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					Raising the stakes
     The link between
      pay and quality

UNISON Submission to the Low Pay
                     Commission




                   September 2006
Executive Summary and Recommendations

Introduction

This is UNISON’s eighth submission to the Low Pay Commission (LPC) on the
National Minimum Wage (NMW), something we started campaigning for in the
1980s. UNISON has consistently argued that a minimum wage should be set at a rate
which provides a ‘living wage’, that is sufficient income to secure an adequate living
standard, without dependence on in-work benefits. We believe that there should be a
minimum income standard for healthy living.

Background

The NMW was introduced in April 1999 by the Labour Government who also set up
the Low Pay Commission1 to provide them with regular recommendations.

UNISON believes the NMW was introduced too cautiously and has only benefited
about 1-1.2 million jobs instead of the 2 million intended. After a slow start the LPC
recommended rises above average earnings growth to give the NMW slightly more
bite.

Over the seven years that the minimum wage has been in force there have been no
widespread job losses as predicted by the critics, in fact employment has increased.

The target rate

UNISON is guided by a variety of measures and members’ experiences when setting
minimum wage and collective bargaining targets. Minimum rates in the public sector
have continued to rise strongly and remain well above the National Minimum Wage
level, ranging from £5.80 to £6.22 an hour. The Family Budget Unit has done a series
of studies which calculate that a two parent household with two children, in which
both parents work – one part-time – needs a disposable income of £7.74 an hour
nationally to achieve a ‘living wage’ without recourse to in-work benefits. The Greater
London Authority’s Living Wage Unit produced its annual report in May 2006 saying
that a worker in London, taking full advantage of their entitlement to tax credits and
benefits, would need to earn £7.05 an hour to avoid poverty.

Economic indicators suggest that the UK economy on the present course will be stable
over the next two years with a slight improvement over 2005 and 2006. There is
therefore room for the Low Pay Commission to increase NMW rates.


RECOMMENDATION:

1
    See www.lowpay.gov.uk for more information.

                               Raising the stakes, UNISON’s submission to the Low Pay Commission 1
Taking into consideration key economic indicators, UNISON believes that the
minimum wage should reach £6.75 an hour by October 2008.


Extension of bank holidays

We reject the connection of the extension of bank holidays to the National Minimum
Wage as one which penalises low paid workers, by sacrificing NMW increases for
holidays they should have had by right in the first place. We see the move as a
welcome contribution towards improved health and safety at work.

We believe staff will be more productive and motivated and that businesses and
employers will be able to absorb extra costs easily.

The calculation of annual leave entitlement for part time workers has often been
difficult. We believe that the extension should actually make it easier for both staff and
employers to apply the Working Time Regulations.

Vulnerable workers and enforcement

There is growing concern in official quarters regarding vulnerable workers in the UK
economy. Many vulnerable workers are not getting their legal rights. Even more are
not getting their proper paid holiday rights.

Migrant workers are particularly at risk. Evidence collected by UNISON and London
Citizens reinforces the conclusion that unscrupulous employers and employment
agencies are taking advantage of migrant workers.

UNISON is concerned to learn that in the face of growing enforcement problems
resulting from the influx of workers from the Accession Countries, the budget for
NMW enforcement has been reduced. The entire success of the minimum wage could
be undermined if employers felt that it was easy to evade.

RECOMMENDATION:

   •   That the budget for NMW enforcement be substantially increased to allow for
       more proactive and targeted enforcement, especially in those sectors where
       migrant workers predominate.

Youth rate

UNISON believes in the “rate for the job” and would like the full NMW rate to begin
at age 16. We believe this could be achieved in two stages lowering the adult rate to 18
and then 16.

RECOMMENDATION:


                           Raising the stakes, UNISON’s submission to the Low Pay Commission 2
   •   In keeping with our position, “fair rate for the job”, the development rate for
       18-21 year olds should be brought in line with the full adult rate.

   •   That 16 and 17 year olds be entitled to the ‘development rate’, with a view to
       harmonising it with the adult rate over time

   •   Further consideration should be give to the extension of the minimum wage to
       those undertaking modern apprenticeships, so that no-one is expected to do a
       full-time job on as little as £40 a week


The relationship between pay and quality -- a look at social care and childcare

UNISON’s 2000 submission to the Low Pay Commission called for a wider pay
strategy to reverse the trend towards low-pay/low-skill/low-quality work prevalent in
some areas of the economy. Despite the significant improvements brought by seven
years of minimum wage protection, UNISON remains concerned about the prevalence
of low pay in certain sectors, and its link to poor quality services.

There have been significant increases in pay and qualifications in both social care and
childcare over the past year. Despite this, basic pay in both sectors remains low
compared to other available jobs. The inability of employers to offer competitive pay
and conditions is hindering their ability to recruit and retain staff. Local authorities are
under pressure to outsource social care provision, adding to downward pressure on
pay levels. UNISON is also concerned that reliance on private sector provision in the
childcare sector threatens to undermine the benchmarks set by the public sector in
terms of quality provision, high standards, qualified staff and pay and conditions.

RECOMMENDATION:

   •   UNISON calls for greater levels of funding to local authorities to allow them to
       recruit, retain and train dedicated care staff on adequate pay and conditions.

   •   Social care services should be retained by or returned to the public sector.

UNISON is extremely concerned about terms and conditions in private sector
childcare centres where it appears that one in three providers are paying less than the
minimum wage. UNISON is working closely with the DTI and HMRC on their
targeted enforcement programme in the childcare sector.

RECOMMENDATION:

   •   UNISON believes that there needs to be agreed national quality
       guidelines/minimum standards in the childcare sector, as at the moment the
       focus appears to be driven by quantity. We have made it clear to the


                           Raising the stakes, UNISON’s submission to the Low Pay Commission 3
    Government that we will be monitoring the new policies and raising issues of
    concern.

•   We want to see an integrated Qualifications Framework which will offer
    opportunities for our members to build career pathways in the sector.




                      Raising the stakes, UNISON’s submission to the Low Pay Commission 4
Raising the Stakes: The Link Between Pay And Quality

Introduction

UNISON is the UK's biggest trade union with more than 1.3 million members. Our
members are people working in the public services, for private contractors providing
public services and in the essential utilities. They include frontline staff and managers
working full or part time in local authorities, the NHS, the police service, colleges and
schools, the electricity, gas and water industries, transport and the voluntary sector.

This is our eighth submission on the National Minimum Wage (NMW) to the Low
Pay Commission (LPC), something we started campaigning for in the 1980s.
UNISON has consistently argued that a minimum wage should be set at a rate which
provides a ‘living wage’, that is sufficient income to secure an adequate living
standard, without dependence on in-work benefits. We believe that there should be a
minimum income standard for healthy living.

In this submission we make the case for a minimum wage rate of £6.75 an hour by
2008 and examine the link between low pay and the provision of quality services.

The Low Pay Commission remit for this review is to recommend rates for October
2007 and October 2008 and to:


•     continue to monitor, evaluate and review the NMW and its impact, with particular
      reference to the effect on pay, employment and competitiveness in the low paying
      sectors and small firms; the effect on different groups of workers, including
      different age groups, ethnic minorities, women and people with disabilities; the
      effect on pay structures; and taking into account the forthcoming changes to the
      statutory annual leave entitlement.


Background

The NMW was introduced in April 1999 by the Labour Government who also set up
the Low Pay Commission2 to provide them with regular recommendations. There have
been no widespread job losses as predicted by the critics, in fact employment
increased.

UNISON believes the NMW was introduced too cautiously and has only benefited
about 1-1.2 million jobs instead of the 2 million intended. After a slow start the LPC
recommended rises above average earnings growth to give the NMW slightly more
bite.

The rates of the NMW so far have been:

2
    See www.lowpay.gov.uk for more information.

                              Raising the stakes, UNISON’s submission to the Low Pay Commission 5
Raising the stakes, UNISON’s submission to the Low Pay Commission 6
Table 1: Historical rates of the NMW

Adult Rate                   Development Rate                 16-17 Year Olds Rate*
(for workers aged 22+)       (for workers aged 18-21)
1 Apr 1999 £3.60             1 Apr 1999 £3.00                 -              -
1 Oct 2000 £3.70             1 Oct 2000 £3.20                 -              -
1 Oct 2001 £4.10             1 Oct 2001 £3.50                 -              -
1 Oct 2002 £4.20             1 Oct 2002 £3.60                 -              -
1 Oct 2003 £4.50             1 Oct 2003 £3.80                 -              -
1 Oct 2004 £4.85             1 Oct 2004 £4.10                 1 Oct 2004     £3.00
1 Oct 2005 £5.05             1 Oct 2005 £4.25                 1 Oct 2005     £3.00
1 Oct 2006 £5.35             1 Oct 2006 £4.45                 1 Oct 2006     £3.30


The target rate

UNISON is guided by a variety of measures and members’ experiences when setting
minimum wage and collective bargaining targets:

   •   the current minimum rates across the key UNISON agreements;
   •   the current and planned rate of NMW;
   •   half-male median earnings;
   •   average earnings in the public sector;
   •   minimum rates in comparator groups (such as Civil Service, teachers, police);
   •   the national Low Cost but Acceptable (LCA) figure;
   •   the negotiating policies of the service groups;
   •   UNISON’s policy priorities.

UK labour market and economy

The UK labour market has continued to grow in size, with 1.5 million (6.2%) more
people in work since 1999. The low paying sectors of the economy have grown over
recent years, though there was slight dip between spring 2005 and 2006. There is still
room for significant increases in the minimum wage as the official forecast for GDP
growth in the last Budget are for slightly increases to from 2.3 to 2.4% per annum in
next 2 years.

The latest RPI figures for July 2006 show a headline rate of 3.3% having risen 0.9
percentage points over the last four months. The main reason continues to be higher
fuel and lighting costs (with growing electricity and gas bills) but food, furniture and
tobacco have also increased sharply. According to the Department of Trade and
Industry the price of fuel and light rose by 12% in real terms over the past year. In
that period, domestic electricity prices rose by 9%, gas by 13.4% and heating oils
27.4%. These costs hit low paid workers hardest as the represent a larger proportion
of their outgoings than the better paid.
                          Raising the stakes, UNISON’s submission to the Low Pay Commission 7
According to a study by John Hawksworth, the chief economist at
PricewaterhouseCoopers, the poorest 20% of households are facing an average
inflation rate of around 2.8%, compared to the national average of 2.4% and the
estimated rate of 2.1% for the richest 30% of households. The reason is mainly the
much higher weight of energy bills and, to some extent, food bills in poorer families'
budgets. 3

It is also becoming more difficult for low paid workers to live in the areas in which
they work. The Halifax reported in July 2006 that key public sector workers are being
frozen out of the housing market in two-thirds of the towns and cities of Britain after
prices have doubled in five years.

Over the three months to June 2006, the annual increase in whole economy average
earnings (excluding bonuses) was 3.9%, up 0.1 percentage point on the May rate.

In the public sector average earnings rose by 2.7%. Earnings in the private sector grew
by 4.2%. The Industrial Relation Services (IRS) panel of experts expect that earnings
growth will average 4.2% over 2006, and 4.2% over 2007.

Average earnings growth is expected to run at 4.3% throughout the remaining three
quarters of 2006, before dipping to 4.2% in the first half of 2007. It is expected to
remain around 4.2% through 2007 and 2008 according to forecasters.

All the above statistics illustrate that the UK economy on the present course will be
stable over the next two years with a slight improvement over 2005 and 2006.
However, rising costs of utilities and housing are putting pressure on the incomes of
low paid workers. There is therefore room for the Low Pay Commission to increase
NMW rates, and a need to do so if the minimum wage is to retain its value.

Minimum rates in the public sector

Over the past four years the minimum wage has risen by 27%.There is no question
that these substantial increases have helped to put upward pressure on wages in the
public sector. Minimum rates in the public sector have continued to rise strongly and
remain well above the National Minimum Wage level, according to Incomes Data
Services (IDS). An analysis of public sector organisations shows that most starting
salaries are between £11,200 and £12,700 – or £5.80 and £6.22 an hour. The lowest
rates were in local government, and the highest in the civil service.

      •   Local government in England and Wales paid £5.80 from April 2006, and in
          Scotland paid £5.67 from April 2006.
      •   The NHS minimum was £5.88 from April 2005, equivalent to £11,494.


3
    Ashley Seager, The Guardian Thursday September 7, 2006


                            Raising the stakes, UNISON’s submission to the Low Pay Commission 8
    •   Minimum pay in higher education varies from £5.52 (pre-1992 HE
        institutions) to £5.70 (post-1992 HE institutions). From 1 August 2006 all
        universities are due to move onto harmonised structures which will set the
        minimum rate for a 38 hour week at £5.58 and hour, equivalent to £11,060.
    •   FE colleges pay upwards of £5.48 an hour. The latest UNISON survey results
        indicate that the nationally agreed rate - £6.17 – is being paid in over two-
        thirds of colleges. This rate maintains a 22% gap over the National Minimum
        Wage.
    •   Sixth form colleges’ lowest rate is £5.62 as of 1 September 2005.
    •   Annual minimum rate in the Probation Service is £12, 329 (£6.39 an hour)
        from 1 April 2006.
    •   Minimum rates in the civil service vary between departments from £10,634 for
        admin assistants at the Meteorological Office to £14, 083 at DEFRA. The
        median across the Civil Service is £12,264 a year, equivalent to £6.36 for a 37
        hour working week.

Two-tier workforce

If there is an Achilles heel in the strong growth in public sector pay rates, it is the
two–tier workforce where staff employed by private contractors are often paid rates
well below those of their counterparts in the public sector.

The government has taken steps to eliminate the two tier workforce, introducing the
Best Value Code of Practice on Workforce Matters in March 2003. The Code of
Practice applies to contracts let by local authorities, the police and probation service
and requires contractors to offer new staff ‘fair and reasonable terms and conditions’
which are ‘no less favourable’ than those of transferred employees, with some
pension provision. Similar provisions have been applied to the National Health
Service, but gaps remain. The Code of Practice does not apply to higher or further
education, nor to certain types of contracting such as spot purchasing, particularly in
social care and staff working for Independent Treatment Centres in the NHS and
Academy schools. 4

Even where the Code applies, the pension arrangements are not as good as those
available to directly employed public service workers. Cuts in pension schemes
represent a major transfer of wealth from wages to profits and have long-term
implications for both workers and government spending.

The Low Pay Commission should be in no doubt about the importance of the
minimum wage to employees in this situation. As one contractor put it, “Of course
we have an annual pay increase – every October when the minimum wage goes up.”

The living wage


4
 For further details http://www.unison.org.uk/acrobat/B840.pdf and
http://www.unison.org.uk/privatecontractors/doc_view.asp?did=1793

                             Raising the stakes, UNISON’s submission to the Low Pay Commission 9
UNISON has consistently argued that the minimum wage should be set at a rate which
provides a ‘living wage’, that is sufficient income to secure an adequate living
standard, without dependence on in-work benefits. The living wage should be based
on what people need to live and not on what businesses can afford.

The Family Budget Unit (FBU) at York University regularly calculates what a ‘Low
Cost but Acceptable’ (LCA) budget would be for different family groups. It is a
carefully researched measure, which costs the minimum income needed by a family or
individual to ensure good health, adequate child development and social inclusion. The
Family Budget Unit has done a series of studies which calculate that a two parent
household with two children, in which both parents work – one part-time – needs a
disposable income of £7.74 an hour nationally to achieve a ‘living wage’ without
recourse to in-work benefits. The Greater London Authority’s Living Wage Unit
produced its annual report in May 2006 saying that a worker in London, taking
advantage of their full entitlement to tax credits and benefits, would need to earn £7.05
an hour to avoid poverty.

A study done at the request of the Head of Facilities and Office Services of the
Assembly Parliamentary Service of the National Assembly for Wales has determined
that a minimum hourly rate of £7.25 (without recourse to means tested benefits) is
needed to meet the Low Cost but Acceptable threshold in Cardiff.

While UNISON recognises that the implications of the living wage goes beyond the
remit of the LPC, we nonetheless ask that the Commissioners bear in mind the
importance of income adequacy in achieving a whole range of government objectives,
such as increased workforce participation, expansion of childcare and eradication of
poverty.

RECOMMENDATION:


       •   Taking into consideration key economic indicators, UNISON believes
           that the minimum wage should reach £6.75 an hour by October 2008.


The extension of annual leave

The increase in statutory annual paid leave from 4 weeks to 5.6 weeks (max. 28 days)
for those working a 5 day week (pro-rata otherwise) is one of the key measures in the
‘Warwick agreement’ and the successful Labour Party general election manifesto of
2005. The DTI are seeking views on various options5 to implement this between
2007 and 2009. It is intended to overcome the problem, particularly for the lowest
paid, of the current 20 day entitlement not covering the 8 British public or bank
holidays, thereby leaving staff unpaid for not working these days or being compelled
to use some of their annual leave allocation. UNISON has long believed that this
breached the European Working Time Regulations and the UK was the only country
5
    Increasing the holiday entitlement – an initial consultation, DTI, June 2006.

                                Raising the stakes, UNISON’s submission to the Low Pay Commission 10
in Europe to interpret the regulations as including bank or public holidays in the 20
days leave entitlement. The intended increase in leave is being portrayed by the DTI
as part of its plan to improve work-life balance.

The DTI approach is not to give the right to have the bank or public holidays as paid
time off (this is a matter of contract for individual employers) but to increase the
general employee entitlement to 5.6 weeks per annum.

They are proposing an increase of 4 days in 2007 and the rest between 2008 and/or
2009. UNISON believes, as a manifesto commitment, that this should be introduced
more quickly, with all 8 days added in 2007.

The UNISON members directly affected by this change in regulation are those who
work in contracted out public services, typically in cleaning, catering, facilities
management, security and social care.

There is a separate consultation in Northern Ireland where there are ten bank or public
holidays.

The Government have asked the Low Pay Commission to consider the annual leave
extension as part of their remit. We reject the connection to the National Minimum
Wage as one which penalises low paid workers, by sacrificing NMW increases for
holidays they should have had by right in the first place. We see the move as a
welcome contribution towards improved health and safety at work.

We believe staff will be more productive and motivated and that businesses and
employers will be able to absorb extra costs easily.

Only a minority of employers currently offer no paid bank or public holidays. The
most recent IDS study of hours and holidays found that basic holiday entitlement
averaged 25 days across all organisations and sectors.

On October 1st 1998 when the working time directive was introduced to the UK, 6
million workers benefited according to Labour Force Survey, 2 million who had had no
previous rights to holidays. This was a far larger change and was easily absorbed by
the economy without any adverse side effects. There was no link made at this time
between adoption of the directive and the first report of the Low Pay Commission in
1998 and the introduction of the first ever UK National Minimum Wage in April
1999. There should be no link now for much smaller changes.

We believe that the calculation of annual leave entitlement for part time workers has
often been hard up to now, and the extension should actually make it easier for both
staff and employers to apply the Working Time Regulations.


Vulnerable workers

                        Raising the stakes, UNISON’s submission to the Low Pay Commission 11
There is growing concern in official quarters at vulnerable workers in the UK
economy. The DTI “Success at Work” policy paper in March 2006 spoke of
protecting them and in September the DTI announced6 two multi-agency enforcement
pilots in Docklands in London and Birmingham. In September 2006 the TUC have
launched a “one in five” campaign7 to protect the employment rights of 5 million UK
workers, believing that one in five of working population need support.

Brendan Barber, TUC General Secretary, said

“Most people at work today enjoy their jobs. They may have problems - such as
pensions, work/life balance and lack of a real voice - but today we put a relentless
focus on the significant minority who face insecurity, poverty pay and rank bad
treatment.

'Many - though by no means all - are migrant workers. Some are home workers. Some
work through employment agencies. Some work in the grey economy for cash in hand.

'Many vulnerable workers are not getting their legal rights. Last year the government
recovered more than £3 million from criminal employers not paying the minimum
wage. We estimate that at least 150,000 people - and possibly a lot more - are not
getting the minimum wage.

'Even more are not getting their proper paid holiday rights. Even the official Labour
Force Survey shows that more than a million people do not get their legal minimum of
four weeks paid holiday, including bank holidays - and the most vulnerable will not be
counted in those figures.”

Migrant workers – problems with NMW enforcement

Millions of immigrants – both legal and illegal – now fill the lowest rungs of the UK’s
labour market. And indications are that the number of migrants working in the UK will
continue to climb. Between May 2004 and March 2006 approximately 375,000
workers from the new accession countries registered to work in the UK.

A report from the London Chamber of Commerce and Industry (LCCI) has warned
that increasing numbers of migrant workers from Eastern Europe may have to be
imported to cope with major skills shortages in the key five sectors related to the
2012 Olympics - construction, transport, security, tourism and IT. The shortages are
especially rife in the five Olympic boroughs - Newham, Tower Hamlets, Waltham
Forest, Greenwich and Hackney.




6                       th
    DTI press release 12 September 2006.
7
    One in five, report by Policy Studies Institute (PSI) for TUC, September 2006.

                               Raising the stakes, UNISON’s submission to the Low Pay Commission 12
Immigration status, ethnic and racial origin all have a serious impact on workers’
access to jobs, compensation and their ability to enforce their employment rights,
making union membership essential for their protection.

A series of regional projects funded by the TUC in 2005 found that:
   • Migrant workers were commonly treated with little respect by employers
   • Employers had little concern for their health and safety
   • Legalities taken for granted by most workers (eg. having wage slips, contracts
       of employment and wages paid in full) were often absent
   • Violence, intimidation and bullying were common features of migrant workers’
       employment.

Evidence collected by UNISON and London Citizens, a broad-based alliance of
community groups, faith organisations and trade union branches, reinforces the
conclusion that unscrupulous employers and employment agencies are taking
advantage of migrant workers.

Over a six week period in July and August 2006 nine students engaged in the London
Citizens summer academy made contact with workers employed in London hotels,
universities and museums. The majority of these workers were employed by private
contractors or employment agencies contracted to provide cleaning, catering and
security services. The workers were largely migrants (both legal and undocumented) or
from BME (black/minority ethnic) backgrounds.

The students uncovered a catalogue of abuses and illegal practices being regularly,
systematically and deliberately practiced by these contractors and agencies. Included
were: fines for calling in sick, unreturned deposits for name badges and locker keys,
charges for meals in canteens (whether requested or eaten or not) and weekly charges
for cashing pay cheques. Workers frequently worked unpaid ‘training days’ and long
hours of unpaid overtime. There appeared to be systematic under-recording of hours,
made more difficult to spot because pay slips were either impossible to decipher or
absent altogether.

Most alarmingly, the students discovered that there were agencies who purposefully
employed ‘irregular’ immigrants. Workers are commonly under-paid or not paid at all,
and are then threatened with being turned over to immigration authorities if they
complained. Workers employed by one contractor engaged to clean halls of residences
in a London university, estimated that they are owed tens of thousands of pounds in
unpaid wages. A group of aggrieved cleaners recently met with management of this
company, who admitted that they owed many thousands of pounds in unpaid wages.
As the attached correspondence (Appendix 2) indicates, the company is now making
efforts to put the matter right. Laudable as this is, their change of heart only occurred
after the company was threatened with exposure by London Citizens.

Evidence gathered by London Citizens is being provided to the DTI and HMRC to
support individual complaints by the affected workers.

                         Raising the stakes, UNISON’s submission to the Low Pay Commission 13
UNISON is concerned to learn that in the face of growing enforcement problems
resulting from the influx of workers from the Accession Countries, the budget for
NMW enforcement has been reduced. The entire success of the minimum wage could
be undermined if employers felt that it was easy to evade.

RECOMMENDATION:

    •   That the budget for NMW enforcement be substantially increased to
        allow for more proactive and targeted enforcement, especially in those
        sectors where migrant workers predominate.

Youth rates

UNISON’s 2005 submission8 “One year on” concentrated on youth rates and
apprenticeships and sets out the evidence we have collected.

UNISON believes in the “rate for the job” and would like the full NMW rate to begin
at age 16. We believe this could be achieved in two stages lowering the adult rate to 18
and then 16.

This is a growing issue as firstly after the recent round of the NMW increases the gap
has grown between the adult rate and the 18-21 year old rate, whereas previously the
Low Pay Commission had been closing it. Evidence from USDAW, the shop workers
union, suggests that as a result more employers are making use of the youth rates.

What’s more, the student labour market is growing and they too are increasingly
vulnerable to exploitation. A recent report 9 from the TUC and National Union of
Students, says that in the past ten years the number of full-time students who are
working has risen dramatically, from 406,880 in 1996 to 630,718 in 2006.

Therefore, we remain disappointed with the government for rejecting on at least two
occasions recommendations from the Low Pay Commission for 21 year olds to be
eligible for the adult rate. We believe that there could be exceptions to our policy
where young workers are receiving quality apprenticeships leading to qualifications
and higher wages. However, due to our current concerns about quality, completion
rates and exploitation we would like apprenticeships bought immediately under the
current NMW regime.

There are several issues behind young workers disillusionment with the
apprenticeship scheme. These problems are graphically illustrated by a case of a


8
  One year on; 16 and 17 year old and the national minimum wage, UNISON submission to the Low
Pay Commission, September 2005.
9
  'All work and low pay: The growth in UK student employment', TUC/NUS report, September
2006.

                          Raising the stakes, UNISON’s submission to the Low Pay Commission 14
modern apprentice working in a private childcare centre, who has been forced to
withdraw before completing her NVQ.

Jane, a modern apprentice in a large private nursery chain, found that qualified staff
members were too busy to complete the required NVQ observations for her. She had
to wait a year whilst working full-time for an assessor to be found for her.

Apprentices in her nursery all had to do the same duties as qualified staff and with
staff meetings and other duties, this often resulted in 12 hour days. They also had to
write long reports on a number of children for parents in their own time four times a
year and pay for materials they used out of their meagre pay. “In one month I
supplied two pumpkins, a selection of fruit, flowers and a story sack- reimbursement
was never offered.”

If the nursery was short staffed the apprentices missed out on breaks. At 16 years of
age Jane was only allowed one 15 minute paid break a day. The one hour lunch was
unpaid. “The company have also started new disciplinary measures for sick leave
which is triggered after a few days illness. HR conduct a formal interview because
sickness rates are so high. There is no regard for the expectation of high levels when
you are working with young children who arrive with sickness.” Jane was frequently
required to come in and work when ill.


RECOMMENDATIONS:

   •   In keeping with our position, “fair rate for the job”, the development
       rate for 18-21 year olds should be brought in line with the full adult
       rate.

   •   That 16 and 17 year olds be entitled to the ‘development rate’, with a
       view to harmonising it with the adult rate over time

   •   Further consideration should be give to the extension of the minimum
       wage to those undertaking modern apprenticeships, so that no-one is
       expected to do a full-time job on as little as £40 a week


The relationship between pay and quality -- a look at social care
and childcare

UNISON’s 2000 submission to the Low Pay Commission called for wider pay
strategy to reverse the trend towards low pay/low skill/low quality work prevalent in
some areas of the economy. The lack of a pay floor during the 1980’s and 1990’s had
prompted some sectors to develop practices based on the exploitation of low paid,
low skilled labour, with high levels of turnover and low bargaining power. This was
further exacerbated by the requirements of private contracting, which set price, not

                        Raising the stakes, UNISON’s submission to the Low Pay Commission 15
quality, as the defining variable.

We noted at the time that:

“It is often the labour intensive industries, particularly those providing personal
services and care, which have become the repository of poor employment practices.
They present a barrier for the government’s strategies in two ways:

•      The jobs in these sectors are poor quality. Their pay levels leave workers in
       poverty—with all of the associated problems for them and their families. Large
       numbers of workers in these sectors must depend on benefits to survive.

•      Jobs in these sectors pay too poorly to attract and retain high quality staff. Any
       individual who improves their skills or qualifications must leave the sector to find
       suitable employment. As a result, the sectors perform badly, harming the
       country’s long-term economic development. Most important, they cannot provide
       exactly the quality services – such as childcare, eldercare and education – that are
       needed if large numbers of currently inactive workers are going to be drawn back
       into the labour force.”

Despite the significant improvements brought by seven years of minimum wage
protection, UNISON remains concerned about the prevalence of low pay in some
sectors of the economy, and its link to poor quality services.

In this submission we look in some detail at two sectors, social care and childcare, to
examine the relationship between pay and quality. Both of these are expanding sectors
where recent government policy has called for expanded capacity and improved
standards.

Social care

Social care services support children and older people, people with learning
difficulties, those with mental ill health and disabled people through social work, home
care, employment, and specialist day, residential and nursing services.10

According to the 2005 Labour Force Survey the social care sector has a workforce of
1,324, 211 people. 11

Table 2: Social care labour force

Number of employees in the social care sector
                  With                  Without                                  Total

10
   The Commission for Social Care Inspection, The state of social care in England 2004-05, December 2005.
The wider definition of social care also includes childcare. We will deal with this separately in the next
section.
11
     Income Data Services, Pay in Social Care, 2006

                              Raising the stakes, UNISON’s submission to the Low Pay Commission 16
                     accommodation                    accommodation
Private              226,562                          285,973                 512,535
Not-for-profit       272,051                           57,178                 329,229
Public               375,551                          106,896                 482,447
Total                874,164                          450,047                1,324,211
Labour Force Survey, autumn 2005

The Department of Health estimates that there are 922,000 in paid employment in the
core areas of social care. 12 Core social care functions have been defined as: social
work, residential, day and domiciliary care staff in all sectors, agency staff and a
limited number of NHS staff care. 13

It is estimated that:
     • 62% of the paid workforce are employed in the private and voluntary sector.
     • 50% work in residential care homes, 18% in domiciliary care services, 12% in
         social work services, 10% in day care.
     • 61% of the workforce works with older people,
     • 19% in services for adults with learning or physical disability,
     • 7% in mental health services and 13% in children’s services.
     • 85% of the workforce is female.14

In its 2006 survey of staff in social care, Incomes Data Services (IDS) found that the
vast majority of care staff are employed on permanent contracts, around one-third of
which are part-time. Over two-thirds of employees in the sector are women.

IDS found that agency or bank staff make up 8% of the total social care workforce,
though on average organisations employed only 3% of their staff that way. The
discrepancy arises from the very large numbers of agency staff employed by a small
number of organisations -- for example 47% by Brandon Trust, 44% by Mencap and
42% by Hackney Independent Living Team.

Pay levels in the sector

The average pay rate for unqualified care assistants in either the private or not-for
profit sectors stands at £5.94 an hour, according to the current IDS survey. The
median rate of pay is £5.70 which represents a 3.8% rise since 2004. The median in
the private sector is £5.34, which represents an increase of 6.5% on 2004 rates. IDS
speculates that the higher rise in the private sector probably reflects above-average
increases in the minimum wage. With starting rates of between £5.10 and £5.15,
private sector care organisations are likely to be more directly affected by minimum
wage increases.


12
  Department of Health (2005) Independence, Well-being and Choice: Our Vision for
the Future of Social Care in England. London: Department of Health publications.
13
     Skills for Care (2005) The State of the Social Care Workforce 2004.
14
     The state of social care, op. cit.

                               Raising the stakes, UNISON’s submission to the Low Pay Commission 17
Care staff in the not-for-profit sector are paid between 10% and 13% more than the
private sector. In the not-for-profit sector median rates for those qualified to NVQ2
also rose sharply, from £5.96 an hour in 2004 to £6.32 in 2005. This suggests that
pay rates have been boosted by both the NMW and the Care Standards Act, which
set a target figure of 50% qualified staff by the end of 2005.

High vacancy and turnover rates

Even with these significant increases, however, basic pay in the social care sector
remains very low. The Commission for Social Care Improvement suggests that low
levels of pay in the sector, compared to other available jobs, is hindering employers’
ability to recruit and retain staff.

According to the CSCI, vacancy rates in social care are higher than those for all other
employment sectors in England. In 2003 there were twice as many vacancies in the
social care sector than in all types of industrial, commercial and public employment.
At the time 6% of all posts within the social care sector stood vacant. This compares
to 3.1% for all employment sectors. In September 2004, the average vacancy rate for
all staff directly employed in councils was 10%, a slight improvement on the rate
three years ago of 11.5%.

It appears that problems with staffing levels have worsened. Fewer older people’s
homes were able to meet minimum staffing requirements in 2005 than in 2003 in 40%
(60) of council areas. Nursing homes in particular are finding it difficult to recruit
permanent nursing staff.

Staff turnover rates appear to have improved slightly in the not-for-profit sector
compared to last year at 25% (for care workers in care homes for older people).
However some 45% of workers leave within 12 months of commencing in the sector.15

Staffing problems in the sector arise from the local labour supply, the reputation of
residential care homes as employers, local training and development opportunities and
the wages that can be offered, which in turn will be linked to fees.

           Pay is an important consideration for the supply of people willing to work in
           social care. Pay differentials impact directly on recruitment and retention,
           particularly at times of general labour shortages. Discussions with employers’
           organisations and directors of social services indicate that it is increasingly
           difficult to recruit and retain workers in social care when other employers pay
           more and ask less. People who use services have also commented on the low
           value that appears to be placed on social care in respect of salaries and
           wages.16



15
     The National Care Forum (NCF) annual Personnel Statistics survey for 2005-06
16
     The State of Social Care

                              Raising the stakes, UNISON’s submission to the Low Pay Commission 18
The CSCI notes that pay and conditions were generally better in the public than for
private sector care workers. In 2003, the overall average gross weekly pay for care
assistants and home carers was £183.25. Pay for public sector care workers was, on
the whole, 22% higher than in the private sector, £208.75 a week compared with
£171.50, and terms and conditions in the public sector are often better. For example,
unlike agency staff, domiciliary care workers employed by councils get travel time
paid and tend to have better pension and sickness benefits.

Outsourcing: a downward pressure on pay

Low levels of government funding puts pressure on public employers to depress the
wages of their in-house staff, or consider outsourcing services to the private sector,
further depressing pay rates.




                         Raising the stakes, UNISON’s submission to the Low Pay Commission 19
Local authority: in-house care workers lose premium pay

Carers and care assistants in council run residential homes in a south coast local
authority have been told that they face outsourcing if they do not accept a worsening
of their pay and conditions. The council is proposing to reduce pay enhancements for
Sunday working and eliminate additional enhancements for weekend and evening work
for all home carers and care assistants. The local authority is offering some
compensation in the form of two extra increments for staff whose contracts include
evening and weekend working, additional funding for training and two additional
increments for staff who achieve the required qualifications. Despite this, the
proposed changes represent a significant loss of pay for most staff.

The authority claims that proposals have been made in response pressure from
Councillors and the Chief Executive to “ensure that the unit costs of providing these
services were reduced”. Council management have written to care staff warning that
failure to accept the changes could result in a decision to purchase current care services
from the independent sector, which would save £1.7m a year. The letter reminds staff
that if they were employed in the independent sector, they would not be entitled to
sick pay, pensions or other benefits.

Where work is outsourced, councils’ purchasing regimes often have a direct impact on
job security for care workers. The use of ‘spot contracting’ affects the ability of
private and voluntary providers to predict requirements from week to week.
Consequently, this lack of job security is reflected in the conditions imposed upon
staff, such as no guaranteed hours, and as a result, no stable income or employment.

In the worst cases, staff are actually having their pay slashed by private care
companies. For example, pay reductions are being experienced by staff working for a
private company contracted to run three residential care centres for an inner London
Borough. Despite posting profits of £5.7m last year, up £500,000 on the year before,
the company claimed that the contract was pushing it into the red. Staff salaries are
set to plummet by some estimates from £20,000 annually, to £12,000 annually.




                         Raising the stakes, UNISON’s submission to the Low Pay Commission 20
Changing labour market

The Commission for Social Care Improvement warns that pressures on the capacity
of the social care workforce are already limiting the ability of the sector to meet the
demands placed on it. The proportion of the workforce that is economically active is
predicted to fall, while active workers will have higher aspirations for employment
than a “poorly perceived” social care sector.

The sector appears to rely on an increasingly migrant workforce. As noted in the
section on NMW enforcement, these workers are particularly vulnerable to
exploitation by unscrupulous employers and employment agencies. CSCI stresses the
need for the development of a longer term strategy aimed at improving skill levels and
developing domestic care staff.

Training

As noted above, low pay rates in the social care sector have a direct impact on staff
shortages and the quality of care.

Low pay may also be hampering efforts to raise standards of training. Qualification
levels of staff in care services are increasing, although there are many services that are
not meeting the 50% target for staff NVQ levels. Rapid turnover, linked to poor pay
and conditions, means that many care staff do not remain in post long enough to
complete their NVQ qualification.

The CSCI concludes:
“The report identifies continuing and chronic difficulties in recruitment and retention,
endemic throughout the whole social care sector. This is having a direct impact on the
quality of care people receive. Whilst more can be done by way of staff training and
development, it is difficult to see how the situation can improve without further
improvement in the pay and conditions of social care staff.17”

CONCLUSION AND RECOMMENDATION:

Even with recent significant increases in pay and qualification levels in the
social care sector, basic pay remains low. Low levels of pay in the sector,
compared to other available jobs, is hindering employers’ ability to recruit and
retain staff. The pressure on local authorities to outsource social care
provision is adding to downward pressure on pay levels.

       •    UNISON calls for greater levels of funding to local authorities to allow
            them to recruit, retain and train dedicated care staff on adequate pay
            and conditions.



17
     The state of social care, op.cit

                                  Raising the stakes, UNISON’s submission to the Low Pay Commission 21
•   Social care services should be retained by or returned to the public
    sector.




                    Raising the stakes, UNISON’s submission to the Low Pay Commission 22
Childcare

Radical reform of children’s services in England (and to a lesser extent in Scotland) is
being driven through by the government. In England under the headline ‘Every Child
Matters’ the Government has introduced the Children’s Act 2004 and the Childcare
Act 2006 and supported these with a series of white and green papers including a
childcare strategy and a Children’s workforce strategy. The focus is on giving access
to childcare for all working parents via children’s centres and extended schools and
stopping further failures in preventing child abuse.

The Childcare Act provides for massive expansion of childcare. It forces Local
Authorities to hand over future children’s centres (based on the sure start model) to
the private and voluntary (P&V) sector, with local authorities only being allowed to
deliver them as a last resort. Local authorities are also being required to co-ordinate
childcare via extended schools. Again involvement by the P&V sector is to be
encouraged.

UNISON has a number of concerns regarding these reforms, particularly the reliance
on private and voluntary sector providers. The public sector has recently set the
benchmarks in terms of quality provision, high standards, qualified staff, pay and
conditions – the move to the private sector threatens to undermine these advances.

Pay trends in the sector

The last year has seen a sharp rise in average salaries in the private sector. According
to the Nursery World/Hays Early Years pay survey the average annual pay of
childcare practitioners in the private sector, particularly people in senior positions,
has risen by at least 10 per cent and in some cases by as much as 17 per cent over the
past 12 months. Pay at the bottom end of the scale has risen much less dramatically,
however.

Table 3: Pay rates in private child care

Changes in annual salaries in the private sector 2004- 2005

Position                Average annual            Annual average         Percentage increase
                        salary 2005               salary 2004
Nursery manager         £21,547                   £19,195                12.3%
Nursery senior          £13,953                   £11,908                17%
nurse/room leader
Nursery nurse           £11,782                   £10,257                15%

Nursery assistant       £10,098                   £9,808                 3%

Nursery World/Hays Early Years pay survey, 2005




                           Raising the stakes, UNISON’s submission to the Low Pay Commission 23
Employers warn that these big pay rises reflect strenuous efforts by private and
voluntary providers to retain qualified and senior staff in the face of competition from
public sector children’s centres.

The Nursery World/Hays survey demonstrates the sharp contrast in the levels of pay
enjoyed by staff in state funded settings and their counterparts working in the private
and voluntary sectors. While the average pay of a nursery manager in the private
sector has risen to £21,547, and to £13,179 for a manager working part time in a pre-
school, the salaries in children’s centres are much more attractive: £26,692 on average
for a manager, £22,906 for a deputy manager and £17,204 for a senior nursery nurse.

Despite the increases, the pay of people working in the childcare sector remains
comparatively low, and this tends to be true for all types of care, whether it is local
authority provision or services provided independently. Survey data from the Labour
Force Survey shows that average earnings for nursery nurses, childminders and play
group leaders are lower than earnings for comparable positions in the health, social
             Average hourly earnings for childcare and comparative occupations, 2006
                      Nursing            Care           Care             Education        Nursery         Child-    Playgroup
                      Auxiliaries        assistants     assistants       assists -        nurses          minders   leaders
LEVEL                 (hospital)         (hospital)     (home)           primary
                                                                         schools
NVQ 4+                9.22               *              8.45             7.15             *               9.48      *
NVQ 3                 8.01               7.52           5.50             5.58             5.65            5.13      5.87
NVQ 2                 7.10               5.80           7.47             6.76             5.94            5.82      6.68
< NVQ 2               6.35               8.34           7.74             5.52             5.02            *         *
No                    9.13               5.65           6.60             *                *               *         *
qualifications

AVG                   8.06               6.69           7.31             6.35             5.26            6.51      6.41
*sample size not sufficient for publication
Source: Labour Force Survey, January-March 2006, prepared by Inclusion

Qualifications, Pay and Quality In the Childcare Sector, The Centre for Economic & Social Inclusion, July 2006
work and education fields.

Table 4: Comparative earnings




                                     Raising the stakes, UNISON’s submission to the Low Pay Commission 24
The issue of underpaid childcare workers has gained attention recently. In July 2006,
the Department for Trade and Industry announced that teams from HM Revenue &
Customs, which ensures payment of the minimum wage, will begin a year-long
enforcement campaign after finding widespread evidence of non-payment of the
minimum wage in the childcare sector. The new campaign will involve a combination
of education, targeted enforcement and working with childcare providers.

The campaign has been launched following a series of site visits by HMRC’s
enforcement teams which found that one in three nurseries have been paying less than
minimum wage. This is a much higher occurrence than in other sectors.

Relationship between pay and quality

To examine the relationship between pay and quality, UNISON commissioned
research from the Centre for Social Inclusion. The study looked at OFSTEAD reports,
in an attempt to ascertain what constituted high, medium and low quality
assessments. A table outlining the results is included in the full report, attached as
Appendix 1.18

Through a series of interviews with childcare managers, the study found a direct
relationship between the level of training and the quality of childcare provision, but
found that many employers struggled to find the funds to allow staff to improve their
qualifications.

As the excerpt below indicates, views on the wages of childcare workers were
unanimous.

“One employer said that pay was ‘the biggest challenge in our industry.’ All
providers felt strongly that wages were a real issue for their employees, and that there
was a relationship between the wages of staff and the quality of the provision.

One employer said that pay was the issue that had the most impact on the quality of
provision and her ability to retain staff:

‘I’d be able to keep the quality of staff I need if they were on better wages.’

Wages, retention of staff, and the impact on quality was a recurring theme throughout
the interviews. Staff retention was seen to contribute to the quality of the provision
because it means children are looked after by familiar people, parents can build
relationships with the people who are looking after their children, and staff remain




 Qualifications, Pay and Quality In the Childcare Sector, The Centre for Economic & Social Inclusion, July
18

2006




                              Raising the stakes, UNISON’s submission to the Low Pay Commission 25
familiar with each other and are pleased when they can rely on one another over the
long term.

Similarly, another employer spoke to how the wages reflect the low value of the
childcare sector:

‘We’d like more money – people receive more for working in Tesco’s stacking
shelves… you know, you’ve got lives in your hands… you’ve got such an incredible
responsibility and get paid nothing for it… so you do it for the love of the job rather
than financial recompense.’

The pay employers can offer depends almost entirely on the income they attract.
One employer said that established nurseries spend 60% of their income on wages,
where start-up nurseries spend as much as 80%, before considering overhead costs.”

The study found similar fears amongst private sectors providers regarding comparison
with the public sector. An employer said that she worried she would lose her staff to
government initiatives such as SureStart and children’s centres, who advertised posts
at salaries that as an employer, she would never be able to afford. This could, she
suggested, affect the wider childcare delivery infrastructure already established in local
communities.

Some nurseries simply could not pay higher wages, but would if they could. Instead,
other benefits such as flexible working, reduced or free childcare, training, and ‘awards
evenings’ were offered.

Conclusions and recommendations:

UNISON is extremely concerned about terms and conditions in private sector
childcare centres where it appears that one in three providers are paying less than the
minimum wage. UNISON is working closely with the DTI and HMRC on their
targeted enforcement programme in the childcare sector.

   •   UNISON believes that there needs to be agreed national quality
       guidelines/minimum standards in the childcare sector, as at the moment the
       focus appears to be driven by quantity. We have made it clear to the
       Government that we will be monitoring the new policies and raising issues of
       concern.

   •   We want to see an integrated Qualifications Framework which will offer
       opportunities for our members to build career pathways in the sector.

Conclusion

UNISON believes the National Minimum Wage should reach £6.75 an hour by 2008,
with no lower youth rates, as significant move to tackle poverty. The opportunities

                         Raising the stakes, UNISON’s submission to the Low Pay Commission 26
for exploitation of the low paid have grown over the last two years, with both the
increased marketisation of the public services (not withstanding two tier workforce
protection agreements) and the growing employment of workers originally from
outside the UK. There is an urgent need for greater resources for enforcement of the
National Minimum Wage as a result.

Special attention must be given to the relationship between pay levels and quality of
services in low paid sectors such as social care and childcare.




Appendix 2

From: xxxxxxxxxxxx
Sent: 15 September 2006 09:50
To XXX XXXX
Cc: xxxxxxxxxx
Subject: Wage Queries University of xxxxxxxx

Dear XXXX,

Further to our meeting last Friday, our London team have reviewed the site sheets that are
currently in our possession.

Unfortunately, in most cases there is no record of the additional hours being claimed by the
individuals’, and in some cases there is no record of the individual even being employed by
us.

This problem may also partly be because we have not been able to retrieve all the records
from site, as you are aware we no longer have access to the building.

We have, however, decided that under the circumstances a gesture of faith in these
individuals is more appropriate than a strict adherence to the factual information we currently
hold, and we are therefore prepared to make payment on this occasion for the amounts
allegedly due.

We are therefore calculating the sums today, with the net amounts after deduction of Tax and
                                                                                           th
National Insurance to be cleared funds in their nominated bank accounts on Wednesday, 20
September 2006. The only exceptions to this are Miss xxx, Mrs xxxi, and Mrs xxx, all of whom
                                                          th
have already received some payment last Wednesday, 13 September 2006, of the sums
already showing as outstanding here at Head Office.

We hope this goes some way to resolving the problems encountered by these individuals,


XXXX
XXXXX
FINANCIAL DIRECTOR
XXX Contract Cleaning Ltd




                           Raising the stakes, UNISON’s submission to the Low Pay Commission 27
Raising the stakes, UNISON’s submission to the Low Pay Commission 28

				
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