BSA Blog: The unintended consequences of changes to employment regulation

  • BSA staff
  • 31 Mar 2015

In recent years, there have been numerous changes to employment law and regulations, including changes to TUPE legislation, right to work checks, right to request flexible working, the introduction of the ACAS early conciliation process and the introduction of Shared Parental Leave, among others.

In addition to this, cases going through the tribunal system and government reviews of employment practices and contracts, such as holiday pay, collective redundancy, zero hour contracts and apprenticeship funding, have created uncertainty for business.

Whilst reforms to employment regulations in isolation may have met the government’s priorities to reduce bureaucracy for businesses and support a flexible workforce, collectively they may be having a contradictory effect.

Businesses have to make substantial changes to their internal policies, practices and systems to be able to comply with the raft of changes to employment regulation. Not only does this place huge additional administrative pressures on businesses, take a considerable amount of time and add cost in terms of implementing new systems, it also requires huge resource to re-train employees at all levels, including line managers, frontline staff and executives. The current scale and pace of regulatory change is limiting companies’ ability to recruit new staff, invest in plant and machinery and expand into new areas.

In areas where uncertainty remains as to whether regulation will change in future, for example where tribunal decisions are pending, businesses are put in a position of not being sure if, when and how to act. For example, BSA members want to be compliant with collective redundancy processes and are abiding with the current position in light of the most recent court ruling. However, the position may change again depending on the final decision of the Court of Justice of the European Union (CJEU), meaning that businesses would, yet again, have to amend their practices.

Apprenticeships funding is another example. BIS consulted on the reform of apprenticeship funding last year and the government response, published recently, concluded that further consideration is needed. The latest proposal is for a digital voucher scheme. Until it is clear how the system will work and what contribution will be expected from employers, it is difficult for businesses to take on additional apprentices, despite supporting the policy.

Another concern is the impact this is having on the flexibility of the UK labour market. Workforce flexibility is vital to support businesses to grow and research has shown the UK’s flexible labour market has underpinned economic growth and job creation. In the fast-paced contractual environment in which BSA members operate, maintaining a degree of flexibility is key. Flexibility enables companies to respond quickly to new opportunities, meet the pressures of fluctuating demand and mobilise new contracts quickly and efficiently. Further restrictive regulation, reviews into holiday pay, which will incur significant future costs for businesses, and reviews into zero hour contracts, for example, could see this flexibility reduce.

There is a need to distinguish between bad employers using employment arrangements exploitatively and good employers who have genuine business need for flexible working arrangements, and work with employees to ensure they understand and are supported. Tarring all employers with the same brush by proposing sweeping changes which affect all employers could damage the flexibility of the workforce. Stronger deterrents, such as penalties and naming and shaming bad employers, would be a more reasonable way to ensure a fair labour market without impacting on businesses’ ability to grow.

We urge the next government to see the big picture around employment regulation. It should pause to give businesses time to understand and implement the raft of regulatory reforms facing them. It should also consult widely with business to understand the pressures it is facing, unblock regulation that is genuinely holding businesses back and find ways to support a flexible workforce underpinned by good working practices.

  Related topics: Human resources and skills, Economy and growth