John Park MSP Consultation

Living Wage (Scotland) Bill

Submission from UCATT

Contact details: Frank Gray, Researcher UCATT UCATT Regional Office, Morrison St, Glasgow, G5 8LB Tel: 0141 420 2880 Organisation type: Trade Union

Introduction

UCATT is the largest specialist trade union for construction workers in Scotland, with members both in the public and private sectors. UCATT is the lead union among the signatories to the National Working Rule Agreement of the Construction Industry Joint Council and the Scottish Joint Negotiating Committee for Local Authority Craft and Associated Employees. UCATT is represented on a number of construction industry related bodies by the Regional Secretary including Construction Skills, STUC General Council, Scottish Building Apprenticeship and Training Council. UCATT has members in private construction companies, builders, craftspeople, shipbuilding, refractory workers, steeplejacks, and workers in the demolition industry. UCATT also represents workers in the public sector across local authorities, the health service, civil service and fixed establishments. The construction industry has been badly affected by the recessionary periods and also faces on-going economic difficulties. The housing industry has ground to a standstill with reductions in new build across all sectors. Of course the hard hitting consequences of this financial collapse has seen workers suffer with wage levels flat-lining and pay cuts being enforced by employers across the sector. Traditionally, pay rates in the construction industry
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would be significantly higher than either the National Minimum Wage or The Living Wage, but recently UCATT has uncovered a worrying increase in low pay across both the public and private sector of the industry. It is in the interest of alleviating poverty pay, supporting dignity and respect in employment and making work pay that UCATT fully supports the proposals contained within this consultation to require private sector employees working on public sector contracts to be paid the Living Wage and require Scottish Ministers to prepare and report on a strategic plan to promote the Living Wage.

Consultation Questions

Q1 Do you support the general aims of the proposed Bill? Yes. The case in support of the Living Wage has been made for over a decade. There is no need to fully revisit the arguments supporting the payment of a Living Wage, currently set at 8.55 in London and 7.45 for the rest of the UK1, with COSLA committed to making 7.50 the lowest rate payable to workers across Local Government in Scotland2. UCATT is chiefly concerned that the hundreds of thousands of workers currently being denied the Living Wage across Scotland receive a level of pay that allows them to make a full contribution to society. The fact that 6 out of 103 households in poverty have one or more people currently in work says much about the current inadequate level of the National Minimum Wage, and UCATT believes that a progressive proposal such as this one would be an important step on the road to making work pay. As a first step it should be possible to ensure through procurement that all those companies benefitting from public sector contracts pay at least the Living Wage. UCATT is supportive of the comments made to a Scottish Parliament Committee by Patrick Maguire of Thompsons solicitors that: the contract performance clause could contain a stipulation that all workers on the contract are paid a living wage provided that: a) the condition applied only to that
1

http://www.livingwage.org.uk/home

http://www.heraldscotland.com/news/home-news/250000-scottish-council-workers-offered-1-payrise.1353600695
3

http://policy-practice.oxfam.org.uk/publications/when-work-wont-pay-in-work-poverty-in-the-uk-197010

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contract and not to all workers employed by the successful tenderer b) the condition was set out in the call for tenders; and c) that the condition complied with EU law 4. Payment of the Living Wage is also consistent with anti-poverty measures taken forward by many public procuring authorities in Scotland and UCATT believes that this could be used in terms of complying with EU Law, that the Living Wage payment supports a social benefit that could be rightly included in any contract performance clause. UCATT has evidence to support our position that exploitation is taking place on major public sector infrastructure projects across Scotland. For example; on some much heralded public sector construction projects currently being built, our representatives are finding that workers are forced into classifying themselves as self-employed, paid poor rates of pay, and are having deductions made to receive an itemised pay slip. Workers are regularly required to operate via employment agencies, who drive down pay rates and who are increasingly forcing workers to be paid via payroll companies. By forcing workers to sign a contract with a payroll company, workers officially become self-employed and therefore are not even protected by minimum wage protection. Workers forced to sign on with a payroll company are as likely to be labourers (whose pay rates are the lowest in construction) as more skilled workers. By the payroll company deducting a charge for their services from the workers pay, rates can fall below the minimum wage.

The exact nature of the relationship between these workers and the employer means they should of course be classed as employees as HMRC rules are clear; employment status is not a matter of choice it is dependent on the way in which work is carried out5. But coercion by employers, a lack of knowledge from workers and by main contractors and clients turning a blind eye, is leading to these practices being commonly adopted on site. This is immoral tax avoidance and it is estimated that this costs the public purse across the UK 1.7bn per annum6 in lost taxation revenue. By ensuring payment of at least the Living Wage on these public sector contracts, the Scottish Parliament could be taking the lead in the UK in delivering fairness for workers engaged in public sector contracts through private sector employers and agencies.

http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/46601.aspx http://www.hmrc.gov.uk/cis/intro/con-or-sub.htm http://cresi.essex.ac.uk/2008/11/10/publication-the-evasion-economy/

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Q2 Do you envisage any issues for public sector bodies when including the Living Wage as a contract performance condition of contract? No. UCATT is not convinced that implementing the Living Wage will cause any issues for public sector bodies. Evidence given to the Scottish Government Local Government Committee from UNISON (Dave Watson) made the argument that this could be done quite simply without potential for equal pay claims7. The example is clearly set by the Greater London Authority, which has successfully implemented the London Living Wage into new and existing contracts supporting more than 3,000 employees8. As yet there has been no legal challenge, and UCATT does not foresee that there would be in Scotland. Following Living Wage week in November 2012, its the case that more and more authorities and public bodies are supporting the payment of a Living Wage for their own employees, the next step for procurers in establishing fair pay is to ensure those working on public sector contracts receive at least the Living Wage, where no collective agreement is in place. It is equally vital that the Living Wage is not used as an instrument to dilute pay, and that recognised industry rates are paid where they are in place.

Q3 What do you consider will be the advantages or disadvantages for employers and employees if public sector performance clauses stipulate the payment of the Living Wage? UCATT does not see any disadvantages in performance clauses stipulating at least payment of the Living Wage on Public Sector Contracts. The most important advantage would be using the Living Wage to support lifting families out of in-work poverty by increasing the wage levels of a worker. When you consider that around 18% of those working in the private sector in Scotland are earning below the Living Wage then that is something that must be challenged, and the lead must come from the Public Sector9. Specifically with regards to the construction sector, it is important to stress that the payment of the Living Wage must be supported by an aggressive policy on tax avoidance measures used by companies winning contracts. To ensure the maximisation of the Living Wage policy, it is necessary to establish that workers employment status reflects their
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http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/46601.aspx http://www.london.gov.uk/sites/default/files/living-wage-2011.pdf http://povertyalliance.org/userfiles/files/consultations/SLWC_Response_Procurement_Ref_Nov12.pdf

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employment relationship. Too often workers are wrongly classified as self-employed and would therefore miss out on this anti-poverty measure. UCATT believes that the implementation of the Living Wage through performance clauses would at least drive out rogues in the construction sector that operate on the lowest rates they can possibly pay members of their workforce, even on public sector contracts. Most often this is seen in construction labouring, security staff, traffic management workers, on site cleaners and canteen staff. These workers undertake tasks to ensure the delivery of some of Scotlands most vital infrastructure projects yet are most often rewarded with the inadequate National Minimum Wage. It is equally important that the Scottish Government creates a Living Wage Unit. This body could promote the issue of the Living Wage both within the Scottish Government and give advice to public bodies on the policy supporting the method of using performance related clauses within procurement for its delivery. The London experience demonstrates that the benefits to the private sector can be promoted through a unit that can establish a strong business case for the Living Wage. It is important that this unit, while supported by the Scottish Government, retains its own independence from the Scottish Government and should report its findings on the issue of the Living Wage to inform Parliament of the impact of the Living Wage across workplaces in Scotland. Q4 Which public sector bodies should use contract performance clauses to deliver the Living Wage? UCATT supports the view that as wide a definition of public bodies as possible is taken and that this includes all those identified in the consultation document, including Scottish Government, Executive Agencies, Non Departmental Bodies, and Local Authorities. The Scottish Government has a useful and informative guide to all public bodies 10. The policy must develop throughout all related public bodies in Scotland so that no public money spent in Scotland is spent supporting poverty pay. Fundamentally, the Living Wage describes the minimum hourly wage necessary for an individual to meet their own or their familys basic day-to-day needs including housing, food and clothing, it is therefore not a panacea but an important step in allowing dignity in employment. In addition, following significant recent outsourcing of many public services to ALEOs, ALMOs and outsourced bodies often wholly owned by Local Authorities, UCATT believes that these organisations should also incorporate the Living Wage into their contract performance clauses. Furthermore, UCATT agrees that there needs to be consistent application of policies such as section 52 of the Local Government (Scotland) Act where the Living Wage could be extended to contracts outsourced by a local authority. Applying
10

http://www.scotland.gov.uk/Topics/Government/public-bodies/about/Bodies

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Section 52 consistently to contracts would ensure that workers brought in to work on an individual contract must at least be paid the Living Wage11.

Q5 Which bodies should be mandatory consultees? In terms of mandatory consultees to the Scottish Government Strategic Plan outlining the objectives and priorities to develop an approach to the Living Wage; groups such as Poverty Alliance Scotland, STUC, Low Pay Commission must be included to guide and inform the realities of pay across workplaces in Scotland and the social impact this has on families and communities.

Q6 What information must be included in Scottish Ministers report to the Scottish Parliament? Any report to the Scottish Parliament on the strategic plan to support the delivery of the Living Wage must be focused on those areas and objectives that influence the policy. For example, the plan should consider: Mapping low pay sectors across Scotland and seek to promote awareness through stakeholders in those areas. Statistics that show the delivery of the Living Wage, looking at areas where commitment to the Living Wage is strong and where the policy needs to be pushed more by Government. The report should consider new approaches and ways of supporting the development of promotion of the Living Wage and propose new methods of achieving the maximum impact of the policy to develop and promote the Living Wage across Scotland. The strategic plan must also consider any employment relationships that are designed to prevent payment of the Living Wage across public sector contracts. These could include disguising employment status and agency working. The Scottish Ministers should be setting out objectives and practical measures to prevent this kind of behaviour from taking place. UCATT is concerned that even should the Scottish Government agree to make payment of the Living Wage a contract performance clause within Public Sector Contracts, those companies that seek every avenue in pursuit of tax avoidance, will do so by coercion and using employment status to reduce tax returns.
11

http://www.scotland.gov.uk/Resource/Doc/115506/0028632.pdf

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Q7 What is your assessment of the likely financial implications of the proposed Bill to you or your organisation; if possible please provide evidence to support your view? What (if any) other significant financial implications are likely to arise? As a trade union representing members working on many public sector construction contracts across Scotland, we vigorously pursue collective agreements for all workers. UCATT is aware of members operating on the National Minimum Wage on these projects. Therefore implementation of this Bill would support increasing these members pay rates, and in turn support increased spending in local economies in our communities. UCATT endorses the financial implications of the proposed Bill as welcome, progressive and helping to alleviate poverty pay, with public sector employers rightly taking the lead. Furthermore, evidence exists that the Bill will actually save money. The Institute of Fiscal Studies has calculated sub-living wage employers cost the taxpayer 6bn a year in in-work benefits alone12. The indirect cost on poverty is around 25bn a year. In contrast the cost to employers is minimal at around 1% of the wage bill. Even in the retail sector it is only 5%. As a recent study of the London Living Wage shows, even that can be recouped through decreased staff turnover and better productivity13.

Q8 Is the proposed Bill likely to have any substantial positive or negative implications for equality? If it is likely to have a substantial negative implication, how might this be minimised or avoided For UCATT, the proposed Bill would only have a positive impact for equality. Historically, pay gaps have existed between men and women, and research carried out by Simonetta Longhi and Lucinda Platt at the University of Essex in 2008 on behalf of the Institute for Social and Economic Research: Pay Gaps Across Equalities Areas outlined that there is persistent disadvantage in pay across equalities areas, with gender being a major issue14. These areas also looked at inequality tied to race and ethnicity and found that in some areas there were clear pay differentials. Certainly in occupations such as cleaning, hospitality and retail the levels of pay would potentially see the greatest increase across a workforce mostly made up of female employees. This would certainly have a positive impact for equality in raising these wage levels to a figure that is calculated to support a quality of life which helps erode in-work poverty.
12

http://www.ifs.org.uk/docs/miliband.pdf http://www.unison.org.uk/file/Living%20Wage%20Factsheet%202012.pdf https://www.iser.essex.ac.uk/publication/511998

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