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Employment Law Reform – What does it mean for small business?

The Government’s proposals for employment law reform that we have been drip fed  over the past few months now seem to be coming through as an avalanche as they look for ways to get the economy moving.  Apart from the confusion caused to my clients at the haphazard way information is being disseminated,  the proposals are being met with  tentative optimism by most of  my clients,  many of whom are running small businesses and trying desperately to keep their staff in work, despite their belief that the odds are stacked against them when it comes to employment law compliance.  Like much of what has been emanating from the walls of Downing Street since the coalition government took office in May 2010, I can’t help feeling that the sound bite proposals that are coming through on employment law reform are tackling the problem from the wrong end.

We have heard about the proposals to extend the qualifying period for unfair dismissal claims from one to two years, and only last month we heard that the abolition of the entire concept of unfair dismissal might be the way forward. We have now been told that the government is considering exempting employers with less than 10 employees from the unfair dismissal laws, so it seems little wonder that we are all confused!  Added to this are the proposals communicated to us by Vince Cable  to reduce consultation periods for large scale redundancies and to introduce fees (for those who can afford them), for employees bringing Employment Tribunal Claims.   As the vast majority of ET claims will be made by those who have lost their jobs, one wonders how many of them will fall into the exempt category when making such a claim.

It’s clear that the government have decided to introduce measures to try to ease the burden on the Employment Tribunal system which is currently creaking under the weight of an increasing number of outstanding claims, but isn’t their proposal to introduce compulsory mediation through ACAS  merely shifting the location of the bottleneck?

Last weekend further proposals emerged to reform the current medical certification of sickness process and to introduce, dare I say it, another quango (I thought we were getting rid of these), to assess the long term sick’s fitness, or otherwise to return to work.

More curious than this, the latest proposals include the concept of ‘protected conversations’ between employers and employees, as the solution to all employment disputes.  The fact is that ‘protected conversations’ lead nowhere in reality.  What does a boss say to his employee during such conversations that is going to make any difference to the outcome of what will necessarily become a formal situation if it is to progress any further?  Will an employer be able to deny the employee the opportunity to raise a grievance following such a conversation if the employee feels unhappy about what has been said to him?  Will an employee be unable to make a constructive dismissal claim if his employment is, to all intents and purposes, terminated whilst in such privileged discussion?

Whilst I believe that these proposals may well be giving employers a false sense of security, that they will no longer need to worry about how they hire and fire their staff, (what about discrimination and whistleblowing – still protected under the law from day one of employment and no signs of this legislation being modified under the current proposals), this whole debate is predicated upon a confrontational relationship between an employer and his employee, which, by some strange logic, the government seems to think will lead to employers feeling more comfortable about taking on staff and thereby boosting growth in the economy and solving our unemployment problems in one hit.

Whilst I applaud and embrace the recognition at last by the government that employers have for  too long been held almost powerless to act when their businesses have been at risk from poor performers or the abuse of sickness absence rules, these proposals are hardly conducive to building strong and positive workplace relationships that encourage loyalty, motivation and commitment from employees.  When you work from the premise that all employees are naturally bad, and therefore an authoritarian structure which places all power in the hands of the employer (all of whom must be naturally good, fair and trustworthy) is needed to control and maintain a compliant workforce, surely you must begin to wonder what century we are living in?

Maybe I am being old fashioned, but I would like to think that the starting point for recruiting new staff has to be a positive belief by both parties that the employment relationship will flourish and grow and that both parties will work together to ensure that this happens.  If we start the relationship by thinking ‘well if it doesn’t work out I can get rid’ costly mistakes will be made – the average cost to an employer of recruiting a new member staff is in excess of  £5,700 and that doesn’t take account of the induction and training required – that are hardly likely to help businesses to flourish and grow. The mutuality of obligation between employer and employee is surely the way we should be approaching this relationship, rather than attempting to reverse the balance of power and give all the authority back to the employer.  Most enlightened employers have known for years that success in business is only possible if you nurture and commit to your staff, so how is that going to work if all security and protection is taken away from employees who could be fired on the whim of their boss?  Is this really going to encourage the development and growth of business?

In the midst of all of this, Richard Branson having recently purchased Northern Rock at a knockdown price, courtesy of the British taxpayer, is now raising the profile of social responsibility and about how we should stop thinking in terms of a confrontational workplace but we should all be supporting each other at work, taking care of each other and our environment and developing a shard value culture – the future route to business success.   The profit motive is not what is needed to promote successful businesses in the future, says Branson, but  socially responsible employers who can demonstrate values and a culture that encourages people to want to work for them is the way forward.   How does this sit with the Government’s approach to Employment Law Reform?  Somehow it does, even in these debt stricken times, ring true that what motivates people to do a good job is changing – and it’s becoming less about what your employee can do for you, but what you can do for your employee.   So, picture an employer who wants to take on new staff having recently been released from the shackles of overbearing employment law compliance.  The employer may be congratulating himself on his high turnover of staff resulting from the ease with which he can now dismiss employees without fear of retribution – but how many potential employees would choose to work for him, knowing they were entering an environment of conflicting values from the start?

 

Since the recession of 2008 we have all in our own ways been brought up short by the realisation that we are living in a very different society to the one we have grown up in since the boom years of post-war Britain.  Since the boom years of the fifties and sixties we have come to believe that we are,  quite naturally, living in an ever expanding economy providing more and more opportunity and wealth than before, on a trajectory that was to continue forever.  We have had to re-assess our priorities and consider our values and what is really important to us, and that has led to a sea change in the way we now view the world.

Many  of my clients who have been forced to make redundancies are now working with much leaner teams, many of whom have sustained pay cuts that would have been unthinkable 5 years ago.  These businesses are now looking at ways to motivate their employees that don’t necessarily impact  the bottom line, and are coming up with a new culture and value system that is encouraging the employees to take a stake in the future of the business, and to help mould it into the type of organisation that reflects their true values.   It is largely an untrodden path that these clients are now following, but I am already getting reports that the staff are buying into this new culture, feel appreciated and influential in the decisions that the businesses are taking and are prepared to take the hits as well as the rewards that come with being passionate about something other than the size of their paypacket.

So when we talk about making it easier for employers , simply by making it easier for them to get rid of staff when things aren’t working well, is this really the answer to our economic ills?  How many bad recruitment decisions are going to be made by employers who know that they can just dismiss staff whenever they want to, how many employees will be afraid to take time off and limp into work being 50% productive,  lest they be sought out by the independent assessor to check if they are really sick?  How many employees will spend a huge amount of time worrying that they may lose their jobs at the drop of a hat, rather than devoting their energies to ensuring the business is the best it can be?  Surely, it has to be true that if you look after and trust people to do a good job for you, they are much more likely to do it well than if they are despising you for the power you have over them and their economic security.

So, whilst the reform of employment law is necessary to free employers to make the right decisions for the growth and development of their businesses, should we not be thinking about developing legislation that leaves both employers’ and employees on a more equal footing.? Yes, sure, employees should be expected to perform effectively in their roles and the painfully slow processes that exist currently to deal with poor performance does need a serious overhaul.  But an enlightened employer might be wanting to look in the mirror before dishing out sanctions and firing poor performers.  Have I recruited the right person for the job, have I created the conditions in which the employee works well, should I be encouraging the employee to contribute to my business decisions and  perhaps I should be working on strengths rather than weaknesses.  Is the employee proud or ashamed to be working in my Company?

For me, unsurprisingly, it always comes back to the same thing.  If you get the infrastructure right, recruitment, training and development right and put clear and reasonable policies and procedures in place, you are unlikely to find yourself in the position where you are going to be faced by confrontation and disputes that take you in the direction of the legal system of which we all live in fear.  Take care of your employees, nurture, develop and involve them in your business decisions; be fair, transparent and supportive in the way that you treat them and you are far less likely to be seeking out a ‘protected conversation’ or grabbing their personnel files in a moment of panic to find out how long they have been working for you!