Are the coalition’s proposals for employment law reform enough to satisfy UK businesses?

Vince Cable

The UK has one of the most flexible labour markets in the world, second only to the USA and Canada according to the OECD. Despite our economic difficulties we have had over 1m new jobs created in the private sector over the last two years. But we know we can do more to increase employer confidence. The government has firmly rejected ideas of a hire-and-fire culture - we are not going down that road. We want a better balance. We want to create an environment, especially for small companies, that is more practical and based on conciliation. This will help reduce the number of employment tribunals and encourage firms to take on more staff. Our new proposals are part of a comprehensive overhaul of employment law with the aim of further strengthening the flexibility of employers without eroding the rights of their workers.

Vince Cable is secretary of state for Business, Innovation and Skills.

Ryan Bourne

The proposals are a step in the right direction on employment tribunals and unfair dismissal awards, but as a package they are too timid. It is sensible to try and cap unfair dismissal payouts to a year's salary, for example, to provide certainty of the risks borne by employers. However, this should have come alongside placing a cap on awards for discrimination-based dismissals, streamlining the two as the Beecroft Report recommends. Instead, there is now a strong incentive to mount such claims in the hope of settling with employers for a higher payouts. Further, there was no meaningful attempt to revisit some of the more damaging aspects of the 2010 Equality Act and TUPE legislation, merely more consultation on the latter. A radical government would have looked to exclude very small firms (less than 10 employees) entirely from a raft of regulation that is stifling entrepreneurship.

Ryan Bourne is head of economic research at the CPS think tank.