The Government’s plan for growth, unveiled last month, focuses on business as the vanguard of economic recovery but companies are facing a wide range of new employment regulation.
Berwin Leighton Paisner employment law partner Marian Bloodworth says: “Businesses seem to have had a piece of new legislation every day since the beginning of the year.
“We are still grappling with last year’s Equality Act and all the legislation coming from Europe. On top of that, there is new matern-ity and paternity legislation, tribunal reform, the scrapping of the default retirement age and the Bribery Act. You could forgive any employer for asking when all this will stop.”
The ending of the default retirement age will have the most impact on employers. It will be phased out over a transitional period until September 30, after which time employers will be unable to retire staff over 65 and will have to objectively justify a forced retirement.
Businesses that become more appealing to older workers will eventually reap the benefits, with one-third of UK workers aged over 50 by 2020, but the move has received a mixed response. One-fifth of employers surveyed by the British Chambers of Commerce said it would harm their business.
CMS Cameron McKenna partner Anthony Fincham thinks scrapping the DRA will lead to more age discrimination claims. He says: “This idea is right in principle but will give rise to problems in practice. Employers will either have to put a management process in place to deal with employees whose performance atrophies with age or they will have to justify a forced retirement.
“This will work in some industries where health and safety risks increase with age but by and large it will just create more scope for claims.”
Acas has suggested that employers should carry out annual performance reviews to tackle the issue of retirement. But Bloodworth says: “Acas is saying employers should ask employees about their short, medium and long-term plans but that is fraught with problems. If they use one wrong phrase they could be facing a claim of age discrimination.”
BusinessHR senior adviser Alison Blackhurst says: “Firms can no longer tolerate poorly performing staff coasting towards retirement in the hope that they may eventually retire. Proper performance management processes will need to be implemented and managers trained in these.”
But Bloodworth says: “The resources to undertake performance management might not be there for some companies in terms of both time and cost.”
Fears that ending the DRA would increase costs have been allayed by confirmation that group risk insured benefits will continue to end at 65 but there is other regulation that could affect employers.
The agency workers directive comes into force in October and will see agency workers receive the same pay as full-time employees. Fincham says: “It is a significant piece of legislation. More expensive agency workers will be the main outcome but it will also result in employers looking to source flexible working requirements internally, which is more for them to deal with.”
Another regulatory change is additional paternity leave, which allows fathers to take up to 26 weeks off work during the first year of a child’s life with statutory paternity pay, provided it is not taken while the mother is on leave.
The annual cost to employers is estimated at £3m-£15m. Fincham says: “It will be an extra disruption for businesses. However, the pay is 14 weeks at £128.73 and 12 weeks unpaid and as people are worried about the money side of things, I do not think this will propel change in the same way as the DRA.”
A potential 250,000 men could be eligible for additional paternity leave but the Government estimates only 10,000 to 20,000 will take it up. A uSwitch survey of 1,000 men found 41 per cent would not take it because the pay is too low and extended leave would damage their careers.
Blackhurst agrees the legislation’s impact will be minimal. She says: “It is expected that less than 6 per cent of those eligible will take up this right.” She believes the effects will mostly be felt by small businesses. “Balancing this within a slimmed-down workforce may be a very difficult task for managers.”
The Government has introduced some measures to ease pressure on small businesses and start-ups, including doubling entrepreneurs’ relief to £10m, 21 new enterprise zones and raising the enterprise investment scheme and venture capital trust investment limits to £15m.
The Government has gone a step further and introduced a moratorium on new domestic employment regulation for businesses with fewer than 10 staff, of which there are 4.6 million in the UK.
But Blackhurst says: “This only applies to new domestic regulations. All current legislation, such as the DRA and additional paternity leave, will still apply, as will European regulation.”
As 72 per cent of the total cost of UK regulation comes from Europe, according to the Federation of Small Businesses, the reach of the moratorium will be limited. Blackhurst says: “Small businesses are already caught by the most significant legislation. You have got to feel sympathy for small businesses as they will not be getting much of a breather.”
Legislation such as the Bribery Act, the extension of the service period for unfair dismissal and the positive action equality law will also put more pressure on businesses this year.
Bloodworth believes the Government needs to offer more clarity to employers.
She says: “We are seeing more inventiveness with discrimination claims. Employees are saying, ’I do not have a religious belief but I do have a philosophical one that is strong enough for me to bring a claim.’ Someone has even brought a claim against the BBC based on their belief in the higher purpose of public broadcasting. The Government needs to exercise common sense.”
Bloodworth thinks the Government needs to improve communication with employers. She says: “At the moment, there are mixed messages. For example, the Government has just repealed the extension of flexible working hours for people with children under 17 but in the same breath it says it is still going to consult on extending it to everyone.
“Following new legislation will seem like a gamble for businesses with that much uncertainty.”
Fincham thinks the Government needs to make a more fundamental change in its approach. He says: “It is focusing too heavily on employment law as a remedy for the ailing economy. The path to growth lies in getting more money circulating in the economy, not fiddling at the edge of employment law. A plan for growth is a question for economists, not employers.”