Executive Summary

The Fair Work Convention

The Fair Work Convention brings together employers, trade unions and academic expertise to promote and advocate for fair work across the economy and to advise Scottish Ministers on fair work. The Convention’s vision is that Scotland will be a leading Fair Work Nation by 2025 where fair work drives success, wellbeing and prosperity for individuals, businesses and society.

The Construction Industry Inquiry Group (CIIG)

The Inquiry was undertaken by the Construction Industry Inquiry Group (CIIG) made up of a range of stakeholders from construction businesses, trade bodies, trade unions, local authorities and the Fair Work Convention to look at the key challenges to delivering fair work in the construction industry in Scotland.

The Inquiry focused on the experience of fair work by the workforce and how fair work practices can be improved.

Why Construction?

The construction industry is important to the Scottish economy providing 5.1% of the jobs in Scotland.[1] These jobs exist in every community and construction plays a fundamental role in communities and society by building schools, homes, hospitals, offices and other vital infrastructure, supporting every sector of the economy.

The construction industry in Scotland is worth around £7 billion. The public sector is a significant customer with an annual spend of more than £4 billion on building or civil engineering works.[2] While emissions from the built environment and construction currently account for around 40% of total national emissions, construction is also at the forefront of the transition to a net zero carbon economy.[3] In the coming years significant investment to decarbonise the built environment will be needed and the construction workforce will need to expand to support retrofit activities. This is a key moment to drive transformational change in the construction industry, supporting fair work and creating positive outcomes for employers and workers, and delivering Scotland’s wider social and economic ambitions.

Fair Work in Construction – The Current Picture

Compared to other industries, construction is heavily labour-intensive and characterised by long and complex supply chains. Large contractors operate a hollowed-out model, employing relatively small numbers of people directly and instead act as procurement or contract managers and rely on a range of sub-contractors. Sub-contractors are usually smaller, often specialist, businesses who play a key role in employment and training, providing apprenticeships and routes into the industry.

Agency workers and workers employed by umbrella companies provide additional labour to supplement a declining directly employed workforce. These workers support construction companies to manage spikes in work, late changes in contract scope, weather slippages, and holiday and sickness cover. Agency workers are an important part of the labour force and the quality of agency employers is increasingly relevant to the overall fair work picture. Umbrella companies are associated with agency work but represent a further lengthening of the employment relationship and deploy a business model that can present specific problems for workers.

Construction has an ageing workforce, with an estimated 50,000 workers likely to retire in the next 10 years.[4] It is heavily male-dominated, with work that is often project-based, temporary and seasonal. Perceptions of the industry can be negative but there are many examples of good practice of fair work in construction. It is also an industry that must attract large numbers of workers in the coming years and CITB has estimated that an extra 26,250 new workers are needed by 2025.[5]

The Inquiry recognises that there is a range of practice in the industry and that many employers have already taken steps to embed fair work in their businesses. This Inquiry aims to identify areas where fair work can be strengthened, along with positive practice that can be built upon. Ultimately the purpose of the Inquiry is to identify practical and tangible actions that can be taken to support positive outcomes for the workforce that will in turn impact on the performance of the industry and the quality of what it delivers.

Improving fair work in all parts of the construction supply chain and supporting recruitment, retraining and upskilling will be key to delivering positive outcomes for workers and employers in construction and meeting the challenges of coming years.

Security

Security at work in the construction industry in Scotland is limited for a significant minority of workers by insecure contracts, lower pay and income variation alongside concerns over future employability.[6] The experience of agency workers, umbrella company workers or the self-employed is commonly worse than for those in direct employment but there is also some evidence of deteriorating experiences for directly employed workers.[7]

Self-employment makes up 23.5% of the construction workforce[8] and can at times be ‘bogus’ to lower tax bills and/or to reduce costs for the employer by depriving the worker of basic employment rights. Construction workers can also be employed by umbrella companies or payroll companies which can be associated with greater insecurity and low wages with more likelihood of variable income due to deductions and late payments. Umbrella company workers can struggle to access basic employment rights like holiday pay and sick pay, despite having employee status. While no specific data is available on the prevalence of umbrella companies, the Inquiry noted that many construction businesses have policies in place to avoid their use, recognising the specific harms that they can cause workers.

More positively, construction workers enjoy higher than average rates of pay. Median pay for full-time employees in the construction industry is £29,055, compared to £26,007 across all sectors.[9] Despite this, there is widespread concern from both workers and unions in the industry about real wage decline over time. This may in part arise from greater exposure to other expenses/costs (travel, accommodation and subsistence) compared to workers in other sectors.[10] Wages for younger workers can often be low, with average apprenticeship wages in construction below the real living wage.[11]

Opportunity

Construction is a male-dominated industry. In 2020, 85% of the construction workforce were men and 15% were women.[12] The gender split in construction has remained largely unchanged since 2009. People from a minority ethnic background make up only 1.6% of the workforce in construction compared to 4.3% for the workforce as a whole.[13] 5.9% of workers in the construction industry were non-UK nationals in 2020, compared with 9.2% for Scotland as a whole.[14] The proportion of workers with a disability in the construction sector (10.5%) is less than the proportion across all sectors (13.4%).[15] 8.1% of workers in construction worked part-time, compared with 26.2% of all workers in Scotland.[16] There is a long hours culture in construction with limited access to flexible working.

There are complex questions when considering how to improve equality within the industry with both perceptions of the industry and genuine constraints around the nature of work and how it is organised acting as barriers to achieving a more diverse workforce. Yet, construction is in need of workers and increasing diversity of the workforce and supporting effective pathways into, and through, the industry will be essential in the next ten years.

Fulfilment

Opportunities to train can be limited within construction. Only 52% of construction employers reported offering training in the previous 12 months[17] and fewer than 20% of construction workers reported being offered opportunities to train.[18] Added to this, 23.5% of the workforce are self-employed and many more work through agency or umbrella contracts.[19] Workers on such contracts will need to source and pay for their own training and face a loss of income while attending courses, potentially impacting the uptake of training opportunities. Collective agreements can be used to support training in the sector. For example, the National Agreement for the Engineering Construction Industry (NAECI) places requirements on employers to ensure employees’ skills are updated.

Opportunities to advance within careers and move into senior roles often appear limited to workers within the construction industry.[20] With an increase in graduate entry to senior roles in construction pathways for advancement for the existing workforce may feel more limited, even where those opportunities exist.

The workforce implications of the transition to net zero mean that effective training, upskilling and continued professional development is essential and the workers in all parts of the industry will need to be supported effectively to access training and reskilling opportunities.

Respect

While a common perception of the construction industry is that work is relatively strenuous and dangerous, health and safety on sites is an area where significant progress has been made in recent years. The rate of self-reported illness caused or made worse by work (3,520 per 100,000 workers) is similar to the average across all industries (3,400 per 100,000 workers) and has been relatively stable since 2004 (when data collection began). The leading type of self-reported illness in the construction industry in 2019/20 was musculoskeletal disorders, accounting for 47% of all working days lost due to work-related illness. Despite this in 2019/20, there were 40 fatal injuries to workers in the construction industry in Great Britain. Over the past five years, on average 47% of deaths were due to falls from height, suggesting that more progress still needs to be made.[21]

While respect for physical wellbeing has improved, there is evidence of verbal abuse, bullying and harassment in the industry with some workers reporting that their employers did not deal with this issue effectively.[22] Trade unions highlighted that workers were often fearful of raising bullying and harassment concerns. There is also a growing awareness of mental ill-health in the industry much of which is associated with workplace cultures and the absence of aspects of fair work. A recent report by CITB found that the risk of suicide among some site-based male construction workers was three times the national average and among skilled finishing trades, such as painters and plasterers, was twice the national average. The report also found that key triggers of poor mental health in construction were:

Improving fair work outcomes within the industry should therefore support more positive mental health outcomes for workers in construction.

Effective Voice

The Labour Force Survey estimates that unions are present in around a third of workplaces and that 17.6% of construction employees in Scotland are currently trade union members. Construction has a range of sectoral agreements that are used to set terms and conditions and to support standards. Collective bargaining agreements in construction are estimated by the Labour Research Department to cover around 85,000 workers or around 62% of the employed workforce.[24]

Many of the agreements have existed for decades and were born out of a need to prevent walk-offs, to provide certainty around costs for large-scale projects and to manage competition for labour due to wage differentials between sites. They continue to renew themselves, being renegotiated on an agreed schedule to meet the changing needs to the industry. While the biggest of the agreements – the Construction Industry Joint Council (CIJC) – appears to be in decline,[25] the structure and potential for collaborative working remains and, if effectively supported, could play a key role in supporting the industry to meet future challenges and fully embed fair work.

The legacy of blacklisting in the industry continues to impact relationships. Construction workers report a reluctance to be seen to consult with unions for fear of blacklisting and the loss of future employment. Progress has been made on the confidence of the workforce to raise health and safety issues but there appears to be a hesitancy to raise other issues on sites such as bullying and harassment.

Dealing with the legacy of blacklisting, improving confidence among the workforce and improving relations between unions and employers is a requirement to build better fair work outcomes in the construction industry.

Creating Change: Procurement

How public procurement is undertaken has the potential to impact the nature and the shape of the industry by incentivising or mandating fair work outcomes, supporting skills and maintaining standards. It is a key tool for driving better outcomes given that public procurement represents around 50% of all construction spend in Scotland. Significant action has already been taken to build fair work criteria into contracts but approaches vary. The Inquiry found that:

fair work weightings are only one element. Clearer connections between fair work, community benefit and mandatory and discretionary exclusions could support better outcomes.

The Inquiry Group makes the following recommendations:

Procurement

Recommendation 1

All contracting authorities should seek to maximise quality weightings and fair work criteria should be given a robust weighting within the quality dimension. Fair work weightings should not be lower than 10% of the contract and it must be possible for low scores on fair work to impact whether a tender is won or lost.

Owner

All Contracting Authorities

Timeframe

Within each tender and reviewing frameworks as they arise

Recommendation 2

Training in fair work should be mandatory for all project commissioners and managers overseeing construction contracts. Training should be provided by those who have demonstrable expertise on fair work and support an understanding of what constitutes positive and stretching fair work commitments by contractors.

Owner

All Contracting Authorities

Timeframe

All staff should be trained by Jan 2024.

Recommendation 3

Guidance should be reviewed to ensure it supports the use of collectively bargained rates within procurement contracts and short best practice guidance should be developed for construction procurement that highlights positive examples of fair work practice in the construction industry. Current wording around avoiding the use of umbrella companies should be retained.

Owner

The Scottish Government

Timeframe

As soon as possible and before Dec 2022

Recommendation 4

Contracting authorities should set an expectation that trade unions have access to workplaces on all public construction contracts in line with the aspiration of the HS2 approach. Access should be facilitated throughout the supply chain.

Owner

Timeframe

With each procurement

Recommendation 5

Guidance should be updated to make clearer the connections between fair work, sustainable procurement duties, community benefits and discretionary and mandatory exclusions. The guidance should support more use of discretionary exclusions when a contractor or sub-contractor has breached its labour law obligations.

Owner

The Scottish Government

Timeframe

Immediate

Recommendation 6

All contracting authorities should include adherence to relevant collectively bargained pay rates as a condition of contract. Introducing this as a clause within industry standard form contracts is an efficient, proportionate and transparent way to implement this and to ensure that it is applied throughout the supply chain.

Owner

All Contracting Authorities

Timeframe

Immediate

Recommendation 7

In every contract in which fair work questions were asked at the framework stage, tender stage or both, effective contract management by the contracting authority must take place to ensure that the response provided by the contractor is delivered in practice.

Owner

All Contracting Authorities

Timeframe

Immediate

Recommendation 8

All contracting authorities should be signatories to a Fair Work Charter collectively agreed with employers and trade unions. The Scottish Government should also facilitate the appropriate industry leadership group/forum, in negotiation with trade unions, to develop a single charter that sets out principles for advancing fair work in the industry. The single Fair Work Charter should then be used as a pass/fail condition within all construction procurement exercises in Scotland to ensure appropriate fair work standards are applied throughout the supply chain.

Owner

Timeframe

Creating Change: Strengthening Effective Voice

Effective voice is key to delivering all other dimensions of fair work. Leadership structures that support social dialogue have an important role to play in ensuring positive relationships and supporting positive outcomes for workers and employers. Organisational structures, collective agreements and voluntary agreements all have a vital role to play in encouraging positive practice in workplaces and creating the working environment necessary for all workers to enjoy fair work outcomes. The Inquiry found as follows.

The Inquiry Group therefore makes the following recommendations:

Strengthening Effective Voice

Recommendation 9

All existing industry level groups including Construction Scotland and the Construction Leadership Forum should include balanced membership from a range of stakeholders including trade associations, professional bodies, federations and smaller employers. All such groups should also include balanced representation from trade unions.

Owner

Timeframe

Immediate

Recommendation 10

The relationship between each of the industry leadership groups should be clarified and the Scottish Government’s interaction with each group clearly articulated.

Owner

The Scottish Government

Timeframe

Immediate

Recommendation 11

All industry leadership groups should seek opportunities to support, through voluntary agreement, collaborative working, and mandatory approaches where possible including:

All Industry Leadership Groups and Forums

Immediate and ongoing

Recommendation 12

The issue of disputes resolution should be considered in all large-scale public contracts before work begins on-site. The contracting authority, lead contractor and relevant trade union should work together to agree an appropriate and mandatory dispute resolution process that all parties on-site must adhere to. This could be through existing collective agreements or through a standalone procedure, for example a procedure backstopped by ACAS.

Owner

Timeframe

With each large-scale project

The Future of Construction

The construction industry is at a moment of change. In the next ten years it faces an ageing workforce and skills shortages and must meet the challenges associated with delivering a net zero carbon economy. Skills Development Scotland (SDS) estimates that an additional 79,100 workers will be needed in construction by 2029[28] and extensive upskilling and retraining of the existing workforce will be required to support the decarbonisation of the built environment. This is also an opportunity to transform the workforce, creating higher-skilled roles, more diversity and equality and building in modern methods of construction, and new ways of working. The Inquiry found that:

The Inquiry Group therefore makes the following recommendations:

The Future of Construction

Recommendation 13

Employers should better engage with existing collective agreements, and unions and trade associations should be prepared to work together to ensure collective agreements support new ways of working and equality, covering elements like flexible working, mental health and maternity issues. The Scottish Government should facilitate unions, employers and trade associations to work together to support effective modernisation within the industry through the collective bargaining structures that already exist.

Owner

Timeframe

By 2023

Recommendation 14

The Construction Leadership Forum should support development of an effective workforce strategy to facilitate the transition to net zero carbon economy. Workforce planning must consider how to support workers through peaks and troughs in demand.

Owner

Timeframe

By 2023

Recommendation 15

All public funding supporting the transition to net zero should include fair work conditionality and drive fair work in the industry.

Owner

Timeframe

With each funding stream

Recommendation 16

Public sector bodies and construction employers at all parts of the supply chain should increase their use of direct employment and support upskilling and retraining to support high quality careers in the industry and improve attraction and retention. Support for direct employment should also reinforce a commitment never to use umbrella companies.

Owner

Timeframe

Immediate

Apprenticeships

Recommendation 17

The Scottish Government should work with SDS, SQA and CITB to reinstate the need to register with trade associations / federations and employers should be required to pay collectively bargained rates as part of the apprenticeship agreement, as was the case prior to 2017.

Owner

The Scottish Government

Timeframe

Immediate

Recommendation 18

SDS should take action to support apprenticeship pay including by:

Owner

SDS

Timeframe

By September 2022

Recommendation 19

Continued funding and support should be provided for the Fair Work Apprenticeship Coordinator role, which has been valuable for supporting the Effective Voice of apprentices.

Owner

The Scottish Government

Timeframe

Ongoing

Recommendation 20

SDS should ensure there is full and consistent partnership working between SDS, SQA, CITB, trade unions, employers and trade associations/federations in agreeing apprenticeship frameworks, with an aim to see all construction apprentices trained to SVQ level 3 (SCQF Level 6) or above.

SDS

Immediate

Recommendation 21

SDS to work with CITB, employers, trade associations/ federations and trade unions to develop principles for taking forward a shared apprenticeship scheme successfully and in line with fair work principles.

Owner

SDS

Timeframe

By Dec 2022

Equality, Diversity and Inclusion

Recommendation 22

Scottish Government, through the Construction Leadership Forum, should convene a working group that includes employers, trade associations/federations, trade unions, SDS and CITB to address skills and labour shortages and future labour needs in the industry and to promote the opportunities that exist within the industry. This group should aim to:

Owner

Timeframe

Advertising Campaign to launch in 2023

Recommendation 23

Employers should support a zero tolerance approach to bullying and harassment at the workplace protecting workers from adverse treatment and employers from potential liability. Embedding a safe culture for reporting must come from the top of the organisation. Employers of all sizes must focus on:

Owner

Construction Employers of all sizes

Timeframe

Immediate

Recommendation 24

Unions should provide support mechanisms and dedicated networks for under-represented groups in construction to combat the isolation that workers can feel at work or on training schemes. Employers, trade associations and other relevant actors should signpost to these networks and any dedicated officers who can offer support.

Owner

Trade Unions

Timeframe

Immediate

Recommendation 25

Contracting authorities should require participation in the Gangmasters & Labour Abuse Authority’s construction protocol within large-scale procurement projects.

Owner

All Contracting Authorities

Timeframe

With each large-scale procurement

Conclusion

It is crucial that the actions of Scottish Government and other public bodies and agencies – either in procurement, in skills or in investment – support fair work outcomes. The construction industry faces many challenges but encouragingly the building blocks for collaborative working and supporting skills, standards and fair work in the industry all still exist.

To make fair work a reality for all in the industry, government and other public agencies must support the existing collective agreements and promote their use and effective implementation. Recognising, valuing and using these agreements and collaborative and inclusive ways of working in the industry will help us support fair work and modernisation within construction and also achieve Scotland’s net zero carbon targets.

The Convention will work with public authorities, employers, trade associations and trade unions to monitor, on an ongoing basis, the adoption and implementation of all of the recommendations within this report.

The Inquiry Group also makes one final recommendation:

Monitoring Outcomes for Workers

Recommendation 26

The Fair Work Convention should return to this Inquiry after five years to examine how well recommendations have been adopted and evaluate the industry against the fair work outcomes within this report.

Owner

Fair Work Convention

Timeframe

2027