Social Chapter? Go for it

Nothing upsets those at the helm of the British ship of state more than Europe. And among captains of British industry, it is the European Commission's commitment to a programme of progressive social legislation that causes the greatest apoplexy.

The Institute of Public Policy Research kicked up a storm when earlier this year it published a report, Promoting Prosperity, that said that Britain should opt in to the Social Chapter if it was to climb back up the league table of national prosperity. The heads of various big businesses were among those on the commission who were responsible.

Michael Meyer, chairman of the lighting manufacturer Emess, believes that British business will soon be clamouring for an opt-in. "On balance, we will not end up better off being by-and-large excluded from core Europe, where 80 per cent of our business lies," he says. "The social provisions can't be looked at independently."

"It's not just a philanthropic thing. There is good economic sense to it," agrees Patrick Wilson, who is managing director of Thrislington Sales, a Clywd manufacturer of lavatory cubicles.

Theirs is not the majority view. Business hawks of all shapes and sizes have been vehement in denouncing the European measures. The Confederation of British Industry also favours preserving the opt-out.

Indeed, there is not necessarily a link between the size of a company and its attitude towards such measures.

Many of the large companies that would generally be expected to deal with any problems raised by the Social Chapter are among its fiercest critics. Companies opposed to the Social Chapter typically have large, low-wage work-forces and take the global perspective, pointing to the need to remain competitive with low-wage Far East economies.

Smaller companies such as Emess, which employs 2,200 people and has a turnover of pounds 180m, and Thrislington, which has 50 employees and a pounds 4m turnover, are more likely to regard Europe as their main competitive arena.

With a general election looming and Labour well ahead in the opinion polls, it is perhaps not surprising that companies in favour of social measures should begin to creep out of the woodwork, or that others should quietly shift their position. If Labour wins, a British "opt-in" to the social chapter would be discussed at the Amsterdam inter-governmental conference in June. The necessary amendments to British law would then be set before Parliament. The Social Chapter could be on the statute book by the end of this year.

The Social Chapter was signed by all European Union member states, except the United Kingdom, in December, 1991. So far, it has produced only two directives, in 1994 and 1996. The first concerned works councils, and the second an agreement on parental leave; these apply in the 11 member states as well as in Finland, Sweden and Austria, which also accepted the Social Chapter upon joining the EU. Further measures under consideration concern conditions of work, distortions of competition brought about by unusual work contracts, and equality of pay and conditions between men and women.

In the original Social Chapter in the Treaty of Rome, the issue of health and safety at work was the only one covered by qualified majority voting. The new Social Chapter extends qualified majority voting to some other areas, while others remain subject to member states' veto. It also provides for the European Commission to consult both employers and workers' organisations to take into account their views on community initiatives. Although the British government opted out of the social chapter, British companies and unions can still participate in this process.

A minimum wage and a maximum 48-hour working week are not part of the Social Chapter. Labour has pledged to maintain the UK's right of veto in these more contentious areas.

Nevertheless, some companies already apply the existing provisions of the Social Chapter, whether as policy or as happenstance. Thrislington Sales considered the provisions of the Social Chapter when the works councils provision was passed. "We got a newspaper summary and looked at what we could do," Wilson explains.

The company restructured its shop floor, doing away with the position of factory manager and instead giving this function to five team leaders. These leaders consult with their teams of six or seven people to determine the number of hours needed to be worked in a given week. Team leaders and their deputies report to company directors.

For good measure, Thrislington also has a minimum wage (pounds 4 an hour) and a 48-hour maximum working week. This maximum applies over a 12-week period and has a provision for employees voluntarily to work more than 48 hours on occasion, provided the average is not exceeded over that period.

The company finds that providing a ceiling on working hours, and flexibility of hours below that ceiling, makes the work-force more willing to adapt to changing demands. Wilson admits that no attempt has been made to measure the costs or benefits of these policies, but clearly feels that they have been a success. "If we put in the Social Chapter now, it would in fact take us backwards," he says.

The management challenge is to cope with sudden demand. Thrislington is currently fulfilling a big order for Granada, which is refurbishing many of its motorway service areas. In the past, the temptation would have been to work everyone to the maximum for a short period. In the new scheme of things, it has been necessary for Thrislington's managers to "get more organised and be a bit more lateral about it".

Using the team approach, for the first phase of the job it was possible to manufacture the 80 per cent of the components that were standard, in the normal sequence, and re-equip for three service areas. This allowed ample time to complete the rest of the manufacturing operation within the customer's required time-frame, and within the working regime of the Social Chapter.

Wilson believes bringing in, and in some areas, surpassing, Social Chapter provisions ahead of any legal requirement to do so has a subliminal beneficial effect on his work-force. Without making a song and dance about it, this progressive position may serve to build morale and assist recruitment. "As the economy picks up, people will go to work for the better companies. In the construction industry, this is starting now," Wilson says. "When you've had something in place for a long time, people have more belief in it than if you've just complied with a new law."

By bringing in social measures ahead of their becoming legal requirements, Wilson has been able to pick and mix how to implement the measures "in a more relaxed way". If the Social Chapter is to become law in due course anyway, there is an argument for bringing it in and getting it running smoothly, ahead of one's competitors. The skill is to place your bet accurately on when the law will change and then to be sufficiently ahead of the game to gain competitive advantage