Bad for business, bad for enterprise and bad for jobs

Jun 16 2003 by Brian Amble Print This Article

Recent employment legislation giving UK workers increased collective and individual rights such as better maternity rights and the right to right to request flexible working are “bad for business, bad for enterprise and bad for jobs”, according to the Institute of Directors (IoD).

A new IoD report, Red tape in the workplace: The re-regulation of the labour, argues that three pieces of post-1997 legislation - the National Minimum Wage Act, the Employment Relations Act and the Employment Act - represent an “ever-expanding burden” that is binding UK business in red tape.

The Employment Relations Act increased collective and individual rights, including the compulsory recognition of trade unions, and introduced various family friendly policies such as the Parental Leave Directive.

The Employment Act enabled the enactment of the EU’s Fixed-term Work Directive, introduced equal pay questionnaires, introduced statutory procedures for internal grievance procedures and significantly extended family friendly policies, including expanded maternity rights, paternity pay, adoption pay and leave and the right to request flexible working for parents of young children.

The report estimates that the extra cost of regulation is nearly £6bn a year. The most expensive regulations related to the Working Time Directive (£2.3bn) and the National Minimum Wage (£2.7bn).

IoD figures suggest that members with small businesses spent an average of 6 hours a week on red tape. Some have taken on extra staff to cope with the increased paperwork.

The IoD also says that while it is unequivocally opposed to discriminating against people on any grounds, the current developments in anti-discrimination legislation “could prove quite counter-productive”.

It also attacks the influence of the EU on UK employment law is as “very damaging” and criticises the expansion in employment rights for contributing to “the explosion in employment tribunal cases”.

Ruth Lea, Head of the Policy Unit at the IoD and author of the report, said:

“The increased burden of regulation in recent years, along with higher taxes on businesses, is undoubtedly hurting the competitiveness of business and the economy.

“This country has to make a choice between a free and lightly regulated labour markets, low taxes, economic dynamism and strong job creation, on the one hand, and intrusive and heavily regulated labour markets, high taxes, economic stagnation and weak job creation, on the other hand.

“There is, in reality, no Third Way. Heavy regulation destroys dynamism. Heavy regulation kills enterprise.

“Extra time-consuming bureaucratic demands distract businesspeople from running their businesses, increase the possibility of litigation, damage businesses and add to costs. Moreover, they discourage job creation.”