsequently challenged the requirement to pay statutory sick pay to its agency workers. It argued that an effect of Regulation 19 of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 was to exclude agency workers from the changes made by the regulations to statutory sick pay legislation. The challenge was successful. The Court of Appeal ruled in favour of the position taken by the Thorn Baker agency. Hence, that leaves a complex and inequitable position, whereby statutory sick pay is payable to individuals who are not agency workers, regardless of the length of their contract, and to agency workers with contracts in excess of three months, but it is not payable to agency workers with a contract lasting three months or less. The Government, nevertheless, remain committed to the principle that those who work through agencies should have the same access to SSP as they have to all the other statutory payments and the same access to SSP as other people who pay national insurance. By making this amendment to the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, we will remove the inequality and restore the original intent. This is the amendment for which I seek the approval of the House today. Between 1 million and 1.5 million agency workers work for more than 15,000 agencies. We estimate that as many as 60,000 agency workers could benefit from this measure. We have considered the financial implications for agencies before bringing this amendment to the House. Of course, agencies already meet statutory sick pay costs for those who have contracts totalling more than 13 weeks. Equally, other employers routinely meet these costs when paying statutory sick pay to their employees, regardless of the length of employment. We estimate that the average cost to each agency of this measure will be in the region of £850 per year. The overall cost to business will be in the region of £13.5 million. Notwithstanding that, I am sure that noble Lords will recognise that there can be no justification for retaining a provision which excludes only this group of workers from sick pay, when comparable workers benefit from this financial protection. Finally, I hope that we can all agree that it is just to restore the original policy intention and ensure that agency workers are entitled to statutory sick pay on a level footing with other workers. I commend this amendment to the regulations to noble Lords. Moved, That the draft regulations laid before the House on 2 July be approved. 25th Report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)