In September 2004, the annual conference of the UK's Trades Union Congress called for the extension of trade union recognition legislation to include smaller firms. Trade unions have also criticised the exclusion of small firms from forthcoming information and consultation Regulations. This article reviews the extent of employee representation in small firms, and the debate about widening legal requirements to encourage it.
In September 2004, the annual conference of the Trades Union Congress (TUC) carried a resolution on fairness at work calling for amendments to the Employment Relations Act 1999 to extend the statutory trade union recognition procedure to smaller firms. The recognition provisions include a 'small firms threshold' and do not apply to employers with fewer than 21 workers. The TUC has also expressed regret about the exclusion of undertakings with under 50 employees from the forthcoming Information and Consultation of Employees Regulations (UK0407104F), which are to transpose the 2002 EU information and consultation Directive (2002/14/EC) (EU0204207F) into UK law.
Against this background, this article considers the different social partners’ arguments for and against increasing through legal mechanisms worker representation and 'voice' in small firms and provides a commentary on the implications of doing so.
Extent of representation in small firms
Small firms are characterised by low levels of trade union membership and recognition, and formal structures and practices for employee representation and voice are unusual, although not entirely absent.
According to the 1998 Workplace Employee Relations Survey (the latest available authoritative data), in the overwhelming majority (74%) of small businesses with fewer than 100 employees, there is no union recognition and no joint consultative committee (JCC). In just 14%, although there is no union recognition, there is a JCC; in 9% there is union recognition, but no JCC; and in only 2% is there union recognition and a JCC.
More recent data indicate that union density is 19% in workplaces with fewer than 50 employees. However, included in the category 'small workplaces' are small workplaces belonging to larger businesses as well as small businesses. The figure for small businesses alone is thought to be lower.
The legal position
There are two main (current and prospective) legal mechanisms providing for collective employee representation and voice at work. However, neither is universally applicable and both are dependent on firm size.
At present the statutory union recognition procedure under the Employment Relations Act 1999 (UK0201171F) does not apply to employers with fewer than 21 employees, which, according to the TUC, means that approximately 6 million UK workers (or a quarter of the workforce) located in very small firms are denied a voice at work.
The other major legal mechanism for worker voice, the Information and Consultation of Employees Regulations, which will come into effect in April 2005, will initially exclude firms with fewer than 150 employees, but will increase in coverage to include firms with 50 or more employees from April 2008. Under the Regulations, information and consultation can be with non-union employee representatives.
The trade union lobby
Speaking about the trade union recognition law, TUC general secretary Brendan Barber has said: 'Thousands of UK workers in medium-sized and large firms now have a union to speak for them at work. There is no logical reason to continue to deny the same rights to six million others just because they work for small employers.'. The Graphical, Paper and Media Union (GPMU, which recently merged with Amicus- UK0410105F) represents workers in an industry where many are employed in small firms and the union has lodged vociferous protests with the government for failing to 'face down' the business lobby on workplace rights. Speaking at the Labour Party conference in autumn 2004, GPMU general secretary Tony Dubbins argued that the 6 million employees in small companies are 'the most vulnerable and the most exploited in our society'. Mr Dubbins went on to ask the government for 'fairness not favours, and justice and equality for all workers no matter what size of company they work in'.
In addition, the TUC has recorded its disagreement with the decision to exclude small firms from the Information and Consultation of Employees Regulations. The TUC argues that small firms can benefit by improving channels of communication between management and workers. It claims that where employees are represented by an independent trade union, managers find themselves spending less time dealing with day-to-day employee relations issues.
The employer lobby
However, employers’ groups have been vocal in their support of the retention of the small firms threshold in relation to union recognition. The Forum of Private Business, a group representing small firms, told the Sunday Times on 23 April 2000 that trade union recognition would 'spark the biggest headache for owner-managers when it comes into effect, even though it excludes firms that employ fewer than 20 workers', while another small firms lobbyist told the newspaper on 27 April 2003: 'I know of owner-managers who would prefer to close down their business than have their employees be trade union members.'
The employer lobby opposes involvement of unions on grounds of time constraints and a preference for informal employee relations. For example, in the public consultation exercise reviewing the Employment Relations Act 1999, the British Printing Industries Federation stated that, according to its estimates, a small company could lose up to 50% of its profit margins as a result of going through the recognition procedure. Similarly, the Small Business Council and Small Business Service reported support for the threshold among small businesses, and the Confederation of British Industry stated that 'imposing recognition on small firms would be as inappropriate now as it was when the legislation was originally drafted'.
The government's position
The government has stated that employee voice is good for employers and for employees. Speaking at a TUC conference on information and consultation in January 2003, the then employment relations minister, Alan Johnson MP, said that 'a proper process of employee communication and dialogue is important, indeed vital'.
However, the government claims that small firms are the 'lifeblood' of the UK economy and it sees itself as needing to create an environment that is conducive to the establishment of small firms, 'free of red tape and interference' so disliked by small firms. This explains the government’s reluctance to force employee involvement structures and practices upon small businesses and its preference for a more voluntarist approach. One initiative to encourage better employee relations in small firms is the Department of Trade and Industry’s 'shared human resources' project, which was set up to test a variety of ways of providing advice and guidance on employment issues for small businesses, enabling them to access human resources facilities to address problems while limiting cost. Amongst other areas, the service will provide advice and support on communications and consultation and partnership working, although a footnote in the project report emphasises that consultation and partnership can occur with or without a trade union.
Another important government-sponsored initiative and employee voice mechanism for small firms is the creation by the Health and Safety Commission, in consultation with the TUC, of worker safety advisors (WSAs, or 'roving safety reps' as they are called in the trade union movement). WSAs will work with employers, possibly where unions are not recognised, to involve and consult the workforce on health and safety issues. This has been heralded by the TUC as a major advance for workers in small firms.
In summary, although the government is generally supportive of employee representation and voice, it does appear to be concerned to pacify the small business lobby, which is opposed to increasing employment regulation. In its recent review (UK0312104F) of the Employment Relations Act 1999, the government stated that it is not persuaded that recognition can work for all small businesses because the sector remains largely non-unionised and often lacks the organisational structures, human resource functions and flexibility that facilitate collective bargaining.
Commentary
In the absence of formal structures and practices, the opportunities for workers in small firms to have their interests represented and to voice their concerns are limited. This is at odds with a number of international human rights treaties, which, as Keith Ewing and Anne Hock, authors of the report The next step: trade union recognition in small enterprises, point out, recognise the right to bargain collectively. There is no qualification that says 'except in the case of small businesses'. In addition, there are various inconsistencies and anomalies in UK employment law relating to the question of employee representation and voice. For example, despite only limited rights to collective representation and voice in small firms, since October 2004 all businesses have been required to have formal written discipline and grievance procedures (UK0408102F), which confer voice rights and a formal avenue for workers to challenge their employers. However, without the protection afforded by collective representation, workers in small firms will remain isolated and vulnerable, meaning that access to this new right is likely to be limited to those who are not worried about the prospect of victimisation.
Trade unions argue that, in not extending the two key pieces of 'voice' legislation to very small firms, the government has bowed to pressure from the employer lobby. However, whether small firms’ dislike and suspicion of employment regulation is rational and justified may be questionable. For example, recent research has found no evidence that managerial decision-making is constrained by the existence of regulation and that employment laws are far from being the main constraint faced by small firms, with market competition being the main influence (UK0310105F). There is no evidence that extending the recognition law and information and consultation regulations would pose any threat to small business survival. Furthermore, a large number of employment tribunal cases come from small firms. It is possible to argue that increasing worker representation and voice could help resolve individual disputes without recourse to legal procedures or even avoid them altogether if workers are allowed their say through improved communication channels and voice mechanisms. The worker safety adviser pilot projects also found that small employers can benefit from trade union involvement, with reports of increased awareness of health and safety issues and improved relations with workers in general.
Finally, the evidence indicates that many workers in the UK’s smallest firms are women, young workers and workers from ethnic minorities. Therefore not to extend legal rights on representation and voice to workers in small firms affects the working conditions of some of the most disadvantaged and vulnerable groups in the labour market. For anyone concerned about equality and fairness at work, this is bound to be worrying and does not sit easily with the government’s aim to value workforce diversity. (Gill Kirton, Queen Mary, University of London)