Rwy'n urbyn iawn, roi gennymau, ac yn gweithio i gŷtelion tynnu dyn nhw i'n sair wahanol, aill nhw i gŷtelion yr aelol. Mae'n gweithio i gŷtelion yn gyfreifio wrth gwrs, ac mae'n dweud yn fawr i ddweud i gyd y mae'n gweithio i'r cyffredig sydd wedi dnod iawn o blwyddyn eu gŷtelion. Mae gennymau i gyrddol o'r cychwyn fwy o'r cychwyn. Mae'n pobl yn gwyterrech mewn ddau deisgwm, ac mae'n gweld sut yn ei ddweud o ddweud are either unwell or have to be elsewhere—Dennis Robertson, Richard Lyle and Joan Lamont. We have two other members who are hit by travel delays, but I'm hoping we'll join us shortly—Patrick Harvey and Joan McAlpine—and we have one witness who's also hit by travel delay and I'm hoping we'll be with us shortly. Item 1 on agenda is whether committee members are content to delegate to the convener for the SPCB to pay under rule 12.4.3 any expenses of witnesses to the inquiry. As agreed, thank you. Item 2 on our agenda, we are continuing to take evidence on our inquiry into work wages and wellbeing in the Scottish labour market. I would like to welcome our first panel. We are joined today by Colin Borland, who is Senior Head of External Affairs at the Federation of Small Business. Alan Spence, director of Accord Energy Solutions Ltd. Duncan White is a senior campaigning officer with the UK Home Care Association and Dr Matthew Dutton, senior research fellow employment research institute at Edinburgh Napier University. Welcome to you all. We are keen to explore a number of issues with you this morning. I should say that Robert Kilgauer of down investments is on his way, so he should be joining us shortly. We are keen to explore this morning around wage levels, questions around the living wage, zero hours contracts, looking particularly at the involvement of small businesses, the work of the government agencies in promoting a fair work convention, the question of the Scottish Government's business pledge, questions around trade union involvement in business and also looking at different models of ownership such as employee ownership and what impact that will have. We have quite a range of topics that we want to cover and I think that we will try and run this until about 11 o'clock, so for about an hour and 15 minutes. Because there are or will shortly be five of you, please do not feel that you should all answer every question, otherwise we will be here for a long time. I would ask my colleagues if they would direct their questions initially at one panel member and if they would like to come in and respond to a point that is made by somebody else. If you just catch my eye, I will bring you in as best I can as the time allows. I think that we would like to start by looking at some issues around different models of ownership and the impact that employee-owned businesses might have, and I will ask Chick Brody to ask the first question. I think that initially I would like to direct this to Alan Spence, but of course if anyone else wishes to contribute please do so. The benefits of employee ownership have been discussed in a number of the occasions that we have been taking witness. Research commissioned by the Employee Ownership Association found that employees and employee owned businesses report high levels of satisfaction, job quality, in terms of contributed by things like improved communications, decision making, job satisfaction, etc. I wonder if you would care to comment on what you see as the general above average quality of job because of that participation and employee ownership. I wonder if Mr Spence would advise what Accord has been doing apparently. Okay, maybe worth giving some background. Accord was established in order to take a business model that myself and two colleagues had developed to the next stage. We developed a very open style of management with a very flat structure in the organisation and we found that that gave very good results and we felt that the next step in the development of that model was to I guess to introduce an element of employee ownership. So when we founded Accord five years ago it was to basically to develop that model further. And we also had the intention of trying to attract good people and retain them because we felt that that would set us apart as a business, it would differentiate ourselves, us from our competitors and hopefully lead to lead to success. We've very well fairly quickly grown to 35 staff with around a dozen or more external consultants supporting us. So from when? From 2010. So we developed very quickly and I think it's very easy to focus on the turnover and the financial aspects of the business and those have been very good. We're turning over six million a year but I think what's more gratifying and probably a better reflection of the model is the fact that in that period of time we've only lost three people. So three people have moved on so that in itself speaks volumes for the type of model and the way we operate the business. In terms of employee ownership clearly there's an aspect of legal compliance and governance. What percentage of ownership for example in the company is there by ownership by employees? Presumably you still retain the capability with the two-thirds majority requirement or not to make decisions. We operate very much as a normal business with board of directors but above the board of directors we have board of trustees, an employee ownership trust and the trustees are actually the governance body of the organisation so they are effectively ensuring that the company is operated in the best interests of the employees, the best long-term interests of the employees so they can hold the board to task if they feel that that that duty isn't being exercised. As we were the first company to be employee owned from startup the way that we're distributing equity in the company is really based on the profits of the company. The plan is that the employee ownership trust will own 51% of the company and that the employees will effectively through a share incentive plan own 30% of the company. At the moment employees through the share incentive plan which is a very tax efficient way of doing it own just over 20% of the company. The employee ownership trust owns 15% of the company on behalf of employees but the employee ownership trust because of the nature of its governance role also has a golden or preference share and that preference share allows them effectively to outvote anyone else. So the company can't be sold unless in very special circumstances where the founder directors, the employee ownership trust and at least 70% of the employees believe that it's the appropriate action to the circumstances at the time. Interesting any other slide to comment Dr Tottenham? Yeah I thought it was particularly struck by what Alan said about the low job turnover. We spoke to including a code we also spoke to about 13 employee ownership businesses as part of our research and low job turnover was one of the striking features of the employee own businesses because people felt like they had a stake in the business and they felt like they were being listened to and you know that for us was particularly noticeable in terms of you know what the employees were reporting. I wonder how that impacts on what the view is of the FSB in terms of I know we're talking small businesses but there are small and small businesses. What's the view of the FSB in terms of inclusion of employees in small businesses? Yeah I mean I think while we haven't done any specific work on different ownership models I think there is a body of evidence that employees in micro businesses are amongst the most satisfied and that is because for the reasons that you cite because they feel more involved they have more of a you know a stake in the business they're closer to the people who are making the ultimate decisions so you know for those reasons they feel they've got more ownership of that job whether or not they have a formal stake in the company that tends to lead to higher job satisfaction levels yes. Okay I'd like to come back later on specifically in talking to Mr White about that aspect in the care sector but I'll come back to that. Okay I'll just before I bring in Gordon MacDonald if I just welcome Robert Colgarer CEO of Down Investments. Thank you for joining us. Foddus for no leaves on the line that was just the bad traffic from Fife. Thank you well as you might have noticed we have two members of the committee missing for similar reasons to do with traffic disruption so we're a little light on this side of the table as well. Anyway we'll come back to you in a second. Gordon MacDonald you want to pursue this? Yes please thanks very much convener and good morning I just want to continue to esteem that Chick Brody was asking about and I was struck by the written evidence from Klansman Dynamics about their employee ownership change where they flagged up turnover was up 90% profits up 140% and employment up 30% but the aspect I was wanting to ask you about and probably this is Dr Dutton because you carried out a survey of a number of employee ownership companies what effect was there on sickness absence disciplinary levels and productivity levels if any findings that you found in those levels bearing in mind that recruitment costs we've seen in evidence elsewhere it's roughly about £3,500 per employee to recruit. Well we spoke to Klansman we spoke to senior management and we spoke to individual engineers on the floor so to speak as well and what they said was absenteeism sickness and job turnover were negligible okay now you can't just assume that that is negligible because it's in a U of B but it did appear to be the case that employees genuinely believe they had a stake in the business they were genuinely listened to in the business and also because of the share ownership structure that the employees activities and actions were directly aligned with the business itself so they felt that they had a genuine stake in the business and in fact Klansman is quite interesting as an example because they held what was called I think it was called the Friday pizza meetings okay where everybody would get together on a Friday afternoon for an hour or so uh the staff would be you know given pizzas and and and some drinks as well and that time would be used to raise any issues to any of the staff where any management wanted to discuss with the staff and some of the some of the staff I spoke to were initially quite intimidated by this idea that you know you would be talking openly with managers about things that may be bothering you uh and it may have taken some time for that style of meeting to to iron itself out and find its feet but eventually almost all the staff seemed to agree that that was a genuinely useful and productive way of improving the way the business was being run because they felt you know they could discuss things of management they could raise issues they could get things changed as well rather than having a grumble you know away from managers as often happens in the workplace we all you know have a moan about people that we work with but that really encouraged a kind of openness and transparency to the way the business was operated so I mean in terms of productivity that that presumably freed up a lot of managerial time and supervision time in order to concentrate and grow in the business rather than well what were you finding with on the question of productivity again you have to be careful making direct links between increased productivity and it being an EOB but it would appear to suggest that you have this apparent link between productivity and being an EOB because issues are raised are addressed at the centre so to speak we're not just left to drift okay so again it's the evidence is because it's qualitative you've got to take it with a you know a pinch of salt but there's a suggestion that because issues are being raised they're not being left problems which might cause people to leave the workforce of being you know addressed by management and they're being raised openly that you know there's this possibility that that may be having an effect on turnover I think the bigger issue on turnover is the point about the share ownership is that employee share ownership is a very efficient way of aligning the interests of the company with the aims of the individual employees they can see what they're doing has a direct impact on the day-to-day running of the business and in terms of the companies that you spoke to were they in one particular sector or were they a ranger sector they were ranger sectors we had we had 12 companies in total across Scotland they were all scotland based but they included you know oil and gas sector engineering sector we had manufacturing sector involved we had consultants and service health services so it was a reasonable spread of of businesses involved so again some caution about the numbers of businesses because we were commissioned by Scottish Enterprise to focus on these 12 businesses but that said you know when you start to get recurring themes coming up such as you know job you know job well-being employee satisfaction low levels of job turnover you know improved productivity then it starts to you know tell you a certain story about what's going on in EOBs compared to the non-EOB sector well I want to ask Colin Borland a couple of questions you've quite rightly pointed out that the vast majority of businesses in Scotland are small businesses employing less than there are around 10 people. How many of your 19,000 members are employee ownership businesses? It's not something that we've done any work on it's not something that we've asked I would imagine though anecdotally I would imagine the numbers would be small. You know given the the savings to the business and the the situation we're in where we're trying to encourage businesses to grow and there is a lot of businesses that are family owned businesses that you know sometimes fail when they reach second or third generation or the you know somebody retires and the business goes out is there any encouragement any support within FSB as a way of handing businesses over from you know one model to the other? I think succession planning is something that does get overlooked because we all want to talk about setting up a business because that's exciting and growing it because that's also exciting. We don't like to talk about exit because that seems to be somehow talking about failure so yes I think we do have to have better conversations about how one exits a business one thing that we have encountered though is that you will see a bit and when it's your business and you set it up in your houses on the line and everything else you can be reluctant to let other people in and we see that with equity partners or other investors or other types of investment that involve giving up an equity stake that has historically been a level of resistance to that amongst the small business community in Scotland so if we are going to go down that route then you would have to start looking at some of those cultural questions as well and is that uh does it require some level of support in order to give owners confidence that this is maybe a way to help stabilise their business or grow their business? I think what you need is when you when you're beginning to think about it and at some point it's not as if people are unaware of the fact that they're getting older or the fact that there's no one there to take it but when you begin to take it where you want to have those discussions the initial contact that you have with the business support system has to be a good one and it has to put you in touch with the right people first time because if it's not right then businesses will ignore that um or they're not going to go back a second time so we have to make sure I'm not sure generally saying to people this is a brilliant idea in general bear this in mind because those messages will wash over them if they're not interested in it at that time but it's when they come to make that inquiry that we make sure that this is one of the suits of you know options that's presented to them. Okay, thanks so much. I was going to make a point about with agreeing with what Colin said about resistance within some businesses to take part in that EUB structure several of the businesses that we spoke to had said that their former partners were resistant to becoming EUBs because they felt like over the years they'd taken the risks they'd as Colin said they put their houses on the line therefore why should they hand over you know what they'd essentially taken huge risks to do you know for the wider benefit but maybe it just takes a greater you know vision to see beyond that. Okay yeah just before I bring the check back in I'm interested maybe just pursue this with yourself Dr Dutton then Mr Spence some of the challenges around employee ownership for years you know the flagship employee ownership business in Scotland was Thomas Russell now I sadly have to sit on the Thomas Russell task force that is trying to deal with the aftermath of the business folding is there any sense that an employee ownership business finds it harder to take difficult decisions because the employee is an employee you know for example maybe Thomas Russell isn't the best example because I think the business model probably made it with the international competition it was very difficult for that business to succeed under any ownership model but if the decisions had to be taken to substantially downsize for example would it be harder to take those decisions with an employee ownership model? There was no evidence suggest that harder decisions were not made or deferred there was some evidence to say that decision making took longer perhaps now maybe that could feed into you know some cases where that might lead to problems of course in the case of Thomas Russell it's maybe an EUB it's not operating in a bubble it's operating in an international marketplace and at the time a very difficult one so no in the sense of that point no evidence directly relating to you know difficult decisions being deferred but perhaps some suggest decisions making was slower okay now from what I heard speaking to the employees and the managers I wouldn't assume that difficult decisions wouldn't be made for that reason because one of the things that was emphasised to us was the openness and transparency of the way in which decisions were made now presumably when a difficult decision did come along that should be in the open too you might think okay but I don't have the the details of the individual cases of course. Mr Spenness do you want to say anything about this? Actually we're in a very difficult position as you can imagine at the moment we're in the oil and gas business many of the major operators are clients and we're seeing levels of activity dropping we're seeing quite a bit of pressure on our rate and we're seeing decisions being taken not on the quality of service but the cost of the service so just last week I was down with a client and basically we were told we'd have to cut our rates by 20% and those are rates that were already discounted significantly so we're at the with that client we're going to be at the margins of making money not making money but we don't really have a choice as to we can't walk away because there isn't that much business out there so obviously you know we've already thought about our strategy for how we continue the business for as long as possible we've already put in place I think some measures to allow us to get through this downturn one of the things that you know because we've been in this business for a long time we recognise that oil industry can be very boom and bust and we have taken measures to ensure that we have sufficient financial resources in place to keep the company going for much longer so rather than taking profits out of the company to reward employees or to sell our shares to the company we've built up a reasonable amount of money in the bank which we feel is prudent so that will help us but additionally we've been looking at how do we respond you know we get more clients cutting rates if more work dries up and we've effectively drawn up a league table of where we start cutting to ensure that the business remains viable until the industry meets some sort of upturn and at the very end of that list is redundancies so it's not the first thing we go for it's the very last thing we go for and we've communicated that to our staff and we'll communicate it again because obviously they're concerned for their jobs but we need to make them aware that that is a last resort we're not looking to maintain profit levels we're happy to you know not make a profit even potentially make a loss we're in a position where we can do that but we have to face the future with a low oil price and I think you know one aspect of what we do Matthew referred to the the pizza meetings at Klansman one of the things that we do is we have a monthly staff meeting and at that staff meeting as well as all the general day-to-day issues with running the company we also prevent present the monthly profit and loss accounts to the staff so the staff know exactly how much money's in how much is coming in how much is going out where it's going what the problems are what the issues are so they understand the finances of the company as well as everyone as the directors and it would not come as a surprise to them you know to know that exactly what I've said we are facing pressure turnover is going down profits are going down and so I think they recognise that the management team are doing everything they can to address the issues and to see the company through this difficult period thank you okay um do you want to come back in just briefly perhaps to talk to Colin by the way I'm a company I have an American company I was with we used to the friday feast which is drinks and sandwiches at half past four but you had to get the meeting over pretty quickly because too much drink afterwards led to other complications um i wonder Colin one of the burgeoning sectors of our economy is the social enterprise and third sector which is largely employee owned if you like is it in your opinion just employee ownership or is there a defined change in culture that you can discern in that sector we don't have many social enterprise members at the moment we have some that are now joining um but I'm not sure that necessarily the ultimate objective makes that much of a difference because when people talk to me about what social enterprises are there to do then it does sound awful like what a lot of our members are there to do which is to provide employment deliver services you know be an important part of that community the only real difference is I suppose that you know most businesses um are there with you know the primary objective of making profits and the social enterprise has you know an additional um you know go over and above that but in terms of you know how the teams are structured how they're motivated and all the rest of it um I'm not aware of any significant differences although my answer to that might change whether membership profile to change in years ahead and we had a greater number of members in that sector I wanted to come back to Alan Spencer's very interesting comments about the sector in which he operates and how the employee ownership model makes a difference the last period of sustained low oil price at the turn of the century in the late 90s and 2000 saw an awful lot of people laid off and an enormous default position by companies in the sector of reducing staff costs first or very early. What you've described is an attempt to do quite the opposite of that but we had some discussion in this inquiry a couple of weeks ago as to whether your response was typical or whether a lot of companies are again defaulting to reducing staff costs first. What in your view from operating in the sector at the moment what is the sector's response to the current position and what difference does it make as to how a business is owned and operated in terms of those choices that are made about how to reduce costs in difficult times? I think certainly in the UK sorry in the UK continental shelf where it's mostly private companies that are operating those companies are driven by shareholder returns and the shareholders are not necessarily don't take a long term view of the business it's very much a short term view of the business it's about getting generating as much money from their ownership of shares in the business as possible and because of that most of the goals of the the board of directors reflect that so while it would be it would be wrong to say that you don't have a long term view there's also very much this short term view of returning shareholder value and often to the expense of the employees of those companies often it's the first step that's taken is to look at reducing the cost base through paying off members of staff and certainly contractors is an easy cut for many of them. I think for us we're different in that we don't have any external shareholders we're able to take a long term view and I can go a bit further back to the 1980s when they all price dropped from $30 to $10 a barrel so I've been through this cycle two or three times and I'm quite sure that things will improve but it's just about getting through that period and you make your choices with an employee-owned business where the money stays within the business and really you're looking to ensure that the business operates in the best long-term interests of its employees then the option of paying off people has to be the last option that you take and clearly clearly that's of benefit to the people who work in the business because they don't face the redundancy situation the uncertainties that many of their peers currently face. Is there a benefit to the business itself in terms of retaining skilled and experienced staff? Does that reduce your costs so to speak when the upturn finally comes? Well yes certainly recruitment costs are exceptionally high for the type of people that we employ so there's an issue there but there's also a sort of a secondary effect there which I was trying to explain to some of our clients and it's quite difficult for them to get it but because we're a consultancy and high-end engineering business our consultants are often based in client offices for prolonged periods of time. They build up an understanding of that client's business and they become almost a relied upon source of knowledge within that client's business. The value that we provide to those clients is that with low turnover we can provide those people for a long term and so they get that quality of service that they demand but also they don't have to bring in new people from other businesses or even from ourselves if we lose people. They don't have to bring in new people and take them through that whole process of understanding the business, of understanding the challenges, the technical challenges and so on and so forth. So for our clients having this long-term approach, this long-term view, is actually very valuable at the moment. They're not prepared to recognise that but you know I think there is that secondary benefit from being an employee in the company. So business benefits both to yourself and to your client companies. I wonder if either yourself or Dr Dutton or others have a view it's clearly, this is clearly an ownership model which delivers great benefits to both employee owners and the business in the way you've described it. Is there any reason other than inertia for such a low level of employee-owned businesses in the economy? Is it simply that others have not discovered what you've discovered in terms of developing the model from the start and what more can be done to make it more accessible to more people? Actually the number of employee-owned companies both in Scotland and the UK as a whole is growing faster than it's ever grown before. The employee-owned companies generate more revenue than the whole of the aerospace sector in the UK. So it is, employee-owned companies contribute quite significantly and through my involvement with Cooperative Development Scotland as an ambassador we are seeing regular inquiries about companies that are looking at employee ownership as a way forward. Probably going back to something I said earlier about 80% I think of companies that become employee-owned, become employee-owned because of succession issues, because the owners have a long-term view, they've built up the business over a considerable period of time, they have probably a significant presence in the area and when they do come to retire, leave the business, they find that the most palatable way of doing that is to sell the business to their employees. The actual difficulties with becoming EOBs and perhaps your question was related to why there are not more. Obviously the dominant model in private sector is external shareholders, not the internal shareholder model. But some of the issues that were raised with us was the complexity of moving your business into an EOB model. I don't know if this was Alan's experience at all, but certainly in the case of the companies that we spoke to they described an enormously complicated system under HMRC regulations to do with becoming employee-owned. Now many of them thought that that was valid in some cases to protect the reasons why businesses would become EOBs to make sure that people were becoming EOBs for the right reasons. But there was also felt to be some difficulty from the companies that we spoke to in terms of accessing additional finance. Because of that shareholding model that the EOBs had, their impression was that the banks were a little bit more uncertain about what they were, a little bit less sure, because they had less experience in dealing with the EOBs. Therefore, they couldn't look to those external sources of finance for growth that other companies may be able to do. On the other side of that, that by not having those external shareholders to meet those kind of short-term demands and your shareholders are your employees and your employees' actions are aligned with the business aims, it does give you that long-term stability and it does give you a long-term view. A brief point on that, I think that Alan and Matthew are both absolutely correct to be talking about companies here. It's important to remember that there's an awful lot of businesses in Scotland that are not constituted as a limited company. I don't have the exact figures in front of me, but I think it's about half. The opportunity there is that if you're moving from a sole trader model to become a partnership and bring somebody in or if you're a partnership and bring another partner on, obviously that employee doesn't just get to share in how much money the business makes, it's also become liable for all the businesses' debts as well. There are specific issues around company law and how we deal with a limited company, but just remember that it's completely off the table for anyone who's constituted as a partnership or a sole trader. I was just going to say that our experience was perhaps different from some of the other companies that Matthew interviewed. In setting up the business, we found that it was actually very straightforward and very simple to set up our share incentive plan and to set up our employee ownership trust. It wasn't particularly expensive in terms of the overall turnover of the business and it certainly would have posed a barrier to setting up the business as being employee-owned business. And you didn't encounter the issues around banks and other external? We recognised that the first time we really got involved with the bank was after our first year James and Phil and I left as the management team of a small part of a large multinational and our contracts colluded us from employing anyone who'd worked for us within that company. So we had a one-year period where those restrictive covenants prevented us from employing former employees. But we recognised that there was a good chance that a significant number of those people would join us after that first year. So our first dealings with the bank were to request an overdraft facility and the bank were very supportive and it wasn't an issue at all. We in fact didn't have to use it but we did grow quite significantly in that second year but our fears over cash flow were unfounded. On the question that he's made around the limited partnership simply to understand better this question about succession and succession as Matthew Dutton described of family traders or sole traders who wish to retire, what in general terms would be the experience of yourselves in dealing with members? Do they come to you for advice about different models of succession or do you proactively offer that kind of advice? Is there a mechanism for those discussions to happen for micro businesses and small businesses? Our function in that would be primarily a signposting one, so we would send them to the publicly available support that is there. And if people do come to you and actually ask about that sort of stuff, they've taken four or five steps already. You know what I mean? They're towards the door, they're roughly where you want them to be. The bigger challenge, I think, as the colleagues have outlined, is how you get them thinking about that and moving in the right direction before it's too late, I guess. Okay, I think we should move on and talk about some other issues. We've had quite a good discussion around employee ownership. One of the other themes we've been looking at in relation to the inquiries is the whole question of wages. We wanted to focus in particular on two sectors, one was retail and one was the care sector. So I wonder if I may start with yourself, Mr White, on bringing in Mr Colgar, too, looking at the whole question of wages. We know that the Scottish Government, through the Fair Work Convention, is very keen to promote the concept of the living wage. We also know that the UK Government are bringing in the national living wage from next year, rising to £9 an hour by 2020. You say in your submission, Mr White, that the UK HCA feels that the new national living wage could lead to a catastrophic failure of home-based care services. Can you just elaborate on that and explain why you think that is the case? Thank you. The home care sector, in many instances, is very different from other sectors in, as far as the vast majority of the business conducted in the home care sector is publicly funded. Certainly, UK-wide, it's in excess of 70 per cent of the contracts and the fees that go with that are publicly funded. That then brings us into an immediate problem. If the fee rates in publicly funded contracts are so narrow, the margins are so narrow and the fee rates themselves don't reflect the actual costs of care, if you raise a single component within those actual costs of care, i.e. the wage that you pay to your staff, without a matching increase in fee levels, then you just squash the whole economic model to the extent that it becomes non-viable and that in terms of trying to sustain a viable market, in terms of trying to sustain corporate company provision of care, it just becomes impossible. Certainly, in our most recent surveys of providers, both at large, intermediate and small level, we are astonished, to be quite honest, at how many companies and providers out there are actively looking at innovating and handing contracts back to local authorities. There are legal issues around that, but, undoubtedly, the cost model is so fragile that, if you extend and propel pay systems and pay propelling measures, such as the national living wage, disproportionate to the fees that you are receiving back, you simply cannot provide a service. It is not economic to do so. When we say that the national living wage could have catastrophic effects on the home care market, I do not think that that is an overstatement or a wow factor. It is a reflection of reality. Mr Cogart, do you want to add to that? Yes, thank you, chairman. The care home business is one of my main business interests. Renaissance care has 650 employees in part and full-time at the moment. There are two biggest issues without any doubt. Our staff recruitment and retention falling from that, particularly nurse recruitment, and the clarity that we now have about the living wage. We know that 60 to 65 per cent of our income goes on wages. A large area of that is at the end, which is affected by the national living wage at minimum by April 2020. At that end, we have also got the differentials above that rate of employees paid slightly above that, which has to be increased to keep the differential. We have the clarity that we know that our biggest cost is going to be going up between now and April 2020. What we do not have clarity on at all is the fee level, what is going to happen to the fee level between now and 2020. If it is just cost of living increases on anualised basis, we have a crisis on our hands in a sector that, in Scotland, 600-odd independent care homes employ directly 30,000 people and secondary on local goods and services employing or assisting employment of many thousands more. In our company, 75 per cent of our income comes from local authorities. We are quite happy to pay the living wage to staff in their own care homes, where, for a residential home, the average fee can be as high as the average cost. I have this under freedom of information from councils about £1,000 a week, and yet they are paying us currently £609 a week for nursing care, which involves nurses, whereas they do not involve nurses. There needs to be a level playing field, and I am quite happy for us to have an open book policy if the councils are between the cost of care that councils are providing in their own care homes and the cost of care that we are providing, because there is not a level playing field between the costs of care. Councils are happy to pay the living wage to the living wage foundation rate of £7.85, which most councils and Scotland are now doing to their care staff, but they are not prepared to pay us the fees to pay the living wage. We would be quite happy to pay the living wage and pass 100 per cent of that increased fee on to our staff, because that would help in our view of staff recruitment and staff retention. We took evidence on this last week from some trade unions and Dave Watson from Unison. It was quite interesting to try and paraphrase what he said. In his view, there were three types of employers. There were the good employers who already paid the living wage. There were the willing employers who wanted to pay the living wage but were constrained because of income, and there were bad employers who just did not want to pay it at all. What used to be suggested by Mr Colgawer is that you are in the middle category of being not good nor bad but willing. You would like to pay more, but you cannot afford to do it. Our margins are extremely tight, and that has been over the past pressures on that. Over the past eight to ten years, we have been both on local authority fee rates and also on increased regulatory burden requirements, which I am supportive of from the care inspectorate as far as to the service and the extra things that we require us to provide, which I am fully supportive of. For councils to pay their own staff in their own care homes the living wage but not be prepared to pay a decent rate to enable us who are willing to do that in the independent sector and the charity sector, the voluntary sector, is unfair. Certainly also from the costs to you get a council that says that it does not have the money to pay us an increase, and yet I would build a new-build care home ignoring land costs at the moment, for about £75,000 a bed. East Lothian Council provided me with information under freedom information that the recent opened home in Trinent down the road cost them £170,000 a bed, more than twice what the independent sector would cost to build a bed. You could ask the question why are they building a care home and spending £10 million on building a 60 bed care home when it would cost us just over £4 million to build. Therefore, that has an ongoing weekly cost if it is more than twice the cost to build it then you have to pay that, even councils have to pay that money back. There certainly is unfair competition from councils who plead poverty on the one hand and on the other hand their own cost of care for a lesser service without nurses is way above what they are prepared to pay asked for a service including nurses. I would like to pick up on a couple of points made by Robert Kilgore there. Very interesting to note his point about the open book accounting approach and I would certainly like to develop that line of thinking. However, to just mention first that the UK Home Care Association has calculated nationwide that an hour of home care costs the provider £15.74 to provide. A recent freedom of information survey of every local authority in the entire United Kingdom showed that the average fee paid by local authorities is £11.36 per hour, so there is automatically immediately a great difference there. To pick up on Robert Kilgore's point about the open book accounting and a couple of local authorities where we have succeeded in entering into an open book accounting process to identify with local providers and the local authority the actual costs of care, we have been quite successful and it has been shown unequivocally in the far south west of England that the fees that were paid were wholly inadequate and that those fees have been raised to £16 an hour from just under 12. In another instance where we're undertaking open book accounting the local authority has realised that it is just not viable to pay in the region of £11.5 an hour for an hour of care by any stretch of the imagination and I think the unfairness that Robert mentioned in terms of local authority provision versus private sector provision is also a personal experience of mine where I sat down with a Yorkshire council a few months ago and we looked in house provision that comes out at about £39 an hour for re-ablement care compared to the fee paid to private providers of marginally over £13 an hour and I think that sort of imbalance is a national trend, it is a national problem. Just to follow that up, I know that other members want to come in but I want to just get to ask you about this issue of the ethical care charter, I don't know if you're familiar with that concept but we were two weeks ago the committee was in Paisley we met Renfrewshire council and they told us about the work they do with their ethical care charter and they have been working with contractors there to ensure the living wage is paid by those contracting council services including care and from what they said they seem to have had some success in that and it is based on an open book approach. Is that a model you think that works that could be progressed further? Yes, I think we would welcome that move in every sphere, I think we would champion that approach. It is productive, it does engage with providers, it does support a viable sustainable market and it does provide an open book arrangement where people can see what the pressures are. I mean we all clearly know that local authorities are under duress but I think you know there has to be a recognition that strategic decisions have to be made in the commissioning process, commissioners have to make decisions around what strategically and long term is sustainable so yes we would unequivocally support that. Maybe I asked the same question to Robert Caldor, are you familiar with this concept of the ethical care charter? Have you had any dealings with Renfrewshire council? No, no, the homes we have are in Murray, Peterhead, Four and Aberdeen, One and Blair Garey and the rest of Edinburgh and East Lothian so no I haven't but if we are prepared to open up our books and show how we make the small margins we make and where our pressure points are then it has to be that councils have to do that as well and I don't find that they are my experience, I've been involved in the care sector for 26 years. My experiences and particularly recent experiences at councils are actually hiding, are actually making efforts to hide the true cost of the weekly cost of their care in their own care homes because they're embarrassed about the level of the differential between the cost in their care homes and the cost in the independent sector. Just on the last point that Bob Caldor mentioned, I spent the summer going around all in Ayrshire care homes and also told the local authorities. I didn't find them hiding, I mean I accepted some of the points that you made but I didn't find them trying to hide questions. Can I change tack just a bit in terms of recruitment and retention because we are talking about wage is obviously a key element and it's regrettable that we're not seeing loading wage being paid across the sector but what's the management in your opinion, what's the management quality like in the care sector because clearly that has an implication both in looking at the incomes of those that are at the front end and how well do you think the care homes generally are managed? I think considering what is an area that I've been concerned about for a while that I'm not sure the managers and deputy managers of care homes for example, I think the pressures that they are under from several different quarters, I think they do an exceptionally good job under huge pressure but I mean the living wage, I'm a strong supporter of the living wage and I would love to be able to introduce and pay in it the living wage across the entire group whether it's a £7.85 or going up to the £9 by 2020 but 75% of our business comes from local authorities and local authorities refusing to pay the give us the fees to pay the living wage. I don't see the concerns that I have in that area. Just on that point maybe because it is very important in relation to the incomes of those in private care homes as well as local authority homes. What then is your view of the procurement process that's going on and when that discussion comes up in terms of the issues that you face through that process in being able to pay the living wage between you and the local authorities? Local authorities meant to be a choice for potential residents. You come up against the bed blocking in NHS hospitals issue as well where you've got the NHS if an elderly person is in a hospital bed you've got that side of the NHS budget and if they come out of the NHS hospital and go into a care home that comes out of the social work budget so there are pressures where social work maybe are being slower at placing out of hospital and then there's the question which is maybe a bit controversial of are they giving preference in placements to places in their own care homes as opposed to those in the voluntary or the independent sector? Langham Bueson, who are UK recognised as the leaders in health consultancy in this area, they published something recently where it was the first time ever between October 14 and March 15. There's a net loss of 3,000 beds in the UK of care of the elderly beds. It's the first time ever and they put that down to the margin pressures on fee pressures and the threat of the pending living wage issues. Older homes are closing at a faster rate and new homes are not being built. The said was a growing trend. In Scotland that might be 250 to 300 net loss in Scotland. The concern that I would have is unless we get clarity, at the moment we have clarity over our biggest cost. Are we going to survive as a business? There's going to be a crisis in the sector that's going to make the collapse of Southern Cross look like a picnic, in my view. If we don't get clarity over our fee levels and some kind of level playing field between what the councils are spending in their own homes and what they're being prepared to pay us. I'd like to pick up on a couple of points raised by Mr Brody. First, the quality of management in the care sector and secondly, the procurement process. I think that our anxiety is that both of those entities are dominated by short termism. It's a constant struggle to manage the tidal wave at any given point, usually 4.30 on a Friday. There is a tidal wave of people who need to come out of hospital and anecdotally discuss other issues around how service users' patients are transferred from hospital care to social care, be that nursing home or home care. Management of social care is a constant struggle. You're running to stand still, you're up against constrained fees, you're up against capacity problems because of short term planning, you can't afford to recruit the staff numbers to absorb the sudden shocks of huge numbers of people coming out of hospital and to pick up on Robert's point in the financial year 2013 through 2014, the NHS spent £1.05 billion on delayed discharges, bed blockages. That sort of money, if you were to transfer that to social care, nursing homes, home care would be an extraordinary fillet to the system. I think in terms of procurement, it is characterised by perpetual consistent short termism. It's solving today's problems, not looking at tomorrow, not looking at next week, let alone next year. If we could get some sort of lined up cohesive procurement commissioning model that says, okay, let's start looking at financial year 2017-2018, let's start thinking about the resource allocation, let's have a look at resource pull, let's have a look at capacity, let's have a look at demand modelling, so that we could put down on paper what we want the system in 2017-2018 to do rather than struggling to solve Monday's problems on Tuesday. It's just madness. I'm intrigued. This is an inquiry into work wages and wellbeing in the labour market, and the care sector has been identified by witness after witness as one of the problem areas. Your response seems to be from the sector, while it's all the fault of local councils, they need to give us more money and then we can provide a better deal for our workforce. That's what it sounds like, and of course, if you want to put me right, I'll be very interested to hear it. What would your advice be if a member of your own family wanted to work in the care sector from what your own experience is, what you've told us today? Would you say that it would be better to seek a job in the local authority or in the health service that appeared to be the implication of what was being said, rather than to work in the private sector?  Well, I think to compete as we are doing our best to compete and continue to provide a good quality of care service when the 75% fee supplier to us has got their own service provision that costs our way above what they feel they're happy paying us. That's where I feel the unfairness is, that they are paying us a rate that is, in general terms, £609 a week for nursing care when their costs can be as high as £1,000 a week for residential care with no nurses. So, I don't feel, you're saying that the model is broken. Well, I certainly know that from colleagues in the same business we're all looking at, which I think is bad for the business, how we increase our percentage of private residents, private percentage of residents, which obviously will kick back to the local authorities, will be shortages of beds back to the 3,000 a year beds that are being lost throughout the UK. If that happens, the other thing that I know a number of my colleagues in the sector are saying is that they are actually looking at closing homes. There's no doubt that with the clarity over our biggest cost between now and 2020 and without any clarity and over the fee level in that basis, a lot of homes will close. More and more homes will close between now and 2020. That is definite. That's a fact. It's going to happen. To answer the question that you raised in terms of would I recommend or otherwise to a family member, would they work in the health or social care sector? I think that question is very ably answered by the dynamics of the recruitment market out there. 38% staff turnover. That tells you the answer of 38% of people out there is, no, I don't want to work in social care. I think the crisis that is about to hit with nursing and I am a nurse, so I, you know, hands up. There is a crisis with nursing. I haven't got the figures sitting in front of me, but we don't train enough nurses. We stop training nurses. You only have to read the Roy Lilley newsletter to realise the grief that is going on out there with nursing. I think in terms of the second question that you implied in terms of what would be our advice to the system, I think it rewinds to my statement to the previous question. I think if we can get away from short termism, if we can get long term planning into the system, if we can start deciding what we need the system to do after the next 18, 24 months, so that everybody in the market, everybody within the system, has clear strategic direction, has a clear idea of what the commissioning disposition is, so that you can say, okay, this is where home care sits, this is where nursing home sits, this is where hospitals sit, this is where accident emergency paramedics, you get that whole constellation of organisations within that spectrum of health and social care lined up in a proper organised, integrated way. Everything else will fall out of that. Once you introduce the investment, not just cash, which I think you were sort of quite anxious, that we seem to be pillering local authorities for the lack of cash. Well, yes, sure we are. I mean, we make no apology for that, but I think it goes far beyond the readies that are available here and now for contracts. It goes to making long term strategic decisions, planning and allocating what you want the system to do, allocating bits within that system to specific rules. I think that if you do that and you underwrite that with not just cash but also resources like nurse recruitment, nurse training, SVQs, things like that, that you are answering in that direction, because standing still as we are now, carrying on as we are now, ain't an option. I was just saying that there is a huge recent survey done that showed that there's probably between 800 and 1,000 nurse vacancies in the care sector in Scotland currently at the moment. Certainly across what we have at the moment is about 57 vacancies, 25 nurses, 20 carers, 10 ancillary and two in middle management. That's our current job vacancies that we have at the moment. I think that part of my concern is that when we've heard evidence about what makes working life difficult for people, yes, they talk about low wages and about high turnover, but there's also evidence that low employee engagement, low prospects, poor prospects of progression and poor opportunities for training. All those things are raised as well, and the care sector is in the focus there. I'm interested to know what you as employers are doing about that, other than lobbying for more money for the public sector, which is quite legitimate, but what are you as employers doing? Do you recognise trade unions, for example? What progression arrangements do you have in place for your staff? This year, from last year, we've increased our training budget by a third, and we're increasing it by 50 per cent next year from this year, so training is a huge part. That is partly on to hopefully help with recruitment, but also to help with staff retention as well, because the staff turnover rates vary home to home, but they are certainly much higher than we would like to see. I think that career progression and training investment and training is something that we've made a conscious decision to ramp up and increase. I would certainly recommend it. There's nothing more—it's a very satisfying job if you speak to those who are involved at the call face. I angst almost daily at the fact that I can't give those members of my staff at the call face more support than I do, both financially and in staff back-up and in training. I do the best that I can in that area, but I would love to be able to do more, but we have huge constraints. We're back to the pressures from local authorities. I understand that local authorities are under huge pressures, but I think that they need to look about where they're spending their money in this area, and we need to have a level playing field. That's surely only fair. Do you recognise a trade union, and if not, what else do you do to engage staff? We did recognise trade unions, but I think that's fallen away due to the lack of interest amongst our staff. I did ask that question of my operations director last week of renaissance care, because I said, didn't we recognise trade unions a couple of years—well, three years ago, I think it was—when we took on some homes from Southern Cross, actually, maybe four years ago? She reminded me, yes, we did, but the lack of interest amongst our staff is just lapsed, and so currently at the moment we don't. Do you have any sense of why that would be, why low paid insecure members of staff would not want trade union representation? No, I don't. They had the opportunity when as part of the taking on the homes from the collapse of Southern Cross that we did, we inherited that across, and we were quite comfortable and relaxed about that, but the take-up and the ongoing is just fitted away and disappeared. I know some other care home operators, my old company that I founded for Seasons Healthcare, I believe they do, but most of the sort of middle size, like ourselves, don't. It's not fair to say that there is no huge ethical problem with trade union membership, it just doesn't happen, and that's very easy to say. I think health, home care, adult social care is firstly a very flat system, it hasn't got a huge hierarchy with, you know, sort of, like board sisters and nursing officers and senior nursing officers and principal nursing officers and whatever, whatever. I mean that sort of hierarchical arrangement in home care just doesn't happen, you know, you have most perhaps a supervisor liaison officer that works with local authorities, so you don't have that huge progression, that huge sort of successor arrangement, and I think that is a problem. I mean the lack of a career structure is undoubtedly a break on developing the attractiveness of home care as a service. I think, and certainly from the UK HCA's point of view, we have a membership of 2,200 something organisations, and they're entirely at liberty to recognise trade unions. We would certainly not give direction or offer any sort of advice, you know, that's an entirely localised business decision, but ethically, ideologically, absolutely no objection whatsoever to trade union members, and, you know, if the majority of our membership organisations came to us and said, you know, we want advice about this, we give it, you know, I just don't see it as an issue to be quite honest. So where employers don't have trade union recognition, and it sounds from what you say almost all of them don't have trade union recognition, what other steps do they take formally to consult staff and engage them in the running of the business? I mean, again, it's a very local issue, you know, and a big company with 35 or 50 branches would do it differently to a company that has half a dozen small sales of workers, and certainly I was with several providers over the last couple of months. I mean, one provider in the east end of London who provides services to ethnic minority women only, they have a very tight knit relationship with their providers, with their carers, and they have formal monthly meetings, and again I was talking to a fairly large provider, they've got 35 odd branches based in the Midlands and South Midlands, and they have quarterly meetings with their staff. I think, you know, it's a question of what works best works best. We certainly wouldn't want to impose a model or prescribe a model. I have yet, in the two years that I've been with the UKHCA, come across any provider that doesn't engage with their care staff in some form or other. I have no idea if there are any people out there that don't deliberately. I have yet to come across anybody that doesn't. The staffing notices that you have from the care inspectorate are, as far as staffing numbers per shift, per skill requirement, are laid down on our staffing notice. From the point of view, that's our guide and that's what we stick to. As far as communication, it's very much locally done through the manager and deputy manager. Things that happen or forests is very different from Aberdeen. Actually, Peterhead is very different from Aberdeen, we find. It's very much locally run and that's where the quality of the manager and also the deputy manager is delivering that. It's our job to give them as much support to be able to do that at the coalface as best they can. No formal structures, that's all. Before I ask my questions, I want to correct a couple of things that Duncan White said. One is that we've stopped training nurses, certainly in my constituency and the university in my constituency, still training nurses. Secondly, he talked about local authority rates being as low as £11.50. Some of the evidence that we've received says that the hourly rate for Scottish local authorities is around £13.50, so just to correct those two. You're painting a very bleak picture of the care home sector. Mr Kilgore, you referred to Lange and Busan being the leading consultants in the sector. They found in a report last year that profits are estimated to be around 8 per cent. They also highlighted that per individual in a care home the weekly profit is between £44 and £60 per week per person. Grant Thornton issued a report last year that said that the care home sector is growing and wages are typically representing 49 per cent of revenues. My understanding in most businesses is that revenues represent about two thirds to 70 per cent, so 49 per cent, according to the findings of the report issued by Grant Thornton last year, suggests that there is room for manoeuvre. I would challenge a number of those. I can only go by what 26 years of experience and where I am at the moment with our business. We are close to 65 per cent of our income, maybe because our percentage of local authority is 75 per cent local authority fees, which is maybe why. If you have 75 per cent private and 25 per cent local authority, then you may well be down because you have higher fees from private sector, from private residents. You may well be at 49.50, but I can assure you that the industry average is above 60 per cent and near 65 per cent, and we are at 65 per cent as far as that. As far as the profit margin, I do not have a problem with telling you that our turnover, employing 650 part and full-time staff, last year was just over £16 million, and we made a pre-tax profit of £430,000. Pre-tax profit, where you then pay your tax, you then have your capital repayments for the capital costs to the bank, and then you spend every single penny that you can and more on improvements, whether it is new carpets, new en suites, new furniture. That is a personal thing. I do not take a salary out of the business, which I have not done for several years, in fact probably ten years. There is not fat cats making high percentages and moaning about being squeezed a bit. We have had eight years of squeeze and pressure on margins, and the margins have gone down. I would say our margins are about, I mean, if 3 per cent would be where I would, if I was asked in a survey, my finance director would tell me, he would say that we are about 3 per cent. That is us. Maybe because we have a higher percentage of local authority residents than maybe others, who will have a higher profit margin if they have a higher percentage or a lower percentage, obviously, of local authority residents. These figures are Grant Thorntons, they are not my figures. This is their survey of the care home sector. The other thing that I was not wanting to ask was, in written evidence, there was a suggestion by UK HCA that, in order to pay the national living wage, the rate would have to go up to £16.50. I am trying to work out what is the difference between the national living wage of £7.85 and an hourly rate that you would want to charge local authorities of £16.50. I understand that you need to pay national insurance, you need to cover for annual leave, you need to cover for sickness levels, you need to recover some of your general overheads. However, how does an annualised cost at £16.50 for a typical employee of about £32,000, and you are paying that individual 17 plus on costs? Where does that difference come in? Does that not cover enough of your overheads? Of any home care businesses? The model that you are quoting, and I will send you a copy of how it has worked out, it is broken down very graphically in terms of the actual cost of providing an hour of home care, and with a national living wage it will certainly go up to £16.70 from £15.74 under the minimum wage of £6.50. Those costs are very easy to recognise if you look through the document that I will send you. There are things like registration fees, insurance, cost of training, pension contributions, a whole plethora of costs involved in that. I certainly have not got the model in front of me, but I absolutely will send it to you, and I am quite happy to come and talk it through with you. As indeed, I sat down with a couple of your staff from the Scottish Parliament health accounts department three or four weeks ago and went through the costing model with them. It is very transparent. These are the UK numbers that you are talking about. Yes, UK nationwide. They include London and the south-east, for example. Yes, UK. It is an average of the averages, and I explain that to every account that I talk to. It is an average of the averages. The second point is that Gordon raised about nurse training. It is a matter of public record that for every student nurse vacancy there are five applicants. The amount of nurses that we are training nationally compared to five, six or seven years ago has dropped dramatically. UK nationally? Yes, of course. I am sure that individual universities and hospitals are above the average. Thank you. Good morning. I apologise for coming in late to the meeting. For once in my life, even I cannot blame the transport minister for the problems that ScotRail is having today. There are several issues that have come up that I think may be relevant to the local government and health committees, and it is possible that we might find a way to refer to what they have done when we look at our conclusions about why this situation exists and some important points have been made. I would like to ask about the consequences for your businesses and for your employees of very low pay and insecure pay. That would be relevant to the care sector, but perhaps beyond so for the FSB as well. Can you tell me what you regard the consequences of low and insecure pay to be on running your business? What impact does it have on the sick leave that might arise, the impact that poverty has on your employee's ability to do a good job and deliver the services that you deliver? What are the consequences of that problem for those employees and for the quality of the services that are being provided? I certainly think that, from the UK HCA's point of view, we have real concerns about low pay and the consequences of extended long-term low pay. Our evidence to the Chancellor for the Spending Review that went in 10 days ago explained that our concern is that the polarisation within the UK economy wage structure is locking in institutional low pay, particularly in the home care sector. I used to work in the nursing home care sector 18 or so years ago and I know that there is a mirror problem there. Certainly in the home care sector, we are really profoundly concerned that institutional low pay has become an absolute factor of life and what we see over in the next four or five or six years doesn't fill us with any enthusiasm that is going to change anytime soon. I think the consequences of low pay are manifest and clear today and that won't get better. Staff churn, staff turnover, companies scrimping on things like training, making staff have to buy their own uniform. A whole manner of corner cutting and cost cutting issues arise and that is a natural concomitant of a persistent low fee situation. He really is the elephant in the room. Is anyone able to give an assessment of the scale of impact, for example, on absence due to sickness and stress connected to poverty pay? I mean certainly we have not undertaken any longitudinal studies of those sorts of issues and I think hearing your question I'd probably need to go back to head office and say we've got a bit of work to do chaps. Anecdotally, the stress within the home care service at the coal face, to use a cliché, is undoubtedly ferocious. You are dealing with some of the most deprived health deficient situations imaginable and working in that environment constantly, carrying all the grief that goes with it does have an absolute impact on your health and your emotional and mental well-being without a shadow of doubt. Hands up I cannot give you any figures here today but I think we probably need to work on that. I wonder if Mr Kilgar or the witnesses want to comment on this? Well certainly low pay or lower pay than we would like to be able to to pay even for example to compete with local authorities which we cannot compete with local authorities on their pay levels. We can't. Staff retention, staff recruitment, we feel that obviously staff recruitment, staff retention, sickness levels, if we were able to pay more those would be affected in a positive way and certainly it is a very, it's both a challenging job working at the coal face in the care sector but it's also extremely rewarding and I do my utmost to both in pay terms, conditions and training opportunities. That's one of the reasons we've taken this initiative of increasing hugely in the last last from last year this year from last year next year from this year in our training budget because we see that as a way we're trying any and every way we can come up with to improve recruitment, improve staff retention and try and improve the the pay what the working conditions and also the capital expenditure that's available to us once we've paid the bank back for the capital on the loans. We're spending more than we're earning back in capital expenditure and improving the quality of the services that we're providing. Thank you. Can I just ask as well about insecure work as well as the pay level? One of the care providers who've given us written evidence draw a distinction between the way they organise their casual support workers, a contract in which the employer has no obligation to provide specific hours so there is insecurity there but the employee has no obligation to accept the hours that they're given so the employee can set their own boundaries. They draw a distinction between that arrangement and what they describe as an exploitative zero hour employer who has contracted the employee to work the hours they give when they are given with no guarantee of hours. Is that a distinction that you recognise and is what's described as the more exploitative form of zero hours contracts common in the care sector? Well going by our company with 650 staff in total part and full time, there's 309 full time, 210 part time and 127 bank staff who work varying hours both at suit them and suit us because some of them have other jobs as well. Only the bank staff are on what you would term zero hour contracts. Is none of them obliged to take the hours that they're given? No. Okay. Wider within the care sector is this distinction common? I can see where that distinction has arisen from. I think it's far more subtle than that and I think there are probably not many UK HCA members out there that would recognise the black and white division between those two. I think zero hours contractors has latterly managed to become very sort of unfavourable and looked on very unfavourably. I think if you call it bank staff it throws it in a completely different light and there are vast majority of people who are on zero hours contracts who are in practice in reality are bank staff and that is what they want and certainly when we have undertaken thumbnail examinations reviews of people who work on that basis the vast majority of people want that sort of arrangement. In which case there'd be presumably no problem in ensuring that they have a right to decide whether they want a contract specifying hours or a flexible contract. I think that there are a lot of providers out there that would struggle to give fixed term contracts because the nature of the commissioning. I'm not suggesting that they all be simply moved to a fixed contract but if you're saying that they are happy with the flexibility as it operates there'd be no objection to ensuring that they have the choice that the employee can choose whether they want that flexible arrangement or whether they want a fixed contract. I certainly couldn't sit here and pretend to speak for all our members in terms of whether they would be happy with that or not but I revert to what I said a minute or so ago. They are bank workers by another name and that works well for everybody involved. We have the requirements under our the care inspectorate's staffing notices and if we can't fill our required at both nursing care ancillary etc then we go to bank if we can't through bank we go to agency and that's another area where the agency cost maybe the Scottish Government should be capping agency level fees both for the NHS and the NHS is a huge problem with agency fee levels the same as the voluntary sector and the same as the independent sector maybe that's something that the Scottish Government could look at doing is capping agency fees that would certainly help but we with the vacancies that I mentioned earlier that we have about 57 vacancies across nursing carers ancillary and middle management that the any bank member as far as I'm concerned in a way any bank member that wanted to to come on a regular contract either part time or full time would be able to do that because we have these vacancies so we we we certainly have full time fixed contract vacancies at the moment. Could I just if you forgive me just make a point so that the beyond A of the care sector I'm just going to just talk about you know small businesses in general I mean I'm really pleased that you're making that distinction between different types of zero worlds contracts. It's going to a distinction that's been made in written evidence and I think it's not it's not my but you're right you're right to highlight that because I think there are you know for a start small businesses are very unlikely to use any sort of the more exotic forms of employment we tend to disemploy people directly but there is a distinction between you know where you need that flexibility and maybe students working in bars or whatever who don't really want to be tied down to certain shifts and to exploitative employment practices which tend to be used in you know I think large retail in other places have been mentioned but I'm sure that it goes on elsewhere. I think there is very little justification for things like exclusivity deals or for using what's effectively you know a zero hours contract for somebody who has what by you know to anyone else looking in a regular hours of work because what that can do is it can let you know unscrupulous employers under decent employers by for example sidestepping bits of employment law so I think while you know we wouldn't want to see the the club completely taken out of the bag some and I accept it's not a matter that anyone in this parliament can can sort out some relatively straightforward legislative changes round about how zero hours contracts can be employed would probably make sense. Thank you. Okay of course at the time we haven't run a bit over time but I've got a couple more points I want to cover and Woody's got a final point I want to cover a couple of issues which have come up maybe I could address this to Colin Borland in the first instance and I'll just ask them both together just for the sake of time. The first is the question of conditionality which we've taken quite a bit of evidence on so the Scottish Government has its business pledge that you'd be familiar with where businesses sign up and they undertake not to use exploitative zero hour contracts to endeavour to pay the living wage and basically be good employers. When we ask the enterprise agencies and the other government agencies whether they treated businesses any differently whether they were signed up to that or not they told us no so there's no conditionality what would be the view of FSB and indeed anybody else from the business community who's here of whether there should be conditionality that's the first point and the second point is we've also heard some evidence about employment tribunal fees and the fact that these have been increased by the UK Government the Scottish Government wants to see these when this has devolved be reduced is there any particular view on that? To deal with the conditionality point first when the business pledge was first announced we were quite clear that we've said it shouldn't be linked to business support businesses are already working hard paying taxes and funding this is public funded support that we are already paying for I do think we get into very difficult territory as well when we start talking about making distinctions between good businesses and bad businesses I think we're all in favour of driving better behaviour sharing best practice and encouraging that but to for example say that someone can't walk through the front door of business gateway or log on to the business gateway website without having their pledge card number next to them you know just didn't seem right to us at all I you know whether or not some point down the line there might be enhanced services available to those who signed up the pledge is an interesting point again I think we would have some problems with that I think we would be quite concerned just because this definition of and I know you'll be probably sick of hearing this haven't done this inquiry for as long as you're having this definition of what's a good job and what's a bad job I think is a very difficult one and if it becomes a mechanical distinction then a lot of our members just you know through no fault of their own are going to lose out I mean the example that might be appropriate for this morning is it's supposed the difference between a job and a small business and a job and a bigger business might be the difference between a job of a member of your estimable clarking team and your parliamentary researcher now clarking team will be on a higher salary final salary pension lots of opportunities to move get promoted internally nice big training budget all that sort of stuff looks like a very good job your parliamentary researcher is your right hand man or woman very close to the ultimate decision maker seeing a vast range of different activities and getting a huge range of experience probably conversant on a dozen or more policy topics knows an awful lot of people so on paper that might sound like the worst job but I don't know it would I would be very hesitant to I would yes I would hesitate to describe you as a bad employer you know so you know so and so I think until you've worked out until we get a better idea of what we mean about good and bad work and good and bad employers then no I think conditionality is is risky second one about employment employment tribunal fees yeah we were I mean we have said we'll be very interested to find out how this is going to apply particularly in Scotland if you have businesses operate across the UK we don't want Scotland to become you know the Liberia of employment tribunals where people disputes in England can come up here and choke up our tribunals because there's some perceived locus because someone has a Scottish office but but I mean on the point of principle I mean did the employer think employment to be no fees as they're set now are set at the right level or should they be I can speak on that I certainly we have the fees that have been introduced at UK level covering the UK and I understand that under the new Scotland act or under Smith commission Scotland that that will be devolved is that right I wouldn't have a problem with them being reduced at all I think that it's very difficult to consider how for the whole of the UK one level one size fits all or one level fits all I wouldn't as has been in the I understand in the government's Scottish government's plan going forward if these are devolved they would scrap them all together I'd be I wouldn't be in favour of them not that it's my decision but I wouldn't be in in something you know I wouldn't be in favour of the overall scrapping of them but reducing off the fees down to a lower level I would totally support but not the total scrapping I think if you're going to get rid of fees I think you I would hesitate to do that in isolation because although the decision may seem harsh it was done for a very good reason which was a lot of vexatious cases which never made it anywhere near an employment tribunal but it was if you dismissed someone for very good reasons they would stick in a claim and you would end up even if it was utterly without merit you still had to spend time defending that claim and all the rest of it now if you're you know an owner managed business you're spending time if you're not working you're not earning you're spending time away from the business and I think if we could find a way of making that less controversial taking those costs for the businesses out making it a little playing field we could look at it but I think simply saying as of this date there is no fee we're going to see you know I mean we saw something like 80 production across the UK in in cases that's just going to go back up again I can't see why I wouldn't okay and last question yes you know me just coming back and ask you a very brief answer is a lot of enthusiasm shared this morning perhaps excluding the care sector in terms of employee ownership do you think the government and its agencies including corporate development Scotland are doing enough to support firms looking at the employee owned or employee shared model personally I do actually I think they're doing a fantastic job with limited resources um they're working very efficiently and uh yeah they're getting getting the message out there and providing the support that's required of them okay I would agree as well from the from the businesses that we spoke to there did seem to be a kind of proactive approach from you know the government agencies who have responsibility for you know promoting EOB as one possible source of business activity so yes, Conn, can you hear me? The limited contact I've had with people in the EOB setup they're very keen they're very happy with how things are going I take their word for it okay thank you all right okay well thank you very much and we have to draw things to a close because I thank you all very much for coming it's been quite a long session and we've covered a lot of a lot of ground and different topics and it's been very useful to the inquiry we'll now suspend briefly and go into private session