Firms say that the UK’s business is at risk from worker reforms

According to a recent survey, employers believe that the UK’s new employment policy will make it less attractive to foreign investors if implemented in its current form.

According to a study by the Confederation of British Industry, 62% of respondents believe that the UK will be less attractive (26%) or even much less (36%) for business in five years’ time if reforms are not altered.

In the latest CBI/Pertemps annual Employment Trends survey, nearly two-thirds (39%) of firms viewed the employment regulation regarding flexibility as a risk to the competitiveness on the labour market. This number will jump to almost three-quarters (58%) over the next five year period. The survey respondents identified this as the most significant change in future threats to competitiveness. Other major threats include skills gaps (71%), labor shortages (58%), and labour costs (56%)

Only one out of four employers felt they could absorb the additional costs associated with anticipated changes to employment laws without affecting investment, growth or jobs. Over half of respondents (54%) disagreed or strongly disagreed that they could afford the higher costs anticipated from the reforms, without experiencing unintended consequences.

Matthew Percival is the CBI’s director of future work and skills. He said, “We share with the government the primary mission to increase investment in the UK, to deliver sustainable, long-term growth, and to raise living standards across the nation. The government has a set of clear directions through its Make Work Pay plan to support employees.

While the business community recognizes many of the reforms’ objectives, the lack details about how these reforms will be implemented has created damaging uncertainties. Businesses worry that the wrong approach to achieving these reforms could have unintended negative consequences on growth and workers.

The hard truth is that many companies, particularly SMEs, are already struggling with their bottom line and that additional pressure from employment costs may hinder their ability to grow, invest and hire.

CBI believes that collaboration with the business community is crucial to reassure employers of the impact reforms will have on the flexibility of labour.

Percival said: “Working with businesses to develop details as the government transforms its ideas into legislation is critical to the success of the plan’make work pays’ and simultaneously achieve their objective of achieving 80 per cent employment.

“For example, businesses often view hiring a new employee as a risky move, especially for small business. The government says that businesses are allowed to use probationary periods. However, 75 percent of respondents said they would be more cautious when hiring new employees because of the potential for decisions made at the end of the probationary period being challenged in an employment tribunal. It can be avoided by a well-designed policy that applies new probation rules requiring only a minimal process of dismissal. Incorporating the voices of businesses into a two-way dialogue will result in a productive partnership with the government that leads to better policy decisions.”

He believes a timeline that allows companies to prepare and co-develop policies will “drive confidence” and “drive certainty”. A public commitment that the new probation rules would be ready before the old rules were removed “would smooth the transition to an equitable and flexible labour market, which is fundamental for growth and works for both employees and employers”.

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