Choppy waters still to come: EEF considers government proposals to review employment law

Posted on 1 Dec 2011 by The Manufacturer
Steve Radley, Director of Policy, EEF

With the global economy hitting some particularly choppy waters and the UK facing very slow growth at best, the government must do all it can to promote growth.

EEF has called for it to focus on four key barriers – taxation, access to finance, skills and regulation. We have now started to see movement on all these fronts but it is vital that the government’s focus on all of them is relentless.

We therefore welcomed the recent announcements by Vince Cable, the Business Secretary, to revise some important areas of employment law, start to review others and reconsider previous proposals that would have added unnecessary costs to business and undermined the flexibility so vital to business at a crucial time for our economy.

Today, flexibility is the lifeblood of our manufacturing sector. For manufacturers, their integration into the world economy both through expanding exports and more complex supply chains, together with a growing focus on innovation, have made it indispensable. Companies now work much more closely with their workforce to manage change, communicating with them and involving them in it.

As well as long term decisions to improve business performance, this flexibility also allowed companies in the last recession to take more immediate tough decisions, often in partnership with their employees, which helped them in many cases stay afloat and minimise job losses, preparing them for future growth.

In both recession and recovery, manufacturers have generally been supported by a labour market which remains relatively flexible in comparison to many of our major competitors. But they have increasingly told us that they have felt this flexibility starting to erode as regulation becomes more complex and intrusive; increasingly getting in the way of effective communication with their workforce.

The two way-street of flexibility between employers and their workforce has become increasingly cluttered with road signs that are difficult to read and sometimes contradict each other.

The current coalition has heeded these warning signs and started to take action.  It has dropped unnecessary plans to impose fines on employers that have lost Employment Tribunals, even on technicalities, and the disproportionate weapon of gender pay audits for those who lost Tribunals on equal pay grounds.

Provisions in discrimination law on dual discrimination and third party harassment have also been dropped. However, simply dropping rules and proposals that should have never got near the statute book was never going to be enough. Plans to make it easier to resolve workplace disputes are therefore particularly welcome. Greater use of conciliation before claims get to the tribunal stage and giving judges the power to strike out vexatious claims will free up significant management time and benefit employees by focussing resources on the cases where workplace relationships have clearly broken down.

But the Government needs to go further to make all this change easier to manage. We therefore welcome proposals to review the rules governing collective redundancies and to make it easier for employers and individuals to put together compromise agreements.

We will also be pressing for the government to move forward with its suggestion of providing for ‘protected conversations’  which would allow employers to have informal discussions with employees on issues such as performance and retirement plans without fear of this triggering a compensation claim. Though we still believe that the abolition of the Default Retirement Age was ill-advised and badly timed, this should ease some of employers’ concerns about planning ahead for what their workforce will look like. It is also vital that measures to extend the right to request flexible working and make parental leave more flexible are kept simple and don’t tie employers up in vast amounts of bureaucracy if they need to turn down these requests on business grounds.

Regulation from Europe remains a pressing issue. Most urgently, there is the ongoing fight to preserve our opt-out from the Working Time Directive and resist the significant costs that the Pregnant Workers Directive would impose on our economy.  But beyond this, we need to work harder to build a collation in Europe that considers more rigorously, whether new regulations are needed, what costs they would impose and even whether we should be rolling back some of the worst examples of existing employees.

With governments in Italy and Spain also focussing on boosting growth by reforming employment laws, the pendulum has started to swing away from excessive regulation and towards flexibility and economic growth. But progress in Europe is never fast and we must press hard to keep it move it in the right direction.