Employment law is counter-productive


The UK's growing volume of employment legislation is having a counter-productive impact on small businesses and is actively discouraging employers from hiring certain groups of people, a new report claims.

Research carried out among 100 small business owners for the Small Business Council (SBC) reveals that small businesses believe that employment legislation makes no positive difference and may actually have a negative impact on employment practices.

Small businesses have a low awareness of employment regulations and see complying with them as a low priority, the report found. There is also a widespread belief that regulations are ever changing and complex, which makes it impossible for employers to understand and apply them.

"Use of the law is seen as a crude measure and one that discriminates against [employers] in order to protect a small number of employees from a small number of bad employers," the report says.

The SBC adds that few employers identify genuine, tangible benefits of full compliance, and do not equate compliance with being a 'good employer'.

Two thirds of the employers interviewed have a relationship of mutual respect or family-type bonds with their employees, fostering a good rapport with them but this had not been achieved by complying with employment regulation, but by alternative means.

But as well as being perceived as a costly blunt instrument, legislation is also discouraging employers from hiring certain types of people, particularly women. According to the report:

"Childcare issues and maternity leave legislation are perceived as barriers to employing women, and some employers (including women) are open about the fact that they do not employ women due to maternity leave issues."

Another bugbear is the employment tribunal system, which is widely seen as being unfair to employers. Unhappy staff are now able to use up to 26 employment acts and 80 types of complaint against employers.

William Sargent, chairman of the Small Business Council, was blunt in his criticism of the government's approach. "Policy makers need to consider alternatives to regulation because regulation does not always work," he said.

"The Government allocates few resources to evaluation of its policy and therefore fails to learn the valuable lessons from the past including how people change or do not change their behavior as a consequence of the actions taken by Government.

"Policy makers must be sure to tackle concerns about unintended consequences of legislation and, moreover, the results of the research prove that regulation should only be used as a last resort."

The SBC's research echoes the findings of a British Chamber of Commerce (BCC) study that found that red tape costs have increased by 46 per cent since Labour came to power, with companies paying an extra £9 billion in 2003.

Separate research by the Institute of Directors also found that more than seven out of ten firms believed that employment legislation is a real disincentive to growth and job creation.

Sarah Anderson, chair of the SBC's Regulatory Interest Group, agrees. "We believe that regulation affecting employment is a blunt instrument to achieve Government policy objectives in small businesses; and the research shows that it certainly does not encourage better employment practices."