P&O Ferries in Deep Water: Labour Outsourcing is Not an Escape from Human Rights Responsibilities

The decision by UK shipping company P&O Ferries to fire 800 staff without notice and to replace them with agency workers is the latest example of how outsourcing is increasingly used as a business strategy to reduce labour costs and secure the flexibility companies claim they need in a global and competitive economy.

Fire-and-rehire practices and widespread use of agency workers are increasingly common in the services, transportation, construction, and hospitality sectors. The P&O Ferries case offers insights into the drive to cut costs and maximise profits, as well as negative consequences of labour outsourcing. The company’s financial losses over some time were not acceptable to parent company DP World, the global logistics business based in the UAE. With a largely unionised workforce, P&O faced a key business dilemma: continue to ensure pay and conditions negotiated by workers and their union representatives over a long period of time, or shift to easily available, low wage labour through agencies.

Labour outsourcing is about more than just wages. It is about business models and culture as well. By shifting to outsourced labour, in a single stroke P&O replaced longstanding employment relationships with workers to a new model, involving a contract between companies – the labour providing agency, and the end-user. From behind those contracts, P&O will now claim no legal responsibility for a workforce that is no longer made up of employees. Hours worked become simple units of labour on a balance sheet, eminently flexible, and able to be turned on and off at will. And possibly considerably cheaper units of labour at that. The RMT union is reporting that Indian, Filipino and Ukrainian ‘ratings’ (non-officer seafarers) will be paid under $3 per hour, though this has not been confirmed by P&O.

The industry practice of operating vessels under ‘flags of convenience’ also creates serious risks of exploitation of seafarers.

Companies may undoubtedly benefit from such labour cost savings, but two different groups of workers face significant uncertainties. In this case, the fleet’s original workers - now made redundant - will see career development prospects, livelihoods and pensions jeopardised, with no guarantee of finding future employment commensurate with their skills and experience. For agency workers, 'flexible' arrangements will mean more precarious conditions: lack of job security, stability and benefits. Constant worry and likely constant change: no guarantees regarding working hours, overtime, paid holiday and sick leave. And no way of voicing those concerns in ways that will produce results, as workers’ complaints will be more likely to fall through the cracks of a fragmented employment relationship. Grave concerns have already been voiced over the safety implications of bringing agency seafarers onto unfamiliar vessels with minimal training.

As outsourced labour becomes an increasingly common feature of globalised markets, companies should be aware that, despite their attractions, these arrangements cannot in any way reduce businesses commitments to respect human rights.

The industry practice of operating vessels under ‘flags of convenience’ also creates serious risks of exploitation of seafarers. Shipowners registering ships under flags of convenience can reduce operating costs and avoid home country regulations by registering the vessel in a ‘flag state’ with less stringent standards. Ship owners can also take advantage of employing cheap labour from the global labour market. According to the International Transport Workers' Federation (ITF), for seafarers this can mean low wages, poor on-board conditions, inadequate food and clean drinking water, and long periods of work without proper rest. – “Flags of Convenience registries make it more difficult for unions, industry stakeholders and the public to hold ship owners to account."

As outsourced labour becomes an increasingly common feature of globalised markets, companies should be aware that, despite their attractions, these arrangements cannot in any way reduce businesses commitments to respect human rights. Employment agencies are service providers and human rights due diligence must be deployed by agencies and their clients.

In 2012, IHRB and Shift jointly developed the EU Sector Guide for Employment and Recruitment Agencies on Implementing the UN Guiding Principles on Business and Human Rights. The guide set out a range of expectations of E&R Agencies and those using their services to be able to fulfil their responsibilities under the UNGPs.

For agencies, these included ensuring that wages paid would be in line with any applicable collective bargaining agreements and local living wage norms, checking that workers will be provided with appropriate working conditions, including relevant health and safety equipment and training, and ensuring access to effective grievance mechanisms. For client companies, expectations include human rights risk assessments of relationships with employment agencies and the business offer agencies make to them. Expectations concerning human rights and labour rights should be clearly articulated to E&R Agencies and reflected in Service Level Agreements. When migrant workers (often the backbone of employment agency operations) are employed, additional due diligence by both agency and client may be required. These are necessary, though not exhaustive steps that companies like P&O should consider if they want to engage agency workers responsibly.

Companies must also be aware of the unintended negative impacts of outsourcing in terms of workplace satisfaction, worker productivity, company loyalty and, ultimately, reputational damage.

Ensuring professional standards by employment agencies is critical to ensuring respect for the law and for workers’ rights. The national associations of employment agencies – the Recruitment and Employment Confederation in the case of the UK, affiliated to the World Employment Confederation - must be strong voices for high standards not just by their members but for the entire industry. National governments must ensure that legislation and enforcement activities such as inspection and licensing of agencies are adequate. This helps ensure protection for workers as well as a level playing field for law-abiding businesses to compete fairly within the law.

Companies must also be aware of the unintended negative impacts of outsourcing in terms of workplace satisfaction, worker productivity, company loyalty and, ultimately, reputational damage. The UK-wide protests, public outrage and calls for boycott following P&O’s mass sackings show that while outsourcing may reduce labour costs, public awareness of corporate responsibility is increasing. Enhanced consumer and public sensitisation to social concerns means heightened expectations for business transparency and accountability, increasing the pressure on companies to review their policies and practices and strengthen efforts to uphold international human rights and labour rights standards. In an era of fragmented supply chains and employment relations, the way companies manage their outsourcing arrangements says a lot about their commitment to respecting human rights.

With thanks to Francesca Fairbairn, Frances House and Alejandra Rivera for contributing to this article.