Fair Work action plan 2022 and Anti-Racist Employment Strategy 2022: business and regulatory impact assessment

2. Approach

This chapter sets out the approach to assessing the potential business impacts of the RAP and ARES. The assessment criteria consider how the actions could have both positive and negative impacts. In considering the impacts, this BRIA takes a 'worst case scenario'.

The approach for undertaking this BRIA and compiling this report follows a six-stage process:

1. Screening for impacts

An overview of guidance and requirements, key evidence and issues and initial screening for potential impacts including a framework for more detailed assessment.

2. Stakeholder engagement

Interviews with stakeholders from equality organisations representing a range of groups and businesses.

3. Impact Assessment Input Note

A technical note for the Scottish Government highlighting the key impacts identified through initial screening and stakeholder engagement for the purpose of finalising the draft RAP and ARES

4. Baseline evidence review

Review of relevant legislation and policies as well as evidence relating to the Fair Work agenda with regards to protected characteristic groups, deprivation, poverty and labour market statistics.

5. Assessment of potential impacts

Informed by a consideration of the policy context, reviewed evidence and feedback received through stakeholder engagement.

6. Recommendations and conclusions

Concluding on key positive and negative impacts as well as planned and recommended actions for minimising negative or uncertain impacts.

2.1 Screening for impacts

A series of screening reports, including a BRIA screening report, were produced for the Bute House Agreement grant conditionality commitment, RAP and ARES in October 2022.

These reports presented a screening of potential impacts for the six headline actions of the draft RAP and the eight key actions of the draft ARES provided by Scottish Government. This screening was undertaken using publicly available data and evidence.

A screening report was also undertaken for a Strategic Environmental Assessment (SEA) which invited statutory consultees to comment through the Government Gateway. This process concluded that there are no significant environmental impacts and a final impact assessment is not required.

2.2 Stakeholder engagement

2.2.1 Stakeholder engagement process

The Scottish Government undertook a public consultation on Becoming a Fair Work Nation in 2021 and used the responses along with further stakeholder engagement and collaboration, including through a range of short life working groups to inform the development of the RAP and ARES.

In addition to this, AECOM carried out stakeholder engagement to support the evidence outlined in the screening report and contribute to finalising the draft RAP and ARES documents. The views of equality organisations and businesses towards the RAP and ARES actions have also been used to prepare the final impact assessments report including the final BRIA.

Stakeholders were invited to complete an online survey (see Appendix C) to submit their views on the two draft documents. The same questions were used to frame discussions for stakeholders who took part in one-to-one meetings.

The following stakeholder engagement activities took place:

• Organisations first contacted via email on 26^th October 2022;
• Webinar to equality focused organisations on 31^st October 2022;
• Business organisations contacted via Scottish Government's October 2022 bulletin; and
• Virtual business engagement session on 7^th November 2022.

The Scottish Government provided an overview of the Bute House Agreement grant conditionality commitment, the RAP and the ARES to share with stakeholders via email and in one-to-one discussions.

Four stakeholders took part in one-to-one discussions, both on Microsoft Teams and in person, and four submitted survey responses between 26^th October and 15^th November which fed into the technical note for the Scottish Government.

AECOM used the findings of the stakeholder engagement to develop an Impact Assessment Input Note which was submitted to the Scottish Government on the 15^th November 2022. This set out key issues, considerations, and recommendations for finalising the draft RAP and ARES documents.

Following this, AECOM continued stakeholder engagement between 15 November 2022 and 9 January 2023 to ensure that a wide range of voices contributed to the development of the impact assessments. An additional six stakeholders engaged in one-to-one discussions, and five submitted survey responses which fed into the final assessment of impacts.

2.2.2 Breakdown of stakeholders

Scottish Government and AECOM identified 103 stakeholders for AECOM to engage across all impact assessments. This included:

• The ARES Short Life Working Group;
• Disability Short Life Working Group;
• Sub Group of the Gender Pay Gap Ministerial Working Group;
• Protected characteristic groups;
• Island communities; and
• Businesses.

The following table demonstrates the size, sector and location of businesses and business representative organisations who engaged directly on the business impacts of the RAP and ARES.^[15] However, a wider range of stakeholders provided thoughts on business impacts as part of wider stakeholder engagement for all impact assessments carried out.

Table 2‑1 Size, sector and location of businesses and business representative organisations

Size	Sector	Location	Form of engagement
National representative body	Business	Scotland	Online meeting and survey response
Sector-specific national representative body	Agriculture	Scotland	Written response
National representative body	Business	Scotland	Online meeting
Regional representative body	Agriculture	Angus	Online meeting and written response
Regional representative body	Island communities/ businesses	Scottish Islands	Online meeting and survey response
Local employer	Island communities/ businesses	Scottish Islands	Online meeting and survey response
Sector-specific national representative body	Agriculture	Scotland	Online meeting and survey response
Sector-specific national representative body	Finance	Scotland	Online meeting
National public sector employer	Public	Scotland	Online meeting and survey response

2.3 Impact Assessment Input note

An Input Note was submitted to the Scottish Government on 15^th November. For each impact assessment, this highlighted the key impacts of the RAP and ARES as identified through the screening process and stakeholder engagement activities.

AECOM delivered a virtual presentation of the input note to the Scottish Government colleagues involved in the drafting process of the two documents.

The key impacts and potential risks identified in the screening reports and input note were used by the Scottish Government to inform the development of the RAP and ARES and enabled it to explore mitigations or adapt its approach.

2.4 Baseline evidence review

The baseline covers the following:

• Review of all relevant documentation and available information regarding the RAP and ARES including the Fair Work Framework (2016), Fair Work Action Plan (2019) and 'Becoming a Fair Work Nation' consultation documents;
• Review of relevant legislation and policies to develop context pertinent to the BRIA; and
• Evidence regarding to potential business impacts as identified through secondary data and research provided by Scottish Government, stakeholders and desktop review.

2.5 Assessment of business impacts

This BRIA presents the review of each of overarching actions in the RAP and ARES. This provides an assessment as to whether the action has potential to impact relevant groups, including businesses, consumers and regulatory bodies.

The assessment and identification of potential impacts has been based on the evidence and key issues (as set out in Section 4 of this report), information provided through discussions with the Scottish Government and stakeholder engagement.

The scoring mechanism used for the assessment initially provides a score of the effect of the policy for each of the relevant groups as follows:

• Major Positive Effect – The action has the potential to significantly support businesses, taking into account the guidance including potential impacts and risks, moving digital/online and the cost and benefits.
• Minor Positive Effect – The action has the potential to support businesses, taking into account the guidance including potential impacts and risks, moving digital/online and the cost and benefits, but not significantly.
• Neutral/Negligible Effect – There is no clear relationship between the action and businesses, or the relationship is negligible.
• Minor Negative Effect – The action may detract support from businesses, taking into account the guidance including potential impacts and risks, moving digital/online and the cost and benefits, but not significantly.
• Major Negative Effect – The action may significantly detract support from businesses, taking into account the guidance including potential impacts and risks, moving digital/online and the cost and benefits. Mitigation is therefore required.
• Uncertain Effect – The policy has an uncertain relationship to business support, or the relationship is dependent on the way in which the aspect is managed. In addition, insufficient information may be available to enable an assessment to be made and will be gathered through further consultation and/or research.

Assessment guide

The guide questions used to undertake the assessment are set out in Table 4-1 below and have been developed in line with the BRIA toolkit.

Potential impacts and risks

Businesses – including Scottish Firms Impact Test and Competition Assessment

• Will the project have an impact on the competitiveness of Scottish companies within the UK / Europe / globally?
• What are the relevant businesses, sectors, markets, products, or services that might be affected by the changes?
• Will the changes restrict or increase competition in these markets?
• Will it make it harder for new firms to enter a market?
• Will it impact suppliers (number / range / competitiveness)?
• Could impacts be different for different parts of an industry or different parts of a supply chain?
• Will micro and small businesses be impacted differently? (Consider regulatory burden, compliance flexibility options, distribution of benefits, cost penalties of non-compliance)

Local authorities

• What is the impact on local authorities?

Consumers – includes users of public services

• Will the quality, availability or price of goods or services in a market be affected?
• Does the project affect the essential services market, such as energy or water?
• Does the project involve storage or increased use of consumer data?
• Could there be increased opportunities for third parties to take advantage of government initiatives to target consumers whose circumstances make them more vulnerable?
• Could the action add complexity in a market, which could lead to information asymmetries or make it more difficult for consumers to understand their rights?
• Could the action affect routes for consumers to seek advice or raise complaints on consumer issues?
• Will it limit the choices and information available to consumers?

Regulators

• What is the impact on regulators?

Organisations in the third sector

• What is the impact on organisations in the third sector?

Environment

• Will there be disproportionate impacts on the environment, including disproportionate cost of compliance and monitoring?

General

• Have any new forms been introduced as a result of the project?

Legal Aid Impact Test

• Could the policy give rise to increased use of legal processes or create new rights or responsibilities, which could have an impact on the legal aid fund?

Moving to digital / online

• Do the changes take account of changing digital technologies and markets?
• Will the changes be applicable in a digital / online context?
• Will the changes potentially have an adverse impact on traditional or offline businesses?
• If the action can be applied in an offline and online environment, will this have any adverse impacts on incumbent operators?

Costs and Benefits

• What will the costs and benefits of the changes be, relative to the status quo were the action not introduced (i.e., will they be additional and monetised)?

2.6 Recommendations and conclusions

Section 7 this report sets out conclusions on the business and regulatory impacts of the RAP and ARES.

The final section of this report sets out recommendations for enhancing the benefits to those affected by the Fair Work initiatives as well as appropriate mitigation against adverse impacts.