UK employment laws are currently undergoing a five year long ‘root and branch’ review.
The review was announced in 2010 by the new Coalition government claiming that our existing system was a barrier to economic growth as it was overly complicated and acted as a disincentive to employers recruiting staff.
Arpita Dutt, a senior partner at leading City employment lawyers Brahams, Dutt, Badrick, French LLP, argues there is scant evidence to support the government’s assertion. Indeed, she claims indications from around the globe suggest that the opposite argument may well be true as some of the world’s most prosperous economies have robust but flexible employment protection regimes.
The government is now into the third year of its wide ranging overhaul of our employment law infrastructure.
Some of the most notable changes so far have seen a rise in the unfair dismissal qualifying period from one to two years, a cap on compensation of the lower of £74200 or 52 weeks salary for unfair dismissal compensation and the controversial introduction of fees of up to £1200 for staff to take their bosses to an employment tribunal.
From now until the end of this Parliament, it’s expected that there will be a more intense period of implementation. Among planned changes is the expected introduction of a new ‘employee shareholder’ status which offers employees a shareholding in the company in return for waiving some of their employment rights, particularly any claim of unfair dismissal.
Another expected change is the provision of early conciliation so both parties have the chance to resolve a dispute through ACAS before a claim is lodged at an Employment Tribunal.
Taken in tandem with the changes to the welfare benefits system including the moratorium of two weeks an employee has to wait after being dismissed before they can claim benefits, these have a multiple whammy effect for the worker.
When the government first announced its Employment Law Review in 2010, it was argued it was being implemented to improve flexibility and efficiency in the labour market and to reduce barriers to growth and job creation.
For many years employers and their lobbyists have been strident in claiming employment law ‘red tape’ and bureaucracy have acted as a hindrance to enterprise.
As part of this sustained onslaught, others have claimed so called draconian pay outs awarded by employment tribunals have impacted detrimentally on the financial viability of small to medium sized enterprises.
It could be interpreted that the Coalition government, perhaps hungry for votes at the last election, subscribed to the view that employment law was stifling business growth with the announcement of their review when they took power.
However, this was at odds with a plethora of international evidence claiming Britain was relatively ‘lightly regulated’ in terms of its employment law infrastructure and that this was a key feature in attracting inward investment from overseas.
The report of the ILO and the OECD on the ‘Short terms labour market outlook and key challenges in G20 countries’ cites that the situation now calls for strong and well-designed employment, labour and social protection policies applied in conjunction with macro-economic policy to address the underlying demand and supply conditions of each economy.
Some booming economies have strong employment protection laws whilst others that have little or no employment law are performing well below par.
Recently, the European Commission and ILO have been promoting a concept of ‘flexicurity’ which has four main components:
- Flexible and Reliable Contractual Arrangements
- Comprehensive Lifelong learning strategies
- Effective active labour market policies
- Modern social security systems
Underpinning these themes is a recognition that there is no ‘one size fits all’ approach and that the UK will need to implement a different system to Spain, but approached in the right way it can create a ‘win- win’ situation for employees and employers.
Indeed, some would argue that the government could be looking for a convenient scapegoat in a bid to deflect attention away from the real causes behind our current state of economic mediocrity.
Basic economics stipulates that job creation is affected and driven by consumer demand and the ready availability of credit. There is a real concern that we may be turning into an ‘ Alice in Wongaland’ economy as coined by Ann Pettifor.
Our economy is not driven by the cost of sacking poor performing staff. Insisting that it does have an effect could be argued to be just a smokescreen; a bid to disguise the real issues at the root cause. Indeed, the average cost of settling an unfair dismissal claim is just £4000.
In fact, the assertion that enterprise is being stifled by a tangle of employment law red tape appears to ignore a huge section of the workforce which has no prospect of challenging an unfair dismissal claim: those with less than two years’ service. Making it easier to sack employees simply cannot have the affect of increasing consumer confidence where there is no prospect of disposable income rising.
While some commentators have been slow to support the overarching concept of ‘Flexicurity’, the concept supports the promotion of stable employment relationships.
The use of ‘zero-hour’ contracts has recently been in the spotlight, indicating on the positive side, a flexible work force which has had an increasing use in all emerging economies and on the negative side, a growing swathe of workers who are in precarious work, have insufficient hours of work, no understanding of their employment rights and no confidence to spend as consumers. Making such workers turn to pay day lenders for their shopping brings an illusory consumer ‘confidence’ to our economy.
Whilst an increase in house prices may have buoyed consumer confidence, there is a feeling of doom and ‘groundhog day’ as this government seeks to boost consumption through a high debt, low security and low wage economy. Has nothing been learnt ?
I would maintain a reasonable degree of employment protection increases consumer confidence and is in fact likely to be stimulus in the creation of permanent jobs. As the public sector is dismantled by this government, reducing the trades unions bargaining units and weakening collective agreements, the role of legislation as safeguard becomes even more essential. We need to find a better balance between flexibility and security as the pendulum is at present too far in favour of flexibility. We need to create productive, stimulating, stable employment opportunities and reduce our wage disparities.
The late 1990s, in the UK, was a ‘golden era’ for employment growth as the economy boomed. But this was also a period which witnessed increased job protection.
Ironically, now with the economy struggling to drag itself out of this prolonged slump, the government believes tinkering at the edges of our employment laws and helping businesses to fire workers will somehow help boost the economy.
Like any reasonable and fair minded person, and a business owner, I support any bid to remove unnecessary red tape and any barriers to enterprise, but not at a cost of dismantling laws that offer vital protection to employees.
Having a clear, practical and robust employment law frameworkis in our view is good for workers, good for business and good for Britain.
