Legislation extends rights without derailing business

Since coming to power in 1997, Labour has introduced a raft of new employment legislation that has extended individual rights in key areas – wages, working hours, parental leave, flexible working and union representation.

Employers were quick to complain about the increasing burden of red tape, but new research concludes that the government has in fact achieved significant improvements in workers’ rights without hindering the competitiveness of UK plc.

A study by Sheffield University’s Institute of Work Psychology, commissioned by the Department of Trade and Industry, suggests that the reforms have successfully balanced the interests of social justice and business, providing minimum standards without jeopardising competitiveness or stifling entrepreneurial spirit.

Professor Stephen Wood based his report on a detailed analysis of published academic research on the impact of the main reforms. How-ever, his conclusion that these employment reforms have not hindered business competitiveness is strongly contested by employers’ groups. They have long argued that the repeated extension of employment legislation has swung the pendulum too far towards workers at the expense of business.

David Frost, director general of the British Chambers of Commerce, said the government needed to recognise that the UK economic climate was worsening and that business needed support “rather than more costly employment legislation”.

And CBI director general, Sir Digby Jones, warned that the government’s commitment to better regulation and a competitive economy did not sit well with pledges to deliver ever more employment rights.

He pointed to the CBI’s 2005 Employment Trends Survey, which highlights the cumulative impact employment legislation has had on employers since 2000. The survey shows that more than three-quarters of all firms are spending more time dealing with legislation-related administration, and about 60% say that valuable senior management time is being diverted to compliance.

But Wood said his research proved there was little evidence to support business moans about legislation.

“The CBI’s views are more to do with political posturing than fact,” Wood said.

He called on business to concentrate more on how work is organised and move away from the command and control model of management that is so prevalent in the UK.

“Employers don’t really see the importance of work organisation and individual skills and roles,” he said. “But they should embrace this approach because of impending labour market shortages and the government’s commitment to ‘playing the long game’ of employee-friendly legislation.”

The impact of Labour’s employment legislation

  • National Minimum Wage (NMW): The report highlights the success of the NMW in boosting the earnings of workers at the lower end of the pay scale. While the pay rises brought major benefits to lower-income workers, any negative economic impact on firms has been marginal.
  • Union recognition: Union recognition procedures introduced in 2000 have been successfully implemented in a way that previous attempts in the 1970s were not. Voluntary recognitions initially increased as a consequence of the statutory procedure and unions have genuinely used it as a last resort, as the government intended.
  • Working Time Regulations: Adaptation of the directive has been “quite easy to effect without major change” and, in general, the Working Time Directive has not been seen as a “major business issue”.
  • Family-friendly policies: Evidence on the impact of these changes suggests it has been limited. Employer awareness of the right to request flexible working has increased, as has the willingness to agree to the requests.


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