Press Articles & Comment

Bending the rules

CBI Business Guide, June 2007

Many businesses are becoming more flexible in response to market conditions. But legislation, regulation and ill-defined practices are doing their best to force the issue - and risk turning "flexibility" into a dirty word.

All of the scenarios in this guide suggest that companies will need to become more flexible and adaptable over the next decade. But the drivers of this increased flexibility are technology, social change and a quickening pace to business. A skills shortage and demands for an enhanced work/life balance from a new generation of recruits will almost certainly convince companies to change - it's the market at work. But no one we interviewed for this guide suggested that legislators had an essential role to play in bringing this about.

The problem is that government isn't very good at second-guessing the market - particularly in the field of employment law. "We're having to grapple with rather arcane employment laws that aren't adapted for fast-moving businesses," says David Williams, an employment lawyer at Kemp Little. "In Europe, we're seeing friction between the French and German systems, which set out primarily to protect workers: and the British system, which historically has made it easier to hire and fire but that has increasingly pushed for rights to employee flexibility."

Forced flex

Legislation has tended to push for flexibility in only one area: employees seeking less rigid hours. That's certainly true in the UK where rules on the right to apply for flexible working have been in force since 2003. The vast majority of workers - 90 per cent, according to the Department for Trade and Industry's Work-Life Balance Employee Survey, published in March 2007 - have access to some kind of flexible working arrangement and 56 per cent had worked flexibly during the previous year. Tellingly, 87 per cent of employees said they were either satisfied or very satisfied with their working arrangements - up to 81 per cent in 2003.

Yet the government thinks that flexible working legislation out to be extended to employees who don't have carer commitments. "Work-life balance is still unobtainable for many low-income families, where the impact of low pay, job insecurity and working hours bite hardest," wrote children's minister Beverley Hughes in February,, in a book published by the Institute for Public Policy Research.

The CBI's director of HR policy, Susan Anderson, believes the right to request has worked well so far. "It helps working parents with young or disabled children to balance responsibilities and increases the retention of these staff," she says. "But it is vital that the impact of this change is fully reviewed before any further groups are included. Only by having a gradual and phased extension can we avoid firms being deluged with a sudden increase in requests."

Defining an employee

The other problem is that companies using flexible models for market-driven reactions are actually facing new restrictions - or downright confusion - from the law. "We have a system where employees have a massive range of rights and consultants have very few," says Williams. "The courts have been grappling with this in a number of areas and it has led to confusion - not least about what actually constitutes an employee. It seems that many people want to be a consultant - they want that flexibility - but others want the rights that come with being an employee. And, of course, because of the way the rules are written, if they tick enough boxes - such as is the work integral to the business? Has the worker agreed to perform the work personally? Are they obliged to do the work offered to them? - they can be classed as an employee."

Case law can be confused in this area. In Hewlett-Packard v O'Murphy, the court ruled a contractor must have a contract with the end user of their services to be considered an employee. But in Dacas v Brook Street Bureau (UK), the Court of Appeal held that contract cleaner Mrs Dacas was in effect employed by Wandsworth Council, despite being paid and managed as a free agent by Brook Street.

Where this goes in the next decade is a puzzle. "One development might be that you have to sign up to a particular status as a consultant or an employee," says Williams. "The problem is that there's a merging of these positions. You have people working remotely or providing support for particular projects where ever they happen to actually do the work, and that blurs the distinctions. Many people classed as consultants are in effect becoming employees just by the way that they work."

Europe: out of touch?

The problem is that while companies and more highly skilled workers, empowered by technology, are starting to engage in new, more flexible ways of meeting the challenges of a fast-moving business environment, the legislators are still trying to protect the rights of low-skill temps. That's not a bad instinct - it's just that the approach has tended to be a blunt instrument.

"Temporary workers ware really important to the economy," says British Chambers of Commerce employment advisor Kieran O'Keefe. "But the green paper of European Labour Law has ratcheted up the debate about which direction the regulatory environment should go. The European Commission calls non-conventional employees 'atypical' and there's a real sense they're trying to push employers and employees back into more conventional relationships. But is it fair to call up to 40 per cent of the workforce 'atypical?"

It seems that European governments' fear of the blossoming cost of welfare may be driving this. Employees are more likely to have pensions, health insurance and critical illness cover than freelancers - who rely on the state. But a sustainable future is surely one where balance is restored to the system.

Other regulations

The more flexible and connected work environment of 2017 will also need smarter regulations in other areas - particularly the control of data. "At the moment, different means of communication have different legal validity," says Peter Brown, director of strategy at Orange Business Services. "Obviously a letter is a legal document and email is the same, but an SMS isn't. Instant messaging chat is, but only if it's been formally tracked."

There are considerations around health and safety in the "workplace" when that extends to the home or a satellite hub office. That includes access to day-light in work areas and ergonomics, of course, and we can expect more severe regulations about pollution and energy use.

Internal rules will also need to be addressed over the next decade. "Businesses have to become more 'disorganised' partly because young people coming into the workforce are used to handling technology and can adapt more readily to flexible work practices," says Brown. "They're less inclined to subject themselves to institutional disciplines, too, but that means companies must work out how they're going to control data flows and people management - they have to work out which areas require this flexibility and which will require more restrictive practices."

There's also a cultural dilemma presented by the "always-on" culture. There are rules governing proper behaviour and appropriate dress in the office - but how will those norms adjust when employment status, location and working hours are blurred?" Everyone in corporate life knows people who send emails at unusual hours," says Williams. "But how valuable is a business communication consisting of a couple of lines sent after a night in the pub? There are no regulations governing this yet. But accepted practice will develop, perhaps in a response to the attitudes of the next generation of skilled workers - and sending those two-line emails from the pub will become less acceptable."