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:
- working away from home and frequent travelling.
- occupational stressors.
- heavy workloads and long working hours.
- job insecurity.[23]
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:
- the balance between price and quality in procurement contracts is important, with a strong industry perception that low price bids have been necessary to win tenders.
- no single system for scoring or assessing fair work within procurements has developed.
- fair work weightings can be as low as 2% with the average in our study being around 5%.
- there is limited evidence of monitoring, audit or follow-up by contracting authorities to ensure that any commitments made by contractors as part of the tendering process are implemented in practice.
- there are examples of fair work clauses having meaningful impact on outcomes for workers where they are monitored and enforced However community benefit clauses were more likely to be effectively monitored than general fair work commitments.
- despite well-written fair work guidance, evidence to the Inquiry suggests that understanding of fair work by project commissioners and managers was inconsistent, particularly with reference to the specific context of the construction industry.
- there are a range of mechanisms to promote fair work through procurement-
fair work weightings are only one element. Clearer connections between fair work, community benefit and mandatory and discretionary exclusions could support better outcomes.
- there is currently a strong focus on the Real Living Wage (RLW) within fair work guidance. In the context of construction the RLW tends to represent a pay rate that is lower than collectively agreed rates and 92% of the workforce already earns above it.[26] Promoting collectively agreed rates is therefore more important than promoting the RLW within construction.
- legal advice to this Inquiry has found that in a post-Brexit context there is no legal impediment to including collectively bargained rates or the RLW as a contract condition within procurement. The Scottish Government has already announced that companies bidding to win Scottish Government contracts will have to pay the RLW. Similar mechanisms can therefore be included for collectively bargained rates in construction.
- there is a need for fair work to be implemented throughout the supply chain and a strong desire for mechanisms that are consistently applied and that create a level playing field for contractors.
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
- All Contracting Authorities
- Lead Contractors
- Trade Unions
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
- All Contracting Authorities
- An Industry Leadership Group / Forum
- Trade Unions
Timeframe
- Each Contracting Authority to have an agreed charter by Jan 2023
- A single charter should be agreed by 2024
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.
- Construction Scotland and the Construction Leadership Forum both appear to act as leadership groups for the industry facilitated or supported by the Scottish Government but they do not all reflect the diversity of stakeholders in the industry. The Construction Leadership Forum is an example of more inclusive practice that should be built upon.
- Effective industry leadership requires participation of all relevant stakeholder groups. Government has a crucial role in creating such architecture where unions, employers’ organisations and businesses of different sizes and experiences have a voice.
- There is a range of sectoral collective bargaining agreements in construction covering an estimated 85,000 workers or 62% of the employed workforce.[27] Together these agreements create a set of minimum standards that could be applied across the industry.
- Collective agreements are the most effective voluntary method to support minimum standards in the industry, because once they are agreed and adopted they provide legally enforceable rights and obligations for the workforce and the employer.
- The legacy of blacklisting remains within the industry and active steps will need to be taken to change workers’ perceptions that contacting their union or raising concerns with their employer will put their future income at risk. Employers and unions need to work together and government, contracting authorities and other public bodies should support and facilitate this change.
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
- The Scottish Government
- Construction Scotland
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:
- greater use of collective agreements;
- trade union access to workplaces;
- the use of fair work charters;
- the use of collective dispute resolution procedures on large-scale complex projects giving faster remedy to the workforce.
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
- All Contracting Authorities
- Lead Contractors
- Trade Unions
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:
- skills and training in construction are demand-led and there is currently little demand for low carbon technologies, meaning few construction workers currently have the skills to support the transition to net zero.
- certainty of funding from the Scottish Government will support the industry to undertake effective skills and workforce planning.
- new ways of working and modern methods of construction have the potential to transform the industry and offer new opportunities to the workforce but currently modernisation is, at times, associated with deskilling in the industry.
- collective agreements may need to be updated to effectively support new ways of working and improved equality and diversity.
- changes to apprenticeships in 2017 and the removal of registration with federations are undermining collective agreements, reducing apprenticeship pay, and are associated with deskilling in the industry.
- apprenticeships should continue to prepare workers for careers in construction and employers should be supported to take on apprentices. Good practice examples show that it is possible to support employers to take on apprentices and offer high quality training even when they offer narrower more specialised job roles.
- there are low numbers of women, ethnic minorities and disabled workers.
- there is an issue around mental wellbeing for the current workforce. The drivers of mental ill-health for the current workforce include factors relating to unfair working practices.
- evidence to this Inquiry suggests that bullying and harassment are currently under-reported within the industry.
- unions have a key role to play in supporting diverse workers in construction, reducing isolation and supporting workers in addressing any concerns they may raise.
- Glasgow City Building and Royal Strathclyde Blindcraft Industries demonstrate that better equality outcomes are possible where inclusive recruitment practice and ongoing support for apprentices is prioritised.
- apprentice recruitment practice is often informal and only small numbers of construction apprenticeships are advertised on www.apprenticeships.scot
- the construction industry in Scotland needs to be proactive in creating a positive environment where modern slavery cannot take root, including engagement with unions and sharing intelligence between employers.
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
- Employers
- Unions
- Trade Associations/
- Federations /
- Professional Bodies
- The Scottish Government
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
- Construction
- Leadership Forum
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
- The Scottish Government
- All public bodies
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
- Construction Employers of all sizes
- All public bodies
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:
- conducting a review of current apprenticeship pay in construction and publishing the findings;
- reviewing all documentation to ensure that it promotes and encourages collectively bargained rates or, where these are absent, the real living wage and consistent messages are offered to both apprentices and employers.
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:
- work with employers to identify a pipeline of vacancies and future skills needs;
- define clear skills pathways required to support the transition to a net zero economy, including for workers who are changing careers;
- work to ensure clear recruitment processes and platforms are available to employers and support employers to access them;
- create dedicated advertising campaigns encouraging young people and older workers to consider careers in the industry;
- take action to improve diversity in the industry building on good practice examples such as at Glasgow City Building and Royal Strathclyde Blindcraft Industries.
Owner
- The Scottish Government
- Construction Leadership Forum
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:
- their internal procedures by providing clear and transparent reporting mechanisms, processes for investigation and management training to identify and take seriously issues of bullying and harassment.
- encouraging and supporting workers to raise any concerns, without fear of retribution.
- ensuring that no detriment arises for workers who raise concerns.
- highlighting external support mechanisms like collective agreements or dispute mechanisms.
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