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Could UK business be facing a massive employment law bill?

In 2011 and beyond there a large number of radical changes being made to employment laws in the UK. Many of these will dramatically change the relationship between employees and their employers, and David Cameron has said that the changes are aimed at ensuring, “that employment law is no longer seen as a barrier to growth, while making sure that employees and employers are treated fairly.”

The British Chamber of Commerce (BCC) however has warned that many of these changes will do the opposite, negatively affecting growth and hampering the creation of new jobs. It claims that UK businesses will lose £23bn as a result of upcoming employment law changes being implemented over the next four years.

What changes are being made?

One of the most significant changes, due to come into effect at the beginning of October 2011, is that temporary agency workers will have to be paid the same as full-time workers once they have spent 12 weeks in a job. This is undoubtedly a positive move for workers who are effectively doing the same job as their full-time colleagues. However, it may eventually result in a diminishing number of long-term agency jobs as employers may find it more worthwhile to hire staff on a permanent basis. Less scrupulous employers may adopt an alternative ‘revolving door’ policy, replacing ‘temps’ after 11 weeks to avoid paying them the same as a permanent employee.

The BCC meanwhile has predicted that this change alone will cost UK businesses £1.5bn a year.

From 2012 employers will have to automatically enrol staff on a workplace pension scheme. This is another positive move for employees that will help safeguard their retirements at a time when the long-term security of the state pension is uncertain. And while the BCC estimates that these pension reforms will cost businesses £4.5bn, there will likely be a return in the form of more motivated, loyal and satisfied staff.

Changes to the parental leave system meanwhile will mean the length of paternity leave new fathers can take in their child’s first year will increase to 26 weeks. Statutory maternity and paternity pay will also increase from £124.88 to £128.73.

All employees will also soon be given the right to request time off from their job for training purposes. This will enable individuals to expand their skill sets and improve their future career prospects and promotion chances. Companies will also benefit from an increase in well trained staff. The BCC says that this change will cost businesses £175m a year.

Employment tribunal changes

Other changes are more directly aimed at making things easier for British businesses to deal with difficult employees. Upcoming reforms to the employment tribunal system will mean that only staff who have been employed for at least two years can take their employers to an unfair dismissal tribunal. They may also be required to submit a fee before the tribunal can proceed. While this may prove unpopular with some workers, the government says that the changes are aimed at cutting down the number of ‘vexatious claims’ brought to tribunal.

Differing opinions

The director general of the BCC has said, “Companies cannot generate growth and create jobs when they are facing a £23bn bill, just to implement new employment legislation.”

The government meanwhile insists that the changes will help businesses operate competitively. A Department for Business spokesman said, “The government is taking dramatic steps to reduce the burdens that regulation places on our businesses, removing barriers to growth."

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