In the past few days we have marked the first anniversary of the Coalition. In the year since its formation, our central task has been to overcome our dire economic inheritance, and stabilise the country’s public finances and achieve sustainable growth.
Growth must come from private enterprise, from businesses investing, hiring, exporting and expanding. But government must play its part, too, clearing away the barriers to expansion.
Flexible labour markets are an essential component of a successful economy, enabling companies to respond to demand and create new employment.
Britain’s employment practices already compare well internationally - they are one of the reasons the unemployment rate remained lower than many forecasts suggested during the recession. Many private sector managers and their unions showed remarkable elasticity under pressure, adopting pay cuts and part time working to save jobs. But the current framework also contains perverse incentives that can dissuade responsible employers from hiring new staff for fear of ending up in a tribunal if it doesn’t work out.
It’s essential the labour market functions in a way that gives employers the confidence to create new jobs, so people out of work can get a foot in the door. We are therefore proposing simplifying employment tribunals, insisting on more mediation and extending the period before a claim can be brought, to encourage employers to expand.
But we also have to increase participation rates - so that those who want and are able to work can do so, and we keep skilled workers in the labour force - not least to protect the investment employers have made in them.
In part, this requires recognition of the profound shifts that have taken place in British society. Family life has been transformed in recent decades, and the traditional stereotypes no longer apply. Most women now go out to work and men - hopefully - shoulder more of the duties at home.
As roles and responsibilities have changed, our lives have become increasingly complex. And that’s not just true of parents with young children.
Millions of people have responsibilities to live up to - whether looking after an elderly parent, a sick partner, or a grandchild - while holding down a job. Keeping all these plates spinning at once can be tough. Unlike some of my colleagues I haven’t had to juggle the responsibilities of being a minister and a father of young children; but as an MP I had to act as a carer for a terminally ill partner and soon came to appreciate the enormous practical and emotional demands which this creates.
We need modern workplaces that reflect modern Britain. Otherwise we run the risk of people cracking up, dropping out of the labour force, and losing essential skills from the economy.
So today I am launching a consultation on proposals that respond to these social trends, leaving behind outdated notions of family life and giving individuals the ability to balance their commitments at work with their responsibilities at home.
It’s no secret some business groups are wary of changes in this area, concerned that new legislation will tie their members up in red tape or weigh them down with new regulations. That’s the last thing we want, so nothing will change until the nuts and bolts of the system have been examined in discussion with all the interested parties; including business groups.
The aim of this consultation is to extend flexible at work in a way that avoids imposing any unnecessary burdens or costs on companies, while delivering the real economic and business benefits that flexible working brings.
Research by the CBI, for example, has found that 63% of firms offering flexible working report lower staff turnover - producing savings on recruitment and training costs.
And according to the British Chambers of Commerce, nearly six out of ten small firms have reported improvements to productivity as a result of flexible working.
Our reforms will extend these benefits to more businesses. So let me outline what we are proposing.
Flexible Parental leave
The current arrangements for maternity and paternity leave are too rigid, resting on antiquated notions of family life and, bizarrely, letting the state dictate which parent should look after a new child.
It’s time we got away from lazy assumptions about women in the workplace. Today, 44% of women earn as much as or more than their partner, meaning that for many families it makes clear financial sense for the leave to be split more evenly.
The new system of flexible parental leave we are proposing will give families the freedom to make their own decisions.
We are proposing giving families four months paid maternity leave, and five months paid parental leave that can be taken by either parent, so couples have more say over how they share childcare. We are also looking at introducing a month of ‘use it or lose it’ leave for fathers, to encourage them to be more involved.
We also want the system to be properly flexible. Currently, there is no way new parents can take leave at the same time if that’s what they want to do, save for the two weeks of statutory paternity leave. Mothers have no way to engineer a gradual return to work, and parents are unable to take leave in anything other than single, monolithic blocks.
Now I know our plans to allow parents to take leave in chunks have caused some consternation. So I would like to clear up the misconception this is a new legal right: it isn’t. It will only be possible if employers agree.
Our proposals are about encouraging a grown-up conversation between the staff member and the company. If it doesn’t work for the business, the employer is entitled to reject the request. So an SME that would find it too disruptive can and should say no.
But many companies will find the extra flexibility gives them the ability to manage their workforce better, allowing them to bring staff back in to deal with big projects or peaks in demand, such as the pre-Christmas rush.
And administration will be kept to an absolute minimum: parents will provide self-certified notice of their leave plans to their employer, signed by both parents to demonstrate the request is genuine. We don’t anticipate employers having to talk to one another to check the validity of a claim.
Far from harming companies’ prospects, analysis suggests measures like these help to boost business performance.
Research by the London School of Economics has found that organisations which offer a range of family-friendly policies perform better than average. In particular, those offering parental leave are 60% more likely to perform well financially and 35% more likely to have above average productivity, than those offering none.
More generally, giving women more control over when and how they return to work makes them more likely to stay with their employer, retaining their skills for the company and producing a better return on investment in training.
Our proposals will also be important steps in tackling the underlying causes of the gender pay gap, in particular by helping to reduce the impact on women of taking time out of the labour market to have children.
Where discrimination does happen, however, it should be stamped out. So we are going further, by requiring employers who lose Employment Tribunal cases on equal pay to carry out a pay audit.
But we are not overlooking the needs of men. Nearly all fathers, 94%, take time off when their child is born, but around 30% are supplementing their paternity leave with their holiday entitlement. There is a demand here that is not being met.
Indeed research by the Fatherhood Institute has found that a quarter of fathers change job, often in the first two years after a child is born, so they can spend more time with their families. This inevitably generates costs for employers, so the answer lies in a system of leave that reflects modern patterns of parenting.
And fathers involved in caring for their children early on are more likely to remain in the child’s life, even if the family breaks up. Sustaining that relationship reaps clear social dividends: children with strong paternal relations have fewer behavioural problems, lower rates of criminality and better qualifications.
So supporting responsible parents, and enabling them to harmonise the rhythms of their lives at work and home, is good for society, good for the economy and good for business.
But as I noted at the start, it’s not just parents who struggle to maintain that balance. Demographic trends and the redefinition of modern family structures are just two of the reasons why people today face increasing demands in their lives.
The ability to work flexibly can ease these pressures and enable individuals to remain in the labour force - a fact recognised by the 95% of employers which already offer at least one form of flexible working.
Its benefits for business were vividly illustrated during the recession, when - as I noted above- many companies used flexible working to manage the collapse in demand without losing the workforce skills they had invested in.
Nevertheless, a perception still exists that flexible working is only an option for women with children. It is reinforced by the experience of employees, with less than half reporting their manager actively promotes it.
Establishing a clear right to request flexible working will raise awareness and give employees the confidence to discuss options with their employers.
But, as is the case with the existing rules, it is purely a right to request: businesses will still be able to reject applications on business grounds. And we are also proposing to give employers the ability to consider the individual’s circumstances where they have competing requests from employees.
To ensure these changes don’t generate a wave of extra form-filling and box-ticking for companies, we are proposing scrapping the statutory process and replacing it with a code of practice.
Under this approach, employees will be clear about their rights, but employers can deal with requests without wasting time and money on unnecessary red tape - they just need to handle requests reasonably.
And it would be wrong to imagine that suddenly everyone will request flexible working: many people don’t want it. The predictability that comes from having a set pattern of working hours is itself a useful way of balancing work and home life.
For those who do, however, our proposals will help keep them in the labour market, giving businesses a larger pool of potential recruits. They will also enable companies to hold onto skilled and experienced staff, keeping down costs.
Flexibility is also a good way of boosting staff commitment and loyalty, which can have beneficial effects in terms of better productivity and higher profitability. And research by the BCC found that 70% of companies said offering flexible working had improved workplace relations.
For businesses still feeling the aftershocks of the worst recession in sixty years, that can only be a good thing. It’s also good for the UK economy. Now more than ever, our economy needs the private sector to grow and expand, and flexible labour markets are a crucial ingredient of success.
If we help people manage their lives and stay in employment, we can avoid losing the skills, talent and energy of millions of people to the UK economy.
But we are not about to make life more difficult for companies by imposing onerous new regulations. That’s why, starting with the consultation being launched today, we want your input so the introduction of flexible working fuels the economic recovery we all want to see.