Government simplification plan targets employment regulation

In December 2006, the Department of Trade and Industry published new proposals for reducing administrative requirements affecting businesses. These included measures aimed at reducing the complexity and compliance costs of employment legislation, which represents the area of the department’s activities that has been estimated as generating the highest costs for business.

On 11 December 2006, the Department of Trade and Industry (DTI) published proposals for reviewing and simplifying a range of regulations for which it is responsible, including employment law measures. The paper, entitled Better regulation: Simplification plan (516Kb PDF), is part of a cross-government initiative to reduce the administrative burdens on businesses. The DTI estimates that the proposed simplification measures will save businesses up to GBP 700 million (about €1.06 billion as at 31 January 2007) a year. Its longer-term target is to reduce such costs by 25%.

According to DTI Secretary Alistair Darling: ‘Britain is already one of the best places to do business, but we must do more to ease burdens. By cutting unnecessary red tape and making essential regulation simpler we can help sustain a strong economy.’

The overall cost to businesses of DTI regulation is estimated by the accounting company PricewaterhouseCoopers (PwC) to amount to just under GBP 5.3 billion (€8.03 billion) a year, with employment law being the most significant cost, accounting for some GBP 1.9 billion (€2.87 billion) annually. As a result, employment regulation is a key focus of the proposed simplification measures. The DTI’s emphasis on identifying ways of simplifying employment law – and easing compliance on the part of employers – was foreshadowed in its earlier strategy paper, published in March 2006 (UK0605019I).

Employment law proposals

Against the background of continued concern on the part of employer organisations over the impact of employment regulation on businesses, the government’s stated aim is to reduce compliance costs and complexity, within the constraints of EU law and ‘without diluting employee or union rights’.

The DTI’s principal initiative in the employment law area is to establish a review aimed at simplifying and reforming the employment dispute resolution system, with a view to reducing the numbers of cases reaching employment tribunals. The review will focus on the operation of employment tribunals and of the statutory workplace disciplinary and grievance procedures introduced in 2004 (UK0408102F). Led by a former Powergen executive, Michael Gibbons, the review will include employer organisations, trade unions and other interested bodies. Its recommendations will be submitted to the government in the spring of 2007.

Other proposals affecting employment regulation include:

  • improving guidance and assistance to employers in drawing up statements of key terms of employment to which all employees are entitled;
  • examining the possibility of reducing the administrative requirements on employment agencies in respect of short-term assignments;
  • extending web-based tools to help employers produce statements of redundancy pay, and improving guidance on contract variation involving dismissal and re-engagement;
  • improving the overall content, delivery and awareness of guidance and sources of assistance on employment rights and responsibilities;
  • examining the case for allowing some non-postal balloting by trade unions for industrial action ballots and elections to senior trade union positions, and requesting ideas for simplifying trade union law more generally.

The DTI is also establishing a new panel of practitioners that will provide advice on the employment law aspects of the simplification plan.

Social partner reaction

The Confederation of British Industry (CBI) welcomed the government’s proposals. The Deputy Director-General of CBI, John Cridland, stated: ‘The DTI’s regulatory simplification plan focuses effort in the right areas that matter to business. Employment legislation is the biggest regulatory concern for most companies and action here will be particularly important.’

On the specific issue of reviewing employment dispute resolution, Mr Cridland claimed that: ‘Employers lack faith in the [employment tribunal] system – with firms seeing tribunals as too adversarial and costly – and many prefer just to settle claims, even when they are advised they can win. The statutory discipline and grievance procedures have not improved dispute resolution – rather they have added to red tape and have elevated process over the merit of a case. The government must now address the real concerns of employers to restore confidence and ensure that the system works effectively for both business and employees.’

The General Secretary of the Trades Union Congress (TUC), Brendan Barber, commented: ‘It is important that all regulation is as easy to understand and implement as possible, without detracting from basic protections for employees’. However, Mr Barber warned government ministers not to accept ‘employer lobbyist arguments that the UK is faced by more regulation than other economies’ or their description of ‘socially progressive and popular policies such as the minimum wage, more time off for parents and protection against unfair discrimination’ as ‘red tape’.

Mark Hall, IRRU, University of Warwick

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