Policy Makers Must Pay Attention to Employers’ Perspectives

Recent welfare reforms in the UK have redrawn the parameters of activity labour market policy (ALMP), the government’s main tool to get and keep people in work. This is set to have important implications for businesses, especially those with low income workers.

In the UK, Universal Credit (UC) is the main in- and -out-of-work benefit for people receiving social security. Changes being trialled to UC could, for the first time, see in-work benefits be conditional on claimants demonstrating efforts to increase the number of hours they work or finding additional work with a different employer.

This change could have significant implications for UK employers, as the new ‘in-work conditionality’ (IWC) requirements could clash with business practices and how they manage their staff. However, despite this impact, employers’ views on these new expectations have been puzzlingly absent from both research and policy debates stretching back to 2010.

This article reflects on why this is the case and presents findings from a small-scale pilot study. The study asks employers directly about their views of the IWC policy and how this could impact around 1 million working people when fully operational.

Why employers may have been so silent for so long

Over the last decade, Universal Credit has been underpinned by a ‘work first' approach to ALMP that places an emphasis on social security claimants making high volumes of applications and moving quickly into any job. This has been reinforced by a strict, sanctions-based system. Within this setting, unemployment has been framed as primarily a supply-side behavioural problem and little consideration has been given to the volume and quality of jobs available to jobseekers.

In some respects, the exclusion of employers from these new developments is hardly surprising. The lack of government interest in employer views is arguably the logical extension of ‘supply-side fundamentalism’ which has dogged UK policy making for decades. Here, poor quality work—not just unemployment—is positioned as a behavioural problem for individuals (rather than employers) to address. On top of this, employers and other social partners have not typically been involved in policy development.

Although ‘in-work conditionality’ has important implications for employers, several external factors may also inhibit the development of a clear ‘employer voice’ on this issue. For employers, these include the protracted period of UC roll-out (the completion was scheduled for 2017; it is now 2024), the government’s ambiguous approach to policy development, and the political sensitivities of arguing for a status quo which could be seen to subsidise low waged employment.

With UK employers facing other pressing policy concerns from Brexit to Covid-19, it is perhaps unsurprising that they have not been more engaged. But is the lack of employer policy engagement a problem?

An insight into employers’ views of the IWC policy

In August and September 2019, a series of semi-structured interviews were conducted with twelve employers in the Greater Manchester area (a mix of large and small businesses, operating in the public and private sectors, with staff on a range of contract types) which explored their perspectives of in-work-conditionality under UC. They were asked about the parameters of the policy and how they thought they would respond to requests from staff on UC who were expected to increase their hours or pay or take on additional work for other employers.

Overall, employers reflected that whether they would offer more hours or pay would depend on whether there was a clear business case to do so. The ‘bottom line’ ultimately had more sway than new expectations placed on staff by the government. There was also reluctance to increase wages on the same basis. This was accompanied by a widespread view that the IWC policy would impact mostly on individual workers and how they would work rather than employers and their business practices.

However, employers had divergent views on whether IWC would be good for their staff. Some welcomed the policy on the basis it may encourage people to try and take on more work and increase output across the business . Others were against it, concerned it would result in increased staff turnover, negatively impact employee motivation, increase stress levels, lower productivity and raise issues around fairness and equality between employees.

Employers also felt related well-being risks were bigger for staff who were combining work with caring responsibilities and identified the potential for conflicts of interests to emerge between the needs of businesses and the expectations of Jobcentres. To mitigate these concerns interviewees felt that more should be done to consult with employers about UC, to better understand the potential impact of IWC on their businesses, and to develop in-work support in an appropriate manner.

Concluding thoughts

The findings from this study, through from a small sample, represent a first in exploring employer perspectives on new ALMP developments in the UK. It provides insights from workplaces employing significant numbers of staff who will likely be affected by this policy change and highlights the types of challenges they may face. Based on this, it is likely that the policy will play out differently in different workplace contexts. This makes the impact of the policy hard to predict.

What can be foreseen though is that ‘work first, then work more’ approaches to in-work ALMP (used in the UC trials) fails to consider (or actively ignores) the realities of work at the low-paid, more precarious end of the labour market. This failure to pay attention to employers’ perspectives and practices points to a reckless experimentation with the lives of low-income workers who are often already in a vulnerable position.

It is therefore critical that policy makers pay attention to employers’ perspectives and practices, especially as extending ALMP is an unprecedented policy change and should not be undertaken without robust analysis and extensive consultation with those likely to be impacted by it. Not doing so may see an increase in business community grievances if IWC is deployed, especially if it results in the negative business impacts identified in this study. As long as both policy makers and employers keep their heads in the sand, individuals will be left to deal with the fallout.