22/11/11

Against the backdrop of continued global uncertainty, weak domestic growth and increasing unemployment, the British Chambers of Commerce (BCC) today wrote to the Prime Minister and the Business Secretary urging them to adopt a cost-effective five-point plan for jobs. These measures would give companies, particularly small- and medium-sized businesses the confidence to hire in the months ahead.

The plan includes:

1. Immediate action to reform the employment tribunal system
Under the current system, employers often settle to avoid the cost and uncertainty involved in defending themselves against unjustified claims. The average cost for an employer to defend themselves at tribunal is £8,500. However three-fifths of tribunal claims are settled due to high costs, with the average settlement at £5,400. According to BCC research, one in five businesses has been threatened with a tribunal in the last three years.

The BCC urges the government to heed its longstanding calls to introduce fees for claimants accessing the tribunal system, and for all claims to be lodged with ACAS, not the tribunal itself. These measures would weed out unfair and unnecessary claims, and free up the system for those with genuine claims.

2. Impose a new no fault dismissal route for all companies with fewer than 250 employees
Over seventy percent of firms see dismissal rules as burdensome to their business. At a time when we need all the business growth we can get, these fears must be removed quickly.

The adoption of a new no fault dismissal route, like that suggested by Adrian Beecroft, would give businesses the ability to sever a contract, without fear of being taken to a tribunal, in return for a statutory level of compensation to the employee. A new compensated dismissal route would give businesses confidence, which is good for employers, employees, and the economy.

3. A three-year exemption from pensions auto-enrolment for sole traders taking on their first employee
In a recent BCC survey, a third of sole traders said than pension requirements were a total or significant barrier to taking on their first staff member. Between 2012 and 2015, all businesses in the UK must begin complying with the Pensions Act 2008.

Exempting sole traders from pensions auto-enrolment would remove a significant barrier for those business owners looking to expand their business and take on their first member of staff. In practice, this would mean that no start-up company would begin paying into a universal pension scheme until 2019, for three years or until they grew to over ten employees.

4. Cancellation of the proposed extension of the right to request flexible working to all employees.
Currently, companies have to consider flexible working requests from parents with children under the age of 16. The government wants to extend this to everyone, generating paperwork, bureaucracy, legal risk and uncertainty for employers.

72% of firms told the BCC that the extension of the right to request flexible working to all employees would be detrimental to their business. Employers can and do work voluntarily with staff on flexible working requests, so there is no new need for regulation.

5. Immediate changes to the Treasury’s existing National Insurance Contributions holiday
The current National Insurance Contributions holiday is poorly targeted, meaning that fewer than 8,000 firms have taken part in the £940m scheme. Currently the NICs holiday focuses on start-up date when very few new businesses take on staff in their first year.

Instead, the scheme should apply to businesses from the date they take on their first employee, rather than start-up date. It should also be extended across all sole traders, regardless of region. Reforming the scheme to support any company, anywhere in the UK, that is less than three years old, would help create jobs.

Commenting on the proposals, John Longworth, Director General of the British Chambers of Commerce, said:

“Businesses across Britain are busting a gut to strengthen growth at a time when there are many risks and potential pitfalls. By adopting these pragmatic, low-cost proposals, the government can give companies greater confidence to take on staff and create new jobs.

“It may seem counter-intuitive, but giving companies greater flexibility to hire and fire will actually spur more businesses to take people on. Current arrangements generate too much legal risk, stopping many business owners from taking on new employees, whether we’re talking about young apprentices, experienced staff members, or the unemployed. Taking on a new staff member is risky for firms. Boosting confidence by reforming dismissal rules for example, will create jobs. As well as freeing up existing businesses to create new jobs, the government must find new ways of encouraging people to start up their own businesses, and ensuring entrepreneurship is part of the UK’s culture.”

Ends

Notes to editors:

The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce, serving over 100,000 businesses across the UK, which employ over five million people.

Media contacts:

Liz Larvin
Tel: 020 7654 5813 / 07825746812
Email: l.larvin@britishchambers.org.uk

Lisa Morrison
Tel: 020 7654 5812 / 07717682221
Email: l.morrison@britishchambers.org.uk