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Compliance boost for FM

28 October 2011

PFM is launching a new column in association with Workplace Law that will look at legislative and compliance issues. If you have a question that you would like addressed in this column please email it to the editor at To launch the series this month Workplace Law's David Sharp gives an overview of how regulatory issues are shaping FM companies.

It’s a moot point as to what extent law and regulation has helped to drive forward the market place for outsourced facilities management services over the last twenty years.

There will be some service providers who regard the demands that compliance brings as a positive barrier to entry for new entrants, or at least a differentiator to position themselves as market leaders in a sector that has become increasingly competitive. There will doubtless also be many who regard regulation as a necessary inconvenience that requires undue focus on procedures that undermine some of the very benefits they as service providers are looking to deliver.

Very many who sit on the boards of facilities management businesses will hold both views.

So these are good questions to ask. What is the current regulatory landscape? What major changes are happening that will impact on the provision of FM services? And how can service providers exploit the need for compliance as a valued added service, delivering greater benefits to their clients through innovation and strategic partnerships?

[x-head] Regulatory regime

I wrote in these pages in 2008 that FM had been subjected to more than 150 Directives, Acts, Regulations, British Standards, Codes of Practice etc. in the previous ten years. I was probably being very conservative.

In recent years the tide of environmental regulation has become ever greater, and the costs of compliance ever higher. In the 2011 budget the Landfill Tax rose to £56 per tonne, and a price ‘floor’ will be introduced from 2014 which means that the tax will not drop below £80 per tonne until 2020 at the earliest. Waste management, resource efficiency, carbon management: all have become central terms in the drive to create a sustainable future.

Health and safety regulation has been relatively stable, but the paucity of new legislation belies the real impact on service providers.

Revisions to the CDM Regulations in 2007 – creating the CDM Coordinator role – were designed to reduce accidents in the high risk construction sector. For facilities managers however, they introduced another layer of administration – and therefore potentially cost and delay – at the very time the recession was about to hit. The criteria to make a project notifiable bring a good deal of refurbishment work under CDM, not all of it high hazard.

The result has seen increased pressure on margins for FM providers, especially those in the retail sector where quick turn refurbs are a necessity and trading conditions for clients are tough. Meanwhile the reduction in accident rates has been marginal.

As a major employer, the FM sector has been impacted heavily by changes in employment policy as well as by economic factors. Changes to the Employment Tribunal (ET) system were intended to reduce the number of claims against employers, which had grown from 34,703 in 1990 to over 100,000 just a decade later. The regulatory process clearly isn’t working: though claims in 2011 were lower than the record 236,100 reported a year earlier, they are still more than 44% up on 2009.

Supporting FM clients through the claims process is one of the fastest growing areas of our business, and the statistics demonstrate why: of the 49,600 claims for unfair dismissal in 2010/11, only 8% of the claimants were successful – but the disruption to the business can be significant if not well managed.

Many employers are still struggling with the impact of age discrimination regulations and the end of the Default Retirement Age. Again, the rules are simple to understand in principle, but harder to implement without impacting on SLAs and margins. Staff attrition rates that would normally have been achieved through a statutory process (retirement) now need to be actively performance managed. The risks are not insignificant: according to a recent demographic survey by 65% of the FM workforce are in the 45+ age group, with a quarter aged 55-64.

FM service providers are also likely to be hit this autumn following the introduction of the Agency Worker Regulations, designed to provide temporary workers with the same protections as those of their fixed-term and part-time colleagues. The impact of this major change remains to be seen, but there will certainly be an increased administrative burden upon employers and agencies, who must also agree how to share the cost of improved benefits for their temps.

[x-head] Future impact of regulation

The coalition government promised a reduction in red tape, accompanied by the Young report Common Sense, Common Safety which recognised that good health and safety should be an aid to good business, not an impediment to it. The proposed relaxation of RIDDOR reporting requirements fits this bill.

In a constrained economic climate, however, the Government has also been seeking another application of the ‘polluter pays’ principle. Hence the follow-up Loefstedt review contains proposals to charge businesses for the time the HSE spends issuing an improvement or prohibition notice against them, or to inspect after a serious accident. (The proposed fee for this activity is £133 per hour. Who is going to pay for this?). The Loefstedt review reports this month.

The CDM Regulations are under review, with some clients now looking to incorporate the CDM Coordinator role within their own operation to save costs and streamline workflow. Short-term gain for longer-term pain?

And corporate manslaughter legislation is likely to be tested more robustly following the recent announcement of the second case being brought in June 2012. The prosecution of Lion Steel Equipment following the death of Steven Berry will be closely followed by anyone carrying out refurbishment and maintenance projects.

Environmental regulation continues unabated. The Site Waste Management Plans Regulations 2008 are under review, and consultation will commence shortly on a revised code of practice regarding the waste management ‘duty of care’. Both reviews will impact on contractors responsible for waste management at their clients’ sites. Schedule 2 of the Controlled Waste Regulations 1992 is also currently under consultation: the new proposals, if implemented, will introduce charges for the disposal of controlled waste from listed premises such as schools, universities and hospitals.

Further changes are expected in the next twelve months regarding civil sanctions for breaches of waste management and following consultation on greenhouse gas emissions.

Proposed revisions to the ET system are looking to take a slightly tougher stance against ‘spurious’ claims. However, the introduction of an application charge of £500, while clearly putting off some claimants, is unlikely to address the imbalance: the best defence for the employer remains a clear understanding of employment law at operational management level; and expertise or assistance in the claims management process.

[x-head] Value added compliance

Ten years ago, promulgation was the pinch point: helping employers understand the requirements of new legislation so that they would not fail to comply. In the so-called ‘information age’ the issue for service providers is less about failure to understand regulation, rather than how to apply it in a commercially pragmatic way, to deliver value to the client and meet its corporate objectives. The companies that are doing this are the ones who seek to go beyond compliance.

We are working with a corporate property management company to streamline the CDM-C process by adding in environmental expertise, bringing the management of site waste management plans into the remit of the project coordinator. At the same time, we are working with them to develop a short e-learning package to help train their own staff and other members of the project team in CDM responsibilities. The result is a client-branded experience which adds value to their operation, improves safety awareness, and through improved communication reduces the aggravating factors that can sometimes delay the progress of the project.

The facilities team at City College Norwich (CCN) faced a different problem following the abolition of the Learning Skills Council who were responsible for conducting an annual health and safety audit to a standard prescribed by the regulator. CCN wanted to maintain its commitment to meeting the standard, while seeking to reduce accidents and incidents at one of the busiest colleges in the country. By working with them to develop an IOSH Managing Safely training course using e-learning, we helped to reduce their per capita training costs by 35% and delivered a customised learning experience for its middle managers. There is evidence that health and safety performance is improving.

In both cases, what has been important is the adoption of a partnership approach where we have been able to work with the service provider at a strategic level to find ways to make compliance a competitive advantage rather than a costly commitment. Technology inevitably plays a part in developing customised solutions: most service providers have compliance systems in place already and so there is little value in reinventing the wheel. But by gaining a good understanding of what they are aiming to achieve, and what systems are already in place, technology can help them to go beyond compliance to deliver competitive advantage.

An understanding of regulation – knowing which boxes need to be ticked – has for a long time been a pre-requisite for the provision of a support service to clients in the FM sector. An appreciation of the impact of new legislation, and the changing regulatory landscape, will help service providers to plan effectively and provide an efficient and seamless service. But we believe the very best FM service providers today are aiming to go beyond compliance by reengineering their business at a strategic level to deliver competitive advantage. And there are signs this approach is working.

David Sharp is Managing Director of Workplace Law, which specialises in the provision of employment law, health and safety and environmental management support in the FM sector.

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