Europe: The Social Chapter: Chapter and Worse

Like many other business sectors in the UK, the IT industry seems to feel that signing to the EU Social Chapter is a signal to run for the hills. Annie Gurton finds out why

The poignant irony of the Social Chapter is that those companies that need it least will be the first to adopt it, while those that need it most will be the last. And it is perhaps indicative of the growing maturity of the computer industry that many IT companies are already implementing its proposals.

Bull, for example, already has a works council at which employees are consulted and kept informed about board decisions. Marketing director Eric Hall says that most enlightened companies, particularly those with existing European links, are already applying the practices which comprise the Social Chapter. The difficulty, he says, is that we have no idea what the Social Chapter will contain in future. ?It?s a bit like signing up to a blank contract,? he says.

At the moment the Social Chapter ratifies best practice, adds Hall. ?The trouble is that there can be a gulf between the principle of a directive and the practice when it is to be implemented. As they say, the devil can be in the detail.?

Robin Strong, head of consulting at Concise Software, which specialises in client server projects and consultancy, says that he doubts whether the Social Chapter could be enforced, and believes it may be better to seek other ways to encourage employers to work more closely with their employees. He says: ?It is easy for IT employers to set up works councils because they are not employing labour at very low rates of pay and they are working in a culture where labour skills are short and therefore valued. Obviously, they are already going to be treating their workers quite well.?

But Strong thinks that one impact of the Social Chapter may be to increase the demand for overseas software developers, because they are cheaper than UK-based equivalents. This will take work away from UK-based programmers. He says: ?The UK IT industry could lose out in several ways, mainly through the perception that the Social Chapter will change things, rather than the reality, which is that it won?t really change it at all.?

David Laking, managing director of Peterborough Software, believes that business software providers in the UK have enough on their plates with the year 2000 and EMU, without worrying about the changes imposed by the Social Chapter. ?It is one thing to encourage firms to adopt good practices but quite another to enshrine them in legislation. There will be an increase in mandatory reporting requirements, which will mean changes to software systems already installed. On one hand this means more business for resellers and integrators, but it is also a pain in the neck,? he says.

Another reason for reluctance to sign up to the Social Chapter, says Laking, is confusion and mystery about where it will lead. ?There is no indication of what the Social Chapter will include in five years? time. We may find ourselves committed to something which has a negative effect on the business bottom line.

?I am all for the good principles which the Social Chapter embraces, but very wary of the power and control which it threatens to wield.?

Laking reiterates the position of the Institute of Directors, which is that the great majority of UK employers, and IT employers in particular, already look after their staff very well, and there is a danger that legislation may have a negative effect on business. ?There is always a danger that it will go too far the other way. At the moment the Social Chapter is fairly innocuous, but there is no knowing how far it will go.

?It is not as though we have a dire history of poor labour relations in this country,? he says. ?We should be concentrating on other issues like labour costs and what?s going on in the Far East.?

But Laking is adamant that the biggest impact of the Social Chapter is going to be on the IT systems, not the companies which sell and implement them.

Richard Fiddis, vice president of sales and marketing at Marcam, which develops enterprise resource planning software, says many US companies currently base themselves in the UK because of the perception that we have more flexible labour laws than the rest of Europe. Whether this is true or not, Fiddis believes that this advantage will be lost by signing the Social Chapter.

?We are certainly more agile in the UK, and that agility could be lost,? he says. ?Some aspects of the Social Chapter will simply bring the UK in line with mainland Europe and so to the Americans we will become less attractive.?

Fiddis does not believe that any future legislation about minimum wages will have any impact on the IT industry, because wages are already far higher than the national average. ?Because we are already in a skills shortage situation, salaries are already high,? Fiddis points out. ?It?s not as though we have much production line manufacturing in this country, which is where the wages are said to be lower.?

Judith Wainwright, a director with consultancy firm Pagoda, says that although some UK firms already offer paternity leave and maternity leave in line with the European norms, many other companies do not, and the process of consultation is as useful as the consultation itself.

?The Social Chapter offers a framework for debate, it creates a forum for discussion which some firms are still a long way from implementing. It is good to have the Social Chapter to set out the way that firms should behave. Enforcement could be quite another thing again, however.?

Wainwright anticipates that there will be two contrasting responses to the Social Chapter. ?One group will see it as bureaucratic and will do the minimum required to conform, while the other will see it as a real opportunity to develop relations throughout the company and will go beyond the required legislation,? she says.

One negative effect Wainwright anticipates is that the trend towards part-time workers, outsourcing and contractors may be reversed. ?The reason why companies like to use part-timers, to outsource to third-party specialists and to use short-term contractors, is because of the favourable terms and conditions. If the Social Chapter annuls and erodes those advantages, many firms will either cut back on the people they use or bring all work in-house. There are advantages to having flexible working arrangements which are not too governed by legislation,? she adds.

There is also a danger, says Wainwright, that IT staff, which are already at the better educated end of the scale, may become stroppy when they feel empowered by the Social Contract legislation. ?It could mean a headache for employers when staff start demanding what they believe are their rights,? she says.

Hall agrees that the Social Chapter may be cursed by employers, but believes that it is for the good in the long run. ?It will make life more difficult for many managers, because all changes will have to be discussed and the staff consulted about certain decisions, but that process will make the managers think through what they are proposing. It may make their lives harder, but the outcome will be better and it will certainly be worthwhile.?

It is important to realise, says Hall, that workers do not have any power of veto at a workers? committee, at least not at the moment. ?It?s also important to realise that all successful economies have socially democratic modules along the lines of the Social Chapter,? Hall says.

?We have moved on a long way from the confrontational days of management against the unions, and most workers realise that the management?s decisions are made for the good of all employees.?

Laking points out that while the legislation being suggested in the EU?s working directive ? which is expected to become part of the Social Chapter ? means that employees are guaranteed the right to refuse to work more than a 48-hour week, have protected rest periods and rules for night workers, and three weeks? paid annual holiday rising to four in 1999, none of these measures will necessarily have a dramatic effect within the IT industry. ?The impact will only come through the systems which we have to implement,? he says. ?Most workers in the IT sector already enjoy those basic rights and plenty more besides. The assured levels are so minimal as to barely apply.?

Furthermore, these initiatives currently fall outside the Social Chapter and there is no assurance as to exactly what will be in the Chapter in five years? time.

But Graham Mather, Conservative economic spokesman in the European Parliament, thinks that it is misleading to think that because the Social Chapter currently only has two proposals that it is innocuous. He says: ?There are several important measures which are at an advanced stage of preparation for adding to the Social Chapter, and if the Social Chapter is agreed in its current form, it is unlikely that the main measure of these could be changed.?

Mather explains that the plan to compulsorily introduce workers? councils for all companies employing more than 50 people would affect half the British workforce, or 11.2 million workers. ?The plan to shift the burden of proof in sex discrimination claims on to employers would result in many millions of pounds in compensation payments, and a new category of indirect discrimination where working practices disadvantage a substantially higher proportion of the members of one sex.?

Lastly, Mather adds that the plan to equate the terms and conditions of part-time, temporary and fixed-term contract workers with those of full-time employees could wipe out their flexibility and dramatically reduce job opportunities for the flexible workforce.

Mather says: ?It is essential that the new government explains to employers whether or not it wishes to accept the measures being proposed in the Social Chapter, and if it doesn?t, how it plans to stop them being passed. The first, on sex discrimination, could come up for final vote by the middle of the summer.?

Padraig Flynn, employment and social affairs commissioner to the EU, supports the proposal to strengthen compulsory consultation legislation through works councils. Under the proposal, employees would have to be consulted before redundancy programmes were introduced, for example.

?Consultation can hold up restructures and frustrate the swift changes necessary for effective management,? said one vendor manager.

James Wickes, MD of Ideal Hardware, says that he is ?by nature? against the changes in employment law. But he takes the pragmatic view that it is better to be a voice heard on the council than an outsider with no voice at all, and if such directives become law there is no point fighting them. ?It is up to individual companies to ensure that they have the systems and processes in place to make the transition as smoothly as possible,? Wickes says.

Whether or not the UK IT industry finds itself having to toe the Social Chapter line in the near future, one thing is certain ? unless we grasp what the legislation may entail, it will be very difficult to adapt to it.