SPARKSAFE LTP OUTLINES WHY A WIDESPREAD RETURN TO THE NATIONAL RATE OF PAY, WOULD BE A POSITIVE MOVE FOR THE INDUSTRY…
Perhaps you are one of the few workers who are in the good of receiving the correct national rate of pay. Many of your fellow skilled electricians, however, are not so fortunate.
Fierce commercial and market pressures have eroded the resolve of the majority of local employers towards the national determination for pay and conditions. This is bad news for both employers and employees. Both have lost out.
The early gain achieved through unregulated pay and conditions has been steadily neutralised, as others have been obliged to join in the ‘low bid’ race to the bottom. During this period balance sheets have weakened and many have been under pressure to set prudence aside when determining the true value of work in progress.
HAVE WE LOST SOMETHING?
The trade has also lost some of its valuable kudos and prestige, and increasingly struggles to attract and retain new talent. Low pay keeps the talent away! Much of this has been brought about by global circumstances beyond our control. However, some of the effects, are self-inflicted. Productivity, morale, attitudes, loyalty and behaviours tend to decline when reward doesn’t match effort.
ALERT TO AN AGING WORKFORCE
We are also faced with the challenge of an aging workforce. Fewer young people have entered the trade in recent years, allowing a skills gap to arise. This feeds the development of an imminent skills shortage within the sector. Other competing sectors have stepped in, outbidding the electrical industry for the best of the annual school leaving population. Attracting new entrants to our sector, from the best of the local school leaving population, is proving to be extremely difficult. Parts of the industry have become conditioned to tender and complete contracts based on labour cost discounting. This leads to diminishing marginal returns, leaving little for employers to invest in attracting and retaining the best of the next generation.
TIME FOR ROOT CAUSE ANALYSIS
Job satisfaction, career progression, opportunity and some residual positive perceptions, continue to feature as key factors influencing career choice, in favour of the vocational trade sector. However, within the trade, there is a general underlying sense of dissatisfaction.
Employers and workers are weary of the negative impact that flows from low bidding and discounted tenders. Dutch auctioning persists. This shameful practice unfairly empowers and motivates many principal contractors, and others, to multiply bidders beyond the list of approved sub-contractors. Principal Contractors then embark on a commercially aggressive, demolition exercise of the initial first-past-the-post, lowest tender. The winning sub-contractor’s price is touted and bartered around an extended list of approved and unapproved sub-contract tenderers. The process is often laced with half-truths, and repeated until the original lowest price is haggled into a sub-economical proposition. Quality, health and safety, welfare, profit, performance, management, materials and workers terms and conditions are systematically whittled away. Inevitably the winner loses!
On major projects most Tier Two contractors rely on ‘subbies’ to support their standing workforce. Using subbies to off-set some,or sometimes all, of the financial risk associated with contract labour costs is now firmly established.
Work that is sub-let by the Tier Two electrical contractors to other ‘subbied’ electrical contractors probably means that the latter is paying a lower pay rate to their workers. These workers may also be obliged to perform under lesser working conditions, when compared with those directly employed by the principal electrical contractor. The unintended consequences of this practice have given rise to an underclass of worker, and often precipitate a breach of working time regulations and an unsatisfactory approach towards staff and apprenticeship training.
The cause and effect of this practice has mixed outcomes. On one hand, principal electrical contractors have gained vital flexibility and competitiveness. On the other hand, some core strengths of the industry have declined. The unregulated pay and conditions on the subbie side has managed to back-feed into the domain of the direct employed workforce. Hourly pay rates and other terms and conditions have veered from the national determination, producing an excess of unregulated pay rate variations. As the skill bank decreases, ambitious employers will be obliged to attract workers away from current employers through rate enhancements, which may trigger a return to a 70’s style labour rate bidding war.
Anecdotal evidence suggests that most Northern Ireland electrical workers appear to be paid less than the national determined rate of pay. In some cases, employers have maintained the rate but downgraded the overtime entitlement threshold, and reduced or removed travel expenses. Restoration and alignment with national pay and conditions is an obvious and significant challenge for the industry. Will failure to meet the required pay rates continue to drain talent and skill away from established and emergent businesses? Who really benefits from reduced pay rates and poor profit margins?
FALSE SELF EMPLOYMENT
The potential and actual effects of false self-employment also continue to undermine the state of the industry. Some employers have become highly dependent on exclusive and reoccurring sub-contract arrangements with individual workers and labour gangs. In many cases, these have become de-facto employees in all but name. Reduced employers national insurance contributions and the elimination of accruing redundancy liabilities, provide a strong rationale for this business model. Those operating this model are at risk of a potentially expensive HMRC look back inspection. False self-employment is not conducive to staff or apprenticeship training. Workers, who are obliged to tolerate or become trapped in the state of false self-employment, often become exploited through design or by error. Longer hours, increased risks, less rights and no job security are typical of the negative outcomes that damage the person and the reputation of the industry.
RESPONSIBLE PROCUREMENT AND RESPONSIBLE TENDERING
Signs from public sector procurement organisations are improving. Local Government procurement is frequently calling upon Tenderers to bid responsibly. Steps are being taken to motivate and encourage smarter bidding. Low bid tendering is discouraged and may even attract punitive consequences. Some CoPE organisations have already rejected low bids, judging them to be economically unviable.
POINTS TO CONSIDER AND ACTIONS TO TAKE:
Restore national pay rates – The industry is not attracting or retaining talent. Poor pay and
conditions are the two main factors that deter talented new entrants and discourage the existing workforce.
Resit Dutch auctioning – Support first past the post tendering and say no to bad bartering.
Reconsider false self-employment – Think about the HMRC risk.The nationally determined hourly rate of pay for an electrician from and including Monday 4th January 2016 is £13.54. This is a 3% increase on the previous rate. Adopting the national pay rate determination will not fix all of the difficulties in the industry. However, failure to do so is likely to mean that workforce development including the recruitment and retention of talent will remain as an emerging and growing problem for the industry.