The venture capitalist and government adviser’s report seems to be predicated on the basis that employment protection is a major growth inhibitor in the UK economy. Employment protection has been something of a political football since its inception in the 1970s. I have never seen compelling research to show a causal link between low protection and growth.
The obvious place to look is Germany, an economy that is growing and has consistently grown in the post war period. It has a high (well above average) OECD employment protection rating of 2.63. The US has the lowest rating (0.85) and has enjoyed growth. Japan has a rating of 1.73 and has had a mixed time. What I glean from these figures is that the level of employment protection does not appear to be causally linked to growth.
I also glean that, we are already the third least protective economy in the OECD (with a rating of 1.09 behind ‘the Land of the Free’ and its neighbour Canada. Can there be much cutting to be done?
What you hear politicians of the right say when interviewed is that they speak to small business people in their constituencies and they hear the very clear message that it is red tape and employment regulation that stifles enterprise. Surely it would be more correct for them to say that what actually stifles enterprise is the attitude of small business towards employment regulation? The fear of its impact and a lack of trust in the system. It can’t be the existence of the regulation itself that stifles growth, look at Germany. The business people chose how to interpret the risks.
Perhaps we should be looking at educating business people about how to view employment risk, about the approach that is actually taken by employment tribunals, about the need to be able to show a good business reason for your decisions and the critical importance of issues such as ‘reasonableness’? At byrne∙dean this is something we have done for the last decade.
Take the right to request flexible working as an example. We are led to believe that Beecroft has proposed postponing the extension of the right to request flexibility until the economy is growing again. Remember that what is being proposed is an extension of the right to request something, not to have it. If an employer has a good reason for refusing, they can do that.
Developing the example, what is the impact on an individual employee of a refusal (or an agreement) to a flexible working request. Is the state of mind of the workforce something that should be the focus of policy makers? A central message that we have always given to managers and directors is that employee engagement is the key to managing employment risk. It is not the existence of employment protection that generates claims, it is the state of mind of the employee. Employees who are happy, who believe that they are in the right place and that they are being treated decently, tend not to sue their employer. And, of course, there is much compelling evidence that high levels of employee engagement drive productivity and creativity. Is a focus on employee engagement what will drive growth (and at the same time allow employers to manage employment risk?)