From the TUC

Are British workers protected from undercutting?

07 Feb 2009, by in International, Working Life

One of the key issues in the Lindsey Oil Refinery dispute was the concern that the terms and conditions of the workers brought in from Italy and Portugal would be lower than those usually paid in the industry. The employers have claimed that this is not the case (although they didn’t say so immediately, which is a bit suspicious). The news media and Government have accepted that claim at face value, and certainly there is not yet any evidence to contradict it. The industry – construction engineering – certainly has a solid collective agreement negotiated unions and employers.

But that’s all that would prevent undercutting – there is no legal barrier to it, and that was a major cause of the uncertainty and fear that sparked the walkouts. Unfortunately, that isn’t the impression that the Lord Mandelson or the BBC are giving. They say the EU Posting of Workers Directive protects British workers against undercutting. But in practice, because of the way it has been transposed into UK law, it doesn’t.

Lord Mandelson was speaking in the House of Lords on 2 February, and it’s worth quoting what he said in detail, because what he said was factually correct, but misleading. He said:

The statement issued by Total last night confirmed that workers from overseas are paid at the same rate as other workers on site.

Two paragraphs further on, he said:

The workers coming here from Italy and Portugal are protected by the EU Posting of Workers Directive, which the UK has implemented fully. This guarantees these workers minimum standards, for example, on pay and health and safety. The Directive facilitates the free movement of services within the European Union, a vital market for British companies.

The impression is that the Directive guarantees what Total say is happening, ie that the rate for the job is paid. And that’s what the Directive is supposed to provide. But in the UK, it doesn’t.

What the UK Government did when the Directive was implemented was to require employers to abide by the legal minima on pay – which means the National Minimum Wage. In most of the rest of Europe, collective agreements are legally enforceable, and that means UK workers posted to continental Europe are guaranteed the rate for the job. But Italian and Portuguese workers are only guaranteed the National Minimum Wage.

As I say, Lord Mandelson did not say anything other than that, but I think that’s what he was implying. And the BBC’s report of his speech on 5 February to a CBI dinner in Birmingham suggests that they have certainly misunderstood – they say categorically that:

Under the EU’s Posting of Workers Directive, foreign workers can be brought in on a temporary basis, as long as they enjoy the same rights and pay as their local counterparts.

Which is definitely not true.

As long as employers are allowed to bring in workers and pay them less than the rate for the job (as long as they pay above the National Minimum Wage of course), they will, and British workers will continue to be distinctly worried.

The Government could change this situation very easily – no one in Brussels will stop them – because all they need to do is bring UK practice on posted workers’ rights into line with the principle of the European Directive.

6 Responses to Are British workers protected from undercutting?

  1. Robert Day
    Feb 7th 2009, 4:02 pm

    I think there’s something much more basic in the whole question of overseas workers, and that’s the attitude of employers who are engaged in selling products and services on a transnational scale. I take as my touchstone the closure of the Peugeot car plant near Coventry a couple of years ago.

    Peugeot closed the plant because they considered that UK labour costs were too high and they could transfer production out of the UK to (it just happened to be in this case) Eastern Europe. But – and this is the part of the equation that rankles with me – they still expected people in the UK, in Coventry, even, to buy their cars!

    How are former Peugeot car workers supposed to buy Peugeot cars? What do they use for money?

    This, we are told, is a sign of the healthy amorality of business. Business takes economic decisions, based on the cold, hard numbers. If confronted with the consequences of their actions, business leaders would say, “It’s nothing personal.” I disagree. If you’re thrown out of work because of an economic decision taken in a boardroom in Paris, or Munich, or Boston, or wherever, then it’s pretty damn personal to you.

    I have no problem with buying goods made outside the UK. (Let’s be honest, you don’t have a lot of choice these days.) But I do object to a company withdrawing its support, its employment from UK plc but then expecting UK plc to carry on buying nonetheless. Effectively, it’s saying, “Our money is too good for you; but your money is good enough for us.”

    I would not buy a Peugeot car now. I also boycotted Total whilst the dispute was on, manly because I didn’t have buying access to the contractor in question. If a company withdraws from the UK, or doesn’t open jobs to UK workers, then I believe that we should use tariff mechanisms against them; not in a protectionist way, but merely to recoup the loss to the economy that the company’s economic decision has caused. I think that would be fair. And fairness is a British virtue that trade unionists still beleive in.

  2. Owen Tudor

    Feb 7th 2009, 5:57 pm

    Thanks for your comments Robert. They’re understandable (I particularly agree with you that “it’s nothing personal” is difficult to swallow when YOU have just lost YOUR job), but I think I tend to prefer the position that the Scandinavian unions have generally taken (I first heard them arguing it in the 1970s).

    Their approach to globalisation has been: protect the workers and the terms and conditions, not the jobs, not least because their view is that protecting specific jobs very often means protecting specific employers, and they don’t repay that help.

    So, concentrate on providing decent redundancy arrangements (our campaign on increasing redundancy pay does seem to be gathering support from MPs and even possibly from Lord Mandelson if today’s Independent is to be believed); decent unemployment benefits; retraining opportunities; and help with return to work, all in the context of Government support not for specific companies but for strategic industries, and counter-cyclical state investment in public works during recessions.

    It certainly seems to have worked for the Scandinavians over the last few decades, and the opposite approach – which the UK and US have adopted – has hardly been a huge success.

    Similarly, it wouldn’t be worth sanctioning particular companies through the tariff system (I’m not sure our trade rules would allow it either, and it would be too easy to evade). However, there’s nothing wrong (and a lot right) with sanctioning particular behaviours, such as breaches of ILO core labour standards, other fundamental human rights, and environmental standards. This is what the global trade union movement is calling for in trade talks. This isn’t protectionism, because the same standards apply universally (protectionism means treating other countries differently) in the same way that intellectual property standards are deemed acceptable in trade agreements. But it does protect workers – all around the world – from unacceptable exploitation.

  3. Robert Day
    Feb 7th 2009, 6:30 pm


    Of course we should protect workers through whatever mechanisms are available, including improved redundancy arrangements, better unemployment pay, retraining opportunities and everything else. That doesn’t mean that we shouldn’t punish the capitalists as well. If we can do this through public pressure and consumer power, all well and good.

    My idea of restricting clawback through tariff mechanisms to the estimated value of the loss to UK plc is intended to defuse the argument that a tariff barrier is always protectionism. To take the Peugeot case; if a government decided that the loss to UK plc as a result of the factory closure was, say, £100 million through lost corporation tax, lost overseas sales and additional costs to the public purse – such as the on-cost of retraining workers and the cost of welfare benefits – then a punitive tariff of £100 million could be levied on Peugeot products entering the UK, and when that £100 billion was recovered, then the tariff should be lifted. To me, that’s restorative rather than protectionist.

    Of course, if such a policy were in place, then the company could just decide not to sell into the British market. That’s fine. There are plenty of other car makers looking for a slice of the UK market who would welcome a major competitor pulling out. Why not make markets work for workers as well as consumers and companies?

    If such a policy were in place, then a wise company looking to decouple itself from the UK would engage in discussions with the government to withdraw in an orderly fashion with proper provision for the workforce. Some already do this; others don’t, depending on how laissez-faire the Government is prepared to appear at any one time.

    The argument about British workers being more expensive to employ only holds good where the company is working on maximising shareholder value; the judgement the company makes about labour costs is comparative rather than absolute. A policy that would cause a company to incur major costs in pulling out of a country would give them cause to think. And if it impacted on the balance sheet (and shareholder value) then it would make pulling out of any country more rather than less painful.

    On other measures: of course, it would be easier to invest in public works during recessions if so many of those works weren’t now in private hands – but that’s another discussion…

  4. Rob Knight
    Feb 8th 2009, 1:41 pm

    Robert Day wrote:

    To take the Peugeot case; if a government decided that the loss to UK plc as a result of the factory closure was, say, £100 million through lost corporation tax, lost overseas sales and additional costs to the public purse – such as the on-cost of retraining workers and the cost of welfare benefits – then a punitive tariff of £100 million could be levied on Peugeot products entering the UK, and when that £100 billion was recovered, then the tariff should be lifted.

    Wouldn’t the likes of Peugeot simply avoid opening factories in Britain in the first place? When you’re looking to open a factory somewhere it’s probably because the economy is growing and you’ve found a suitable place to locate the factory. But those circumstances can change, and you know that you might have to close the factory. If you think that doing so might land you with a £100m bill, wouldn’t you just locate the factory somewhere else, where that charge would not be levied?

    Your plan works if we assume that the objective of policy is to keep things static. But it would be a strong disincentive against the opening of new factories just as much as it would be a disincentive against the closure of existing ones. Given that the type of factories we need changes over time, this would not be sustainable.

  5. Robert Day
    Feb 8th 2009, 4:09 pm

    Rob Knight has a valid point. But I suppose that I’m thinking of a model where the state is interventionist in going out and looking for new inward investment; not impossible even in our market-driven times. For instance, when BMW bought into Rover Group ten years or more back, one of the benefits was that they built a brand new engine plant at Coleshill, near Birmingham, which took over engine block production from a range of smaller subcontractors (particularly Steyr in Austria). That was achieved against rival bids from elsewhere in the EU through a lot of intervention and assistance from what is now BERR (you know, the government department the LibDems want to abolish).

    And before you say “Well, what about the workers in those sub-contractors?”, I’d point out that one of the difficulties that a number of Austrian companies suffer from is having a large, economically dominant neighbour who regularly farms out sub-contract work of such a scale that the company’s own production almost completely disappears because they’re on contract work. Then when the contract work dries up, the Austrian firm finds that it’s lost all its income from that source, but because they’ve had to devote the bulk of their production facilities to the contract, their home market has disappeared as well. This has happened to a few Austrian companies over the past five years or so.

    (The story of the BMW group’s involvement with Rover is an interesting one; a friend who went to work for them gave me a fascinating insight into what really happened….)

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    Feb 8th 2009, 10:17 pm

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