UK: The Swinging Pendulum - Could (And Should) Employment Laws Be Changed To Benefit Smaller Employers?

Last Updated: 5 April 2011

Article by Verity Sayers, Nabarro LLP

Verity Sayers and Graham Stedman of Nabarro LLP discuss measures being considered to improve employment legislation for small businesses.

You may already be familiar with a report to the Government produced by the Better Regulation Executive in November 2010, called Lightening the Load: The Regulatory Impact on the UK's Smallest Businesses. This report found that, "in terms of specific regulations, employment law was considered to be the greatest barrier to growth" by the 500 "micro businesses" (those with less than ten employees) who were surveyed. These businesses said that they felt that the pendulum has shifted, moving the balance of rights too far in favour of employees, resulting in employers being unwilling to take on the risk of employing anyone.

The report identified a number of 'problem' areas of employment law for small businesses, highlighting dismissal processes and litigation and also family friendly rights such as the right to request flexible working and maternity and paternity arrangements.

The Government has opened consultation on its proposed strategies to help resolve workplace disputes. The consultation paper, which is available on the department for innovation and skills website (www.bis.gov.uk/Consultations/resolving-workplace-disputes) sets out what the Government is thinking about doing to help 'swing the pendulum' at least a little way back in the direction of employers. But are these measures likely to do enough to satisfy smaller employers and if not, what changes to employment law would be required?

Dismissals

There seems to be a widespread belief among small employers that the Government should make it easier for employers to dismiss employees – particularly on the grounds of poor performance.

The Government has indicated that it is considering raising the minimum service requirement for a claim of unfair dismissal to two years, rather than one year. Although businesses welcomed the news, some remain cautious that this will have much practical impact for smaller employers. It may even make the situation worse by encouraging claims which do not require a minimum period of service (such as discrimination).

Tribunal litigation

Another proposal is to introduce a tribunal fee, payable by the claimant, to help separate meritorious claims from vexatious claims at the outset. At present, no fee is payable by the claimant and the employment tribunal system is very much geared in favour of allowing employees who have suffered unfair treatment at the hands of their employers to bring claims with minimal cost to themselves. It is, surely, right that employees in such circumstances should not be prevented from access to justice. Yet tribunal cases can have very serious consequences for small businesses. Depending on the size of the fee and the circumstances in which it is payable, this proposal could succeed in striking the right balance.

Family friendly rights

Since the majority of our family friendly rights originate from European legislation, there is very little that the Government can do to re-balance these rights in favour of businesses. In any event, it could harm rather than benefit small businesses to be exempted, making it more difficult to attract the right people.

Watch this space – the year ahead may be an interesting one for employment law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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