Press Coverage

Being an Employer "it's a nightmare"

REAL Business - 2002-07-01

Novice Entrepreneur: Jeremy Rainbird (JR) is MD of 4-yr old TV production company Addiction Hardened Campaigner: Simon Bartley (SB) is chairman of the CBI SME Council and MD of the Enterprise Group The Recruiter: Zena Everett (ZE) is the co-founder and MD of the recruiters' recruiter Perriam and Everett. Legal Eagle: Rebecca Thornley-Gibson (RT-G) is an employment law specialist at asb-law. Employees' Friend: Brendan Barber (BB) is the deputy general secretary of the TUC Big-hearted Boss: Henry Stewart (HS) is MD of 12-yr old Happy Computers Employers' Aide: Sarah Porter (SP) is the head of the employment group at law firm Kemp Little.

RB: Is it becoming ever harder to be an employer? SB: Yes. The largest issue is the changes to employment law and employment practices, regulation, red tape, call it what you want.
All of it impacts on smaller companies. For smaller company owners the most critical element in their armoury is time. Every bit of legislation that comes in, even if it doesn't directly involve the company or the employer, requires somebody to look at it to decide whether it's going to be relevant. In small businesses, that just takes away time. And it takes it away from the people who drive the businesses.

RB: Jeremy, you've been running a business for four years. Do you agree? JR: Totally. We moved to our current office and expanded a bit and suddenly realised that we had no legal background, if something were to go wrong, if, for whatever reason, someone were to leave the company under a cloud or whatever. I realised very quickly that the 18 staff that we had amassed needed someone, literally a full-time member of staff, to manage them. Suddenly I found that we had to pay £22,000 a year for a general manager who's in three days a week. All she does is employment, making sure the staff are happy and making sure that we've covered our backs. That's amazing.

RB: Your business uses lots of freelancers and employees on part-time or fixed-term contracts. Does that present peculiar difficulties? JR: It's a nightmare. Getting someone who's only in the office for two days a week to sign something that protects you if they send some horribly offensive material through one of our computers is a nightmare. We will have to get them all signed shortly. And we'll have to tell anyone who doesn't sign that they won't be working with us in the future. Which is something I don't want to have to do.
ZE: My business is a recruitment agency. We recruit staff for other recruitment companies and the government red tape in that area is an absolute nightmare. I do worry that maybe there's legislation that I don't know about.
HS: I cannot think of a single example of red tape from the government that gets in the way of our business. We have employment contracts that's good practice; we have health and safety again, that's good practice. You talk about employing someone to look after your staff, that's part of motivating people and running a business. IR. But I motivate them myself I shouldn't need to employ someone just to look after them legally. I implement all sorts of motivation schemes, I give them bonuses, I pay for their travel, mobile phones, I buy them lunch every day. I don't need to employ someone to do that.
HS: There are genuine issues that small businesses face around finance, and access to expansion. I instead we're a bunch of whingers in this country complaining about something which, in my mind, is hardly a worry at all.


RB: There is also an issue of employer ignorance. Employers aren't just worried about what they know about, they're worried about what they don't know about. SP: There's a lot of new legislation coming in and to some extent you only really need to know about it if there's a problem. It's only when somebody comes to you and says, "I've read about this and I really want you to do this for me", that you need to start to know about it. There's a lot more employee awareness these days about what their rights are, which may start to impinge on what you have to do in small businesses.

RB: Brendan, the perception by employers is that employees are increasingly aware of their legal rights and are pushing those rights to extremes. BB: What we're talking about here is trying to strike a fair balance between the people running organisations to be able to do that efficiently, but recognising that the people they employ have interests. Yes, there was a period where the caseload of issues going into-the tribunal system was increasing. In the last year or so it has flattened out at about 130,000 cases a year. In an economy the size of ours I think that's a low number. It is reasonable to expect anybody running a business to know what they are required to do when they are employing somebody. There is a major problem in terms of employment practice standards in an awful lot of small businesses. I don't think we're going to improve that by cutting away legislation and making it easier for employers to treat people badly.
SB: Most of the red tape and regulation that's coming through is doing nothing about resolving the situation of the bad employers. What it's doing is putting more of a burden on the good businesspeople. This knocks their productivity downwards. Nobody goes out and polices the part of the economy where the real bad bit of employment happens.
ZE: Why is it the responsibility of small businesses to make sure that people can spend time with their children? Instead of messing around with parental leave legislation it would be far more helpful to most of us if the government reviewed the tax laws so that we don't pay NI and PAYE costs for childcare out of our already taxed incomes. More affordable child care would bring more women back into the workforce. That would solve far more problems than burdening small businesses in the way they do now.
BB: But take the issue of agency workers. There's going to be quite a lively debate about this because there's a European directive that will potentially introduce a new regulatory requirement in terms of agency workers. At the moment there is a huge pay gap. It's equivalent to something like £ 100 a week. Those problems aren't going to be remedied without some intervention.
SB: Hold on. In the construction industry if you go onto a site, agency electricians are being paid more than the electricians are normally. And why are they being paid more? Because there's the flexibility that allows you to say to them, "sorry but we don't need you next week.'
BB: There are a lot of people working for agencies in long-term employment relationships. And the research shows that their earnings levels are significantly lower than people doing comparable jobs on a permanent basis.
SB: I know of electricians who want to work every single hour that God sends. They'll work weekends, anything. They have to be stopped working more than three consecutive weekends. Then there's uproar, people saying "we've got a right to work overtime."


RB: Brendan says that employment tribunal figures have plateaued. But are employers having to be more cunning in the way that t ey put together their relationships with their employees because they're worried about tribunals? RT-G: One of the reasons those figures may have plateaued is because of the use of compromise agreements and the fear factor. Employers are terrified of going to a tribunal and being struck down on a technicality, on a procedural unfairness point. They'll think, "we have all the policies, we have all the procedures, we've trained our employees in respect of these policies and procedures, we've adopted best practice"... and there'll be some ridiculous procedural technicality at the end. Tribunals are also geographically spread out. Each tribunal has different directions for hearing a case, so you never quite know how that particular tribunal is going to react. Because of that inconsistency, it is a bit of a lottery when you go into the tribunal. On paper you can have a tremendous case and you can get in there and have an Oscar-winning performance from the applicant, which totally turns it around. At the end of the day it's who the tribunal believes.

RB: Has the tribunal system erred too much on the side of the employee? SP: The tribunal system is fairly strained at the moment. A lot of cases are going through. One of the issues is that when an employee sues you, it can take up to 12 to 18 months to get any closure. All employers have a perception that tribunals are somewhat biased in favour of employees. I don't actually think that's right. Tribunals that see a frivolous case take a very strict view of it. Tribunals will expect far higher standards of a large employer with a household name than they would of an entrepreneurial business with limited resources. They would expect a fair standard of behaviour towards employees, but they won't expect a very rigorous process. There is some flexibility.
SB: I don't think that there's a feeling of unfairness. If you lose, you're always going to bitch about it. If you win, you're always going to be happy. The real grumbles are about procedure and the feeling that anybody who is caused to leave a business is automatically funnelled by the process into filling in a form in order to go to an industrial tribunal. If somebody said, "I don't know whether you've got a 100 per cent chance of getting this but it's not going to cost you any money and you might get £20,000 at the end of it, fill in this form here and let's see where we go," then people are tempted. Then, six months down the line, the employer - who's concerned about time, evidence, the collection of data, the fact he or she has had to go off to a lawyer's office and might have to go to a tribunal - eventually says, "Oh God, I'll give him £5,000 in order that it doesn't happen". It is a hot topic at the moment because of the review of industrial tribunals. Let's face it, there wouldn't be a review of the industrial tribunals going on if it was working perfectly.
ZE: I've come close once to a tribunal. That got very personal. It made me realise long after the event that you need to treat your staff decently - which is probably what your manager is actually doing now just making people feel important. It's giving them attention that's more important than anything else. When I've had bad leavers, I've always not liked them, they've not liked me, it's got personal and it's got quite nasty and I've been up for a fight. But in most cases, it's because you're not treating your staff decently that there's a problem.

RB: Has the problem been exacerbated by the claims agencies? ZE: I wonder how many staff really want to go to tribunal because it's going to be quite difficult for them to get another job. The employer can drag it on for quite a long period of time, so they've really got to hold their nerve. And entrepreneurs can be quite keen for a fight if they think that they're right. People are not quite as keen to go to tribunal as you might think. Is the £20,000 really worth the 18 months out of the job market and the stigma of winning or losing?

RB: There's a common perception that it is almost an automatic step for an employee who has to leave an organisation to go to a tribunal.
BB: The evidence just doesn't support it at all. I mentioned a figure of 130,000. That's the number of claims that are logged in the system; two-thirds of those are settled without going to a tribunal hearing.
RT-G: But a claim will have been issued as a threat, won't it? So that they can then start to negotiate a settlement for the employee.
BB: But I'm not sure what the alternative is. Are we saying that there shouldn't be protection in these areas, that employers should be free to sack people unfairly? That employers should be free to operate race and sex discrimination? Either we're arguing that or we're arguing that there's actually a better method of dealing with these issues and providing a remedy for those. Now I don't think the tribunal system is perfect. When it was set up it was meant to be an informal process for resolving problems without the need for a lot of legal representation for the parties. That has rather broken down. But it is nevertheless a better process, with people who have a degree of industrial experience applying their judgment, rather than a strictly legal process.

RB: What recommendations is the TUC making to the review of industrial tribunals?
BB: We would like to see less delays in the system. But the mythology is enormous. There's this impression that people are making huge amounts of money out of claims. The median level of award is still about £2,500 - even thought the limit was increased so that potentially awards could be made up to £50,000. People can go through an awful lot of grief, having had their working lives hugely disrupted and they finish up with a very modest amount of money.
HS: I was sacked and I thought that it was dreadfully unfair. But the idea of going through this process of an industrial tribunal? No thanks, I want a life.
RTG: In the hearing before one tribunal, I was having a chat with the applicant who had been made redundant. The applicant let their guard down and said, "actually, I wouldn't have brought this claim if I'd got a leaving card." They'd worked there for 20 years and nobody had sent a leaving card around. That was the main reason for bringing the claim!
SB: Part of the problem is that conciliation has been a dead part of the exercise. We need to retrieve an element of conciliation, to try and resolve things before they even get to the quasi-legal stage of an industrial tribunal. When industrial tribunals were set up, opportunities were given for particular industries or businesses to be exempt from them and set up their own, industry-wide ones. But there's only one, in the electrical contracting industry. If you're a small business with a unionised workforce, and the union is going to represent the applicant, then you the employer are automatically going to find either a trade association representative or spend money on a lawyer. That just escalates the process, so at the end of it the dispute isn't between the employee and the employer; it's between the representatives on each side.

RB: Where will there be greater regulation of the employer-employee relationship in the next two, three, four years?
SP: All sorts of new regulation is due about the terms on which you must employ people. For example, fixed-term contractors having the same right to benefits as permanent employees. Part-time workers must also be treated fairly pro-rata to the amount of work that they do. Changes to rules about people transferring between businesses and new data protection rules. We'll also see a drive towards giving people greater rights regardless of their status within an organisation. It won't matter on what terms you're employed - whether you're a contractor, a temp or a permanent employee - everyone's going to have the same common rights. This goes hand in hand with the move towards allowing more flexibility and moving away from the predominant practice of having mainly permanent, full-time employees.
RT-G: It's the statutory framework that is going to drive employers nuts. You've got to answer the employee's request within a 28-day period. Then they've got to get back with a decision within a 14-day period. Why should you have to do these things within a specified period? And you've only got certain criteria for refusing their requests. Another big issue, which we haven't really spoken about is nonparents. 'Why should we subsidise working parents? If they want to work let them get on with it. The other angle is consultation, making sure that the employee feels much more included within the business and an inclusive approach in terms of consulting with the employee.

RB: Do you see any changes in your likely relationship with your employees over the coming five years?
HS: Sounds like it'll take away my competitive advantage as a good employer by forcing everybody to be good employers! The only thing I'd ask for is that the government produces very simple guides to these things so we don't have to go off and pay huge amounts of money to work out what's going on. just more information, please. The basis of our employment package is that people work better when they are happy and feel good about themselves. I haven't seen any legislation that gets in the way of that.
JR: You just hope that because you are a good employer that they respect you and if your relationship does come to an end they respect that and don't see it as an opportunity to have a cheap go. I'm a bit concerned about benefits being the same between freelancers and full-time members of staff. I don't really see how that can work.
SB: There are a lot of issues to be wary of. Europe is the place that we've got to look to and decide whether legislation that is good for southern Europe is equally as good for northern Europe. The other thing is, the new regulations are going to affect people who generally obey and continue to be good businesses and good employers. I don't think they're going to do anything to affect bad employers. There is a real danger of, first, a decrease in the productivity of the law-abiding businesses, and a propensity and the possibility of increasing the non law-abiding businesses.
ZE: I agree. I think that any good employer is paying attention to those practices anyway. If my staff come to me and say, "look we need to work flexibly", then that's fine.
BB: The best companies build their commercial success on the basis of treating people well. I'm convinced by that. Most of the regulation we're talking about - which is about minimum standards - isn't relevant. Most employers pay above the minimum wage. They are looking to operate and to motivate staff through all sorts of things that are way above anything that the law describes. So the law is there to provide a safety net. I want to see the rest brought up to the standards of the best.

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