UK firms say hands are tied by red tape

The CBI has called for a pause in regulation-making to allow employers to catch up with their everyday work. But will the Government listen, asks Richard Staines

The message to the Government was clear at last week’s CBI conference. Employers are so tied up with red tape surrounding employment regulations that they are unable to concentrate on making their businesses more competitive.

The CBI report Cutting Through Red Tape shows that the 15 new employment rights introduced in the past three years have cost companies £12.3bn and taken managers away from their proper roles. The biggest problem is the way regulations are drafted and implemented. Employers are not consulted, the regulations are vague and implementation time is often too short.

The CBI wants a moratorium on new laws so that employers can turn their attention to business priorities. But what are the chances of the Government complying with this demand?

It was clear from CBI director-general Digby Jones’s speech at the conference that his concern went beyond ineptly drafted employment regulations. He told delegates that the Government’s policy in introducing a raft of rights for employees was fundamentally out of step with the needs of business, especially the need for flexible employment practices.

"The Government seems to think there are two silos out there – one called ‘business’ and the other called ‘people’ – and that you regulate and tax business in order to deliver benefits to the people.

"But of course that’s absolute rubbish. Businesses are people and people are business – there aren’t two silos at all," he told delegates. "Business needs flexibility in its practices – a lot less red tape and bureaucracy. This Government has been over-willing to pursue its social policy ends by imposing burdens on the private sector – and that is self-defeating."

Jones argues that employees will be the losers. "Regulations on business can put people out of work. There is less money left for business to invest," he said.

Such arguments strike a chord with personnel chiefs. Bruce Warman, personnel director at Vauxhall Motors, said companies’ own policies were often more radical than the requirements of legislation, but were threatened by the time needed to implement government regulations.

"We have worked hard to put in maternity and parental leave policies which go further than the legislation would require," he said. "This has given us an advantage and we could well lose this – I think my fear is the law could be used as a blunt instrument."

Cutting Through Red Tape points out that often, in translating EU directives into UK law, the Government has gone further than the originals required and bolted on other rules on its own initiative.

David Yeandle, deputy director of employment policy at the Engineering Employers’ Federation, said, "We have spent more time dealing with these laws than addressing issues such as improving productivity and competitiveness."

The chief criticism of the new regulations focuses on poor drafting, inadequate consultation and poor interpretation of European directives. "The Government should have spent longer consulting with businesses. And we need proper consultation periods – not just a few weeks or months," said Yeandle.

"The Government should sometimes be bolder in the way it interprets European directives, which are often quite vaguely written. In some cases, it is almost as if the laws were copied straight out – which passes the burden of interpreting them onto business."

Yeandle added that the Government should also provide better guidance for businesses.

These are lessons the Government should apply over the next few years as new European legislation is implemented, including laws on atypical workers, covering fixed-term and agency staff.

It seems the CBI has little hope of stemming the tide of legislation emanating from Europe. Romano Prodi, president of the European Commission, told Personnel Today that bureaucratic shake-ups in Brussels will make it easier for the commission to make laws.

He said a system allowing the commission to make laws requiring the signature of only one representative of each member state will soon be in place.

The CBI’s ambition to halt legislation also faces opposition from the TUC and the Government.

In an open letter to employers, released as the conference began, TUC general secretary John Monks dismissed the claims and blamed the problem on the CBI.

"We agree that the working time rules are complex and bureaucratic. Yet this is partly because employers lobbied for opt-outs and exemptions – and refused to sit down and negotiate how these would be implemented in a way that combines effective protection with ease of implementation," he said.

Cabinet Office minister Mo Mowlam’s response gave little hope to employers either. "We make no apology for introducing policies which ensure people earn a decent wage and have the right to paid holidays. Several surveys have dispelled the myth that the UK is heavily regulated," she said.

The OECD reported in 1999 that the UK had the lowest level of product market regulation and one of the most lightly regulated labour markets. "The Economist Intelligence Unit ranked the UK second only to the Netherlands as the best location for business, and the CBI reported the UK has more flexible labour market regulation than other European countries."

The best hope for employers, it seems, is that future legislation is at least implemented in a more employer-friendly way.


The CBI wants government to:

  • Ensure consultation periods last at least 12 weeks and employers have at least 12 weeks between the date they are published and the date they come into force,

  • Publish guidance before regulations come in, not after laws are published or introduced,

  • Give advance warning where new rights change payroll systems,

  • Not introduce employment rights in addition to those already in the pipeline from Europe unless there is a clear business/employment case,

  • Continue to press to ensure the EU social policy agenda reflects the variety of national employment models,

  • Not regulate beyond the scope of EU directives,

  • Be sensitive to the cumulative burden when regulating, particularly the impact on small firms,

  • Ensure regulatory impact assessments separate the costs of new employment rights from the costs of admin to introduce these rights,

  • Not introduce further requirements to pay benefits via the pay packet until changes in employees’ tax codes can be used,

  • Consider before introducing regulations whether good practice guidance would achieve the same objectives,

  • Make better use of the power of tribunals to award costs where weak or vexatious claims have been brought and should be able to award costs specifically to discourage unreasonable behaviour,

  • Strengthen the IT1 form to require more details of each claim and ensure the tribunal service only forwards claims to employers once it is fully satisfied with the details,

  • Ensure EU directives are clear and unambiguous and look at how other countries implement them,

  • Review the effectiveness and relevance of new legislation after a period of time.


Our campaign led the way

The CBI released Cutting Through Red Tape nine months after Personnel Today began its own campaign lobbying the Government to think more carefully before passing employment legislation.

Launched in association with the Employers’ Forum on Statute and Practice, the campaign urged for more consultation, better drafting of legislation and clear guidance on employment laws.

Campaign supporter David Yeandle, EEF deputy director of employment policy, said, "Most of the legislation is about people issues – pay, hours of work, procedures and maternity and paternity leave. These affect the day-to-day running of companies and are therefore important.

"The survey confirms what we have been saying in conjunction with Personnel Today – that we must have better regulations."

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