£37 billion cost of employment laws

October 3, 2006

£37 billion cost of employment laws

Complying with new employment laws has cost firms £37 billion since 1998 and employers have little faith in the government’s ability to tackle the number and complexity of these regulations, according to a new CBI report.

With only two per cent of employers confident that the government will deliver on its promises of simplification and deregulation, the CBI is urging ministers to get smarter in the way they regulate workplaces.

The cumulative impact of 35 new employment rights over the last nine years, and the administrative burdens they have created, is revealed in the CBI publication ‘Lightening the load: The need for employment law simplification’. Their total cost is based on the Government’s own regulatory impact assessments.

Three-quarters of employers told the CBI that time spent administering and complying with new rights was damaging their business. Half say that labour costs have increased, two-fifths think workplace regulations have harmed the UK’s reputation as a place to do business and a third say they have adversely impacted on their ability to compete.

The CBI’s Deputy Director-General, John Cridland, said: “Companies don’t want to turn back the clock. They accepted many of the new rights, but they feel they are being strangled by too much complex and unnecessary red tape, which is holding back the growth of the business.

“Employment laws alone have cost businesses a massive £37 billion in the last nine years. Regulation has its place but the red tape they generate must not be allowed to undermine a company’s ability to get on with the day-to-day job of delivering to customers, increasing competitiveness and developing the business.

“Far too much time and money has been wasted on bureaucracy and firms are struggling with unnecessarily complicated and unclear changes to regulations.

“There should be a focus on encouraging a partnership between employers and employees rather than returning to an adversarial based approach. More support is needed, particularly for smaller firms, who need help in increasing workforce skills, productivity and innovation.”

In its report, the CBI argues no further rights should now be introduced until after the next election and is calling on the government to restrict itself to one employment bill per parliament. It should also review the impact and effectiveness of new regulations no more than two years after implementation.

In addition, the report makes a series of recommendations to the Government across a range of employment regulations, including:

Not gold-plating EU Directives. The CBI says regulations implementing EU Directives are often more onerous than they need to be

Reducing home-grown red tape by simplifying guidance and taking back the administration of statutory maternity and sick pay

Reforming the employment tribunal system which the report criticises for being too costly and adversarial, saying it puts procedure over substance and often elevates minor disagreements into formal complaints