Flexible, effective, fair: promoting economic growth through a strong and efficient labour market October 2011

Flexible, effective fair: promoting economic growth through a strong and efficient labour market

The Law Society is the representative body for more than 140,000 solicitors in England and Wales (the Society). The Society negotiates on behalf of the profession, and lobbies regulators, government and others. This response has been prepared by the Societys Employment Law Committee (the Committee). The Committee is made up of specialist employment lawyers from across England and Wales. Committee members provide advice and representation to employers and employees through practice in City and regional firms, local government, industry, trade unions and law centres. Some Committee members are fee-paid employment judges. Law Society Response The questions raised in this brief paper are important and the issues complex. We understand the government's wish to generate an accessible and wide-ranging debate through its 'red-tape challenge', but there must be a risk that many responses to an invitation to respond within a fortnight will be superficial. Policy must be based on evidence, not anecdote. Pending formal consultation, the Law Society wishes to make only a few brief comments in response to the paper. The paper makes the point that at the macro level the UK has one of the most flexible and most lightly regulated labour markets of all OECD countries. Nevertheless, for many owners of small businesses the Government suggest there is a perception of excessive and costly regulation preventing recruitment. However, recently released figures from BIS show that small businesses and start-ups were responsible for 67 per cent of the 2.61 million jobs created on average each year between 1998 and 2010 and that smaller firms have been increasing their share of total employment year on year and in 2010 their share was triple that in 19981. If de-regulation is thought to be the answer to that perception (which is questionable), it is not without risk. An uncertain test of 'reasonableness' as a substitute for clear regulation and underpinning case-law might in fact lead to scope for greater dispute between employers and employees. The BCC report quoted in the paper ranks demand for goods and services as the most important factor in whether small businesses take the step of recruiting their first member of staff. When it comes to a 'fear factor', it is fear of lack of demand and possible business failure that is the single most important deterrent to expansion, not regulation

BIS Paper (prepared by Aston University), Job Creation and Destruction in the UK (19982010), released 17 October 2011.
The Law Society 2011 Page 2 of 3

There will be those small business owners who wish to expand but lack the confidence to become first-time recruiters, employers and managers. There should be more information and training for small businesses not just about the law and rights, but about how to treat and get the best out of employees as a good employer. On the question of fundamental rights, there are established sources of guidance in the International Labour Organisation's Fundamental Principles and Rights at Work as well as the European Social Charter, to which the UK is a signatory. The government appears to be contemplating a two-tier system of employment rights and access to dispute resolution, one for small businesses and another for larger employers. Such a system could in fact act as a barrier to expansion for small firms who reach the higher regulation threshold. In any event, this would be a significant social policy decision which requires extensive public debate and consultations which conform with the governments own code of practice, before debate and scrutiny by Parliament. A structured dialogue on employment rights has already begun through Resolving Workplace Disputes and Modern Workplaces. The government has yet to give its reaction to the responses to those consultations. The government has also announced further reviews focussing on TUPE, Tribunal awards and redundancy procedures. We look forward to contributing to those discussions through consultation on well-prepared proposals which allows sufficient time for considered responses.

__________________________________________

The Law Society 2011

Page 3 of 3