News

September 21, 2012

Small firms to benefit from new employment laws

The business secretary, Vince Cable, has announced new steps to reduce employment law red tape and give firms more flexibility in managing their workforce.

The changes come in response to calls from business to simplify the process of ending employment relationships when they break down. But the Government has decided that it will not introduce a "no fault dismissal" process for micro-firms.

It is, however, supporting settlement agreements that help end employment relationships in a fair and consensual way. A consultation on how best to make this work in practice has started and Acas has agreed to provide a new code of practice. The government has also announced that it will consider moves to reduce the cap on compensation for unfair dismissal claims.

The UK has a lightly regulated, flexible labour market that the OECD considers to be amongst the best in the world, behind only USA and Canada. The recent World Economic Forum Global Competitiveness Report cited the flexibility of the UK's labour market as one of the main reasons for its improvement in the global rankings to eighth from tenth.

Business secretary Vince Cable said: "Our starting point is that Britain already has very flexible labour markets. But we acknowledge that more can be done to help small companies by reducing the burden of employment tribunals, which we are reforming, and moving to less confrontational dispute resolutions through settlement agreements."

Small firms recruit more freelancers

Meanwhile, an NOP survey of 1,600 UK small businesses reveals that small businesses are finding their own ways to add flexibility to their employment practices. The poll found that 60% say that they would rather hire a freelancer than a new member of staff as they are more flexible and bring key skills as and when the business needs them.

The survey, released by Freelancer.co.uk, also found that only 12% of respondents worried about the cost of getting rid of new employees if things go wrong. And 60% disagreed with the Government's assumption that small businesses were put off hiring their first employee by the burdens associated with employing someone.

Matt Barrie, CEO of Freelancer.co.uk, said: "While the Government changes are welcome, small businesses see these changes as well past their sell by date. Most small businesses are already employing consultants and skilled freelancers as and when they need them rather than worrying about hiring and firing employees."