Partner Article

Big savings from employment law reform?

Alan Jones, partner at Averta, a firm which specialises in giving advice to senior executives and professionals, comments proposed changes in employment law.

The employment tribunal changes that came into effect on Friday are designed to make it easier for businesses to take on and dismiss staff. It has been claimed that the radical reform of employment law will deliver large savings to business – estimated by some at more than £40 million a year.

So, reform in employment law is a hot topic at present. Specifically, the government has announced its intention to make tribunals self financing and now new employees will need two year’s service before they can bring a claim for unfair dismissal. Will these and other changes affect levels of employment, or persuade employers to increase its compliment of staff?

The perceived wisdom amongst lawyers is that most changes will have little effect on the situation although it is generally felt there are too many regulations applying in employment market.

The main obstacle to employing people is lack of confidence, lack of funding, lack of demand (particularly in retail) and the general economic malaise in which we find ourselves. Employment law has been around in one form or another for over 40 years, and rates of unemployment have varied over that time depending on the economic cycle. The Sunday Times recently said in its editorial that a proposal to introduce a “hire and fire” business culture (suggested, interestingly, by a private equity millionaire), should be implemented without delay, presumably with the perceived effect of stimulating the employment market.

Leaving aside the politics of the argument, how would this stimulate economic growth? Why would an unsettled workforce, removable at the whim of a manager, want to commit itself to the well-being of its employer? One of the unexpected consequences of this would be a dramatic increase in claims of sex, race, age, disability and other discrimination (which are much more complicated cases to contest) because if an employee’s basic right is removed, the consequence is that all sorts of imaginative alternatives are considered. There is no unfair dismissal in the USA, but no lack of litigation for unlawful discrimination by employer on employee.

So it may be too early to predict that these changes in law will lead to big savings for employers. Whilst driven by a need to cut regulation, it is possible that these changes may actually increase litigation therefore costs for employers.

This was posted in Bdaily's Members' News section by Alan Jones .