‘Voluntary’ worker certification is occupational licensing by stealth
29 March 2018
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Economic Theory
Labour Market
3 April 2018
Economic Theory
11 November 2024
Occupational regulation protects incumbent members of an occupation, reduces access to jobs and frequently raises costs to the public with little gain in quality.
Attention has focused on the government’s role in this process, but at least legislation to impose state licensing has to go through Parliament and is open to some degree of scrutiny of its pros and cons through the requirement for an Impact Assessment.
Private worker certification schemes, however, face no such hurdles. Yet such schemes give the issuer the same power to control occupational requirements as government legislation. The most powerful worker certification scheme in the UK, currently covering around 2 million people, is the Construction Skills Certification Scheme, better known by its acronym, CSCS.
Originally set up as a voluntary scheme to encourage skills and issuing cards to demonstrate that the worker had a qualification in his or her trade, the CSCS has now morphed into a quasi-compulsory arrangement which imposes substantial costs on potential workers and restricts entry.
When the scheme started in 1995, most contractors were using sub-contract labour. Whatever the rights and wrongs of this arrangement, the contractors were largely aware of the skill and competence of their sub-contractors as they were a trusted source of labour from a history of previous projects.
In 1999 however the Labour government introduced IR35 ‘false self-employment’ tax regulation. This meant that contractors/employers could be held liable for false self-employment of their subcontractors. If found guilty they would have to pay backdated national insurance contributions.
In response many contractors laid off their sole trader sub-contractors and moved to employ workers via employment agencies. Employment agencies use umbrella payroll companies: the worker is actually employed by the umbrella payroll company not the employment agency. Many of these workers are paid by the umbrella companies on a self-employed basis under exactly the same construction industry scheme (CIS) tax regime as before IR35. A deduction of approximately £20 per week is made from the worker to pay for the payroll services of the umbrella company. These umbrella companies pay the Construction Industry Training Board levy for CIS workers with part of the £20 received from them. However even though the CITB receives a levy from these workers, they have no access to training grants from CITB. Only employers can claim CITB grants, and most of these grants only partially fund training courses. So umbrella companies have no incentive to provide funding for their temporary workers’ training.
By putting an intermediary between contractors and sub-contractors, IR35 created a complex layer of unproductive bureaucracy in the construction industry, reducing labour productivity. And employing workers via employment agencies increasingly means that contractors no longer know the skills and competence of the workers they allow on site.
In 2007 the Corporate Manslaughter and Homicide Act came into force. Managing directors of companies could now face prosecution and jail if found to be in breach of their duty of care to their employees and the public.
Contractors and clients accordingly started to use the CSCS card to avoid liability. The cards have biometric security features and a health and safety test that attests workers have a basic understanding of construction site risks. The card has been promoted by central government, local authorities and trade bodies. This gave CSCS a standing as industry ‘good practice’. Health and Safety legislation means that employers have to prove they do all they can to reduce risk. In order for an employer to do this, they must be able to show that they have used industry ‘good practices’. The only excuse an employer has for not using ‘good practice’ is to prove that it was cost-prohibitive. Since it is the employee who holds the CSCS worker certificate, the cost is paid for by the employee. Therefore the employer has no excuse not to use this ‘good practice’.
So even though this worker certification is not a legal requirement, employers have little choice but to use it. CSCS certification has in effect become an occupational licence.
But there is more. The construction industry uses many trades from ground workers to sign fixers. Many of these trades previously had no body that awarded qualifications. So CSCS sold a ‘construction related operatives’ (CRO) card to workers, that only required them to take the CITB health & safety test. Many tradesmen opted for this card, and for the Green ‘labourer’s card’, so that they could continue to work.
However the Construction Leadership Council has now decided that the CRO card should be withdrawn and the labourer’s Green Card should no longer be used by tradespeople. This means that hundreds of thousands of construction workers now need an NVQ level 2 in their trade to be eligible for the full (Blue) CSCS card.
A one-day NVQ2 assessment for a worker with over five years’ experience costs up to £1,500. So now workers with no access to CITB grants are forced to pay for NVQs. What is most concerning is that this current NVQ2 requirement can be increased at any time, with no democratic oversight. Furthermore employers are demanding that workers have additional qualifications such as nail gun certificates, asbestos aware certificates, harness training, first aid certificates and so on. The list is enormous.
Many employment agencies also advertise positions with the words ‘must have PPE’ (personal protection equipment), despite HSE law stating very clearly that employers must provide PPE. In common with many employers, they are offloading their health and safety liabilities onto some of the poorest employees.
Worker certification is now being promoted in other industries which use casual labour (for instance warehousing), again trying to establish ‘good practice’ by using health and safety laws as a lever.
Such schemes – never legislated by Parliament – reduce the flexibility of the workforce, stop the poorest accessing the jobs market and indirectly put a burden on social welfare. They create labour shortages. They reduce competition, especially for government projects, as many small businesses cannot afford to pay for their workers’ training, and thus raise costs to the public.
The knock-on effects of occupational licensing are now beginning to be more fully understood than in the past, and our government is beginning to take an interest. Where such licensing is necessary it must be fully debated in Parliament and subject to periodic review. It should not be allowed to grow up by stealth as it seems to have done in construction.
Paul Fear is a carpenter working in the construction industry. He has recently organised a petition to the National Assembly of Wales asking that the Welsh government should cease promoting private worker certification on government contracts.
Attention has focused on the government’s role in this process, but at least legislation to impose state licensing has to go through Parliament and is open to some degree of scrutiny of its pros and cons through the requirement for an Impact Assessment.
Private worker certification schemes, however, face no such hurdles. Yet such schemes give the issuer the same power to control occupational requirements as government legislation. The most powerful worker certification scheme in the UK, currently covering around 2 million people, is the Construction Skills Certification Scheme, better known by its acronym, CSCS.
Originally set up as a voluntary scheme to encourage skills and issuing cards to demonstrate that the worker had a qualification in his or her trade, the CSCS has now morphed into a quasi-compulsory arrangement which imposes substantial costs on potential workers and restricts entry.
When the scheme started in 1995, most contractors were using sub-contract labour. Whatever the rights and wrongs of this arrangement, the contractors were largely aware of the skill and competence of their sub-contractors as they were a trusted source of labour from a history of previous projects.
In 1999 however the Labour government introduced IR35 ‘false self-employment’ tax regulation. This meant that contractors/employers could be held liable for false self-employment of their subcontractors. If found guilty they would have to pay backdated national insurance contributions.
In response many contractors laid off their sole trader sub-contractors and moved to employ workers via employment agencies. Employment agencies use umbrella payroll companies: the worker is actually employed by the umbrella payroll company not the employment agency. Many of these workers are paid by the umbrella companies on a self-employed basis under exactly the same construction industry scheme (CIS) tax regime as before IR35. A deduction of approximately £20 per week is made from the worker to pay for the payroll services of the umbrella company. These umbrella companies pay the Construction Industry Training Board levy for CIS workers with part of the £20 received from them. However even though the CITB receives a levy from these workers, they have no access to training grants from CITB. Only employers can claim CITB grants, and most of these grants only partially fund training courses. So umbrella companies have no incentive to provide funding for their temporary workers’ training.
By putting an intermediary between contractors and sub-contractors, IR35 created a complex layer of unproductive bureaucracy in the construction industry, reducing labour productivity. And employing workers via employment agencies increasingly means that contractors no longer know the skills and competence of the workers they allow on site.
In 2007 the Corporate Manslaughter and Homicide Act came into force. Managing directors of companies could now face prosecution and jail if found to be in breach of their duty of care to their employees and the public.
Contractors and clients accordingly started to use the CSCS card to avoid liability. The cards have biometric security features and a health and safety test that attests workers have a basic understanding of construction site risks. The card has been promoted by central government, local authorities and trade bodies. This gave CSCS a standing as industry ‘good practice’. Health and Safety legislation means that employers have to prove they do all they can to reduce risk. In order for an employer to do this, they must be able to show that they have used industry ‘good practices’. The only excuse an employer has for not using ‘good practice’ is to prove that it was cost-prohibitive. Since it is the employee who holds the CSCS worker certificate, the cost is paid for by the employee. Therefore the employer has no excuse not to use this ‘good practice’.
So even though this worker certification is not a legal requirement, employers have little choice but to use it. CSCS certification has in effect become an occupational licence.
But there is more. The construction industry uses many trades from ground workers to sign fixers. Many of these trades previously had no body that awarded qualifications. So CSCS sold a ‘construction related operatives’ (CRO) card to workers, that only required them to take the CITB health & safety test. Many tradesmen opted for this card, and for the Green ‘labourer’s card’, so that they could continue to work.
However the Construction Leadership Council has now decided that the CRO card should be withdrawn and the labourer’s Green Card should no longer be used by tradespeople. This means that hundreds of thousands of construction workers now need an NVQ level 2 in their trade to be eligible for the full (Blue) CSCS card.
A one-day NVQ2 assessment for a worker with over five years’ experience costs up to £1,500. So now workers with no access to CITB grants are forced to pay for NVQs. What is most concerning is that this current NVQ2 requirement can be increased at any time, with no democratic oversight. Furthermore employers are demanding that workers have additional qualifications such as nail gun certificates, asbestos aware certificates, harness training, first aid certificates and so on. The list is enormous.
Many employment agencies also advertise positions with the words ‘must have PPE’ (personal protection equipment), despite HSE law stating very clearly that employers must provide PPE. In common with many employers, they are offloading their health and safety liabilities onto some of the poorest employees.
Worker certification is now being promoted in other industries which use casual labour (for instance warehousing), again trying to establish ‘good practice’ by using health and safety laws as a lever.
Such schemes – never legislated by Parliament – reduce the flexibility of the workforce, stop the poorest accessing the jobs market and indirectly put a burden on social welfare. They create labour shortages. They reduce competition, especially for government projects, as many small businesses cannot afford to pay for their workers’ training, and thus raise costs to the public.
The knock-on effects of occupational licensing are now beginning to be more fully understood than in the past, and our government is beginning to take an interest. Where such licensing is necessary it must be fully debated in Parliament and subject to periodic review. It should not be allowed to grow up by stealth as it seems to have done in construction.
Paul Fear is a carpenter working in the construction industry. He has recently organised a petition to the National Assembly of Wales asking that the Welsh government should cease promoting private worker certification on government contracts.
8 thoughts on “‘Voluntary’ worker certification is occupational licensing by stealth”
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Citb Cscs is a money making scheme on the back of tradesmen. We are being charged to go to work. Health and Safety training should be free and introduced whilst tradesman apprentices are at college. A double glazing salesman who pays for a SMTS card qualification £750.00 is now classed as a Site Manager . Agency’s now Fastrack this guy into Construction roles! Totally unqualified ie CARILLION.
I am shocked that the IEA and such a learned professor as Len Shackleton would put out such a poorly researched blog as this – did either of the authors even look at the websites of the organisations?
I’m a bricklayer / site manager and worked in construction for over 20 years, and don’t get me wrong I think CSCS is a money making scam however to say you only need an NVQ is wrong – I got mine by being a member of CIOB. I notice that they now recognise other bodies such as institute of carpenters. My lads got theirs as they were timed served all they did was the health and safety test that my 7 year old could pass.
The levy practice described is illegal and when I reported the umbrella company to the CITB they got right on to it.
Where is the academic rigour on this blog – you’re better than this. If we are to reform these scams we must be clear on the facts.
In Response to Noah Bennetts comment.
The blog stated clearly that a minimum of NVQ 2 is now required for the blue cscs card.
The CSCS web site CLEARLY states that a tradesperson must now have a minimum of NVQ2 in their trade. Other cards are available for instance the Gold card that requires a higher qualification. You mentioned the institute of carpenters, they require NVQ3 for members.
As far as your comnents about the CITB levy are concerned. The FACTS on this blog are also correct.
The maximum CITB will give in grants to an employer for an employees NVQ is £400.
Given that an NVQ 2 can cost upto £1,500 it is of no suprise that umbrella payroll companies have no incentive to claim CITB grants.
Further for your information.
I personally received an email from CITB in late 2017.
In 2016 a total of 197 CIS registered umbrella payroll companies paid almost £12 million in CITB levies. The umbrella companies claimed back in CITB grants nearly £700,000 and of this figure only £160,000 was for NVQs for workers. The email did not state what level of NVQ this was for. However an NVQ1 can be bought for under £400.
I have been a site carpenter for 37 years, I also have a HND in business system analysis. I have spent months researching and gathering data for this blog.
So please, next time you comment on this blog please check YOUR facts because, I have!
Sir, as you asked me to check my facts….the blue card can be applied for with either an NVQ OR an employer apprenticeship. See link;
https://www.cscs.uk.com/card-type/skilled-worker/
You have completely missed my point regarding levy, you reference grants being paid, the deduction of levy by an employer is illegal it was this i was noting, again see link;
https://www.citb.co.uk/levy/paying/deducting-levy-from-wages/
I don’t have a HND in systems analysis and haven’t spent months researching this, but a 1 minute google revealed my facts to be correct. Again, I reiterate I’m not a supporter of these schemes in any way but with out arguments based on facts we will never reform or for that matter get rid of them. I repeat I’m surprise the IEA published such a blog with out the academic rigour it normally applies.
Further response to Noah Bennett.
If a worker has a city & guilds they could apply for the cscs gold card they would not need to apply for a blue card. See requirements.
https://www.cscs.uk.com/card-type/advanced-craft/
City and guilds is concidered by cscs to be a qualification above nvq2.
The blog is refering to a minimum requirement of NVQ2 for the blue card.
As far as the CITB levy is concerned. The blog never stated that workers pay the citb levy. The umbrella companies pay this. However umbrella payroll companies charge workers for payment of wages. How do you think umbrella companies pay the citb levy?
They are not charities.
Noah you are trying to pick faults with the information on this blog regarding cscs.
The blog is about occupational licensing by stealth. Not about cscs, cscs is an example.
Regards
Paul Fear
Sir, I am not picking faults, merely correcting mis information about a sector I’m aware of. In fact it was you who asked me to check my facts.
This blog is flawed and it is a missed opportunity to fully out line the pros and cons of occupational licensing and allow a reasoned discussion. I expect a better standard from a blog coauthored by Professor Shackleton.
If anyone wants to know the CSCS benchmark MINIMUM requirement for skilled occupations. PLEASE SEE THE CSCS WEBSITE.
https://www.cscs.uk.com/about/clc-one-industry-logo-2/
scott:
you might want to reconsider your decision not to use the pediatrician near you. the doctor may not be responsible, or even aware, of the way you were treated by his staff. as a disabled person who spends a lot of time in medical facilities, i have encountered two types of nurses: those who view their job as one of helping the patient, and those who view their job as one of ‘protecting’ the doctor from the patient. if you talk to the doctor about your experience with his staff, he might well talk to his staff about how they should do their job properly. my own criterion for boycotting physicians is that i refuse to talk to doctors who have spent no more than a minute or two reviewing my case as presented in a thin folder which is placed on the wall outside of the examination room, before entering to see me. since my entire medical files are now over 6 feet high due to the complicated medical history i have for my rare disease, no physician can possibly do an adequate examination or treatment based on a cursory glance at my records before seeing me.
richard