Regulatory red tape tightens for employers

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THE regulatory burden on Scottish employers is increasing its stranglehold.

With the potential for fines and penalties for infringing workplace laws, the UK government’s red tape challenge does not appear to have had any positive 
effect for employers. Instead of being able to focus on the business of their businesses, owners and managers are forced to spend too much time on new rules affecting the workplace.

This is felt by many employers grappling with immigration rules. With UKIP success in council elections in England and Wales, the “immigration” political football is likely to be kicked about yet again. The theory is that tinkering with immigration laws to tighten controls defuses the threat posed by UKIP to the big three Westminster parties. The consequence for Scottish employers who hold sponsor licences is an increasing burden, as the rules change so frequently.

At the moment in immigration, there are two hot potatoes. The rules which place restrictions on Bulgarian and Romanian workers who come to the UK for work will disappear entirely in January 2014. As a result, there is a fear that hundreds of thousands of Romanian and Bulgarian nationals will come to the UK in search of a better life and rely on the UK’s welfare system. Whether this fear will materialise remains to be seen but its political significance will continue to be felt in the months ahead.

Also, in July 2013, the UK will open its doors to Croatian nationals, provided they register for work. There are new rules for registering Croatian workers, different to those rules applying to 
Romanian and Bulgarian workers. This will almost certainly clog up the UK Border Agency’s systems and potentially slow down the recruitment of other migrant workers.

Although there has been a staged process for implementing the new pension rules, many employers already have obligations to meet. Every employer should know when the rules will bite for their organisation.

By October 2018, every employer in the UK will be obliged to deduct 5 per cent of the employee’s gross salary, add an employer’s contribution of 3 per cent and put both elements into a 
pension fund for the employee. Some employers will be thinking about changing their benefits packages to afford these new obligations. Employers can do so but they will need to follow reasonable procedures and collective consultation obligations. Other employers may need to make changes to existing pension arrangements to comply. This will invariably require consultation in accordance with 2006 Pension Consultation Regulations.

Legal challenges to employers in a pensions context are going to increase in the future with challenges from the Pension Regulator, court action by unions or employees and compensation claims in the Employment Tribunals for protective awards, discrimination and unfair dismissals.

In employment law, many changes will flow from the new Enterprise and Regulatory Reform Act 2013. Although it is not known when all the changes will be introduced, the following are on the horizon: new Employment Tribunal procedural rules; changes to whistleblowing laws, to introduce a public interest element; “protected conversations” rules, which allow for confidential termination negotiations; new caps on the compensatory award; fees for employees for bringing tribunal claims; employee shareholder status with restricted employment rights; changes to the Transfer of Undertaking Protection of Employment Regulations 2006, and financial penalties for employers for breaching employment laws.

In employment law at least, after these proposed changes, there will be a shift in the current balance of employer and employee competing interests in favour of the employer. However, there will be a period of adjustment before the benefits are fully felt by employers.

Employers are entitled to be sceptical about whether these changes will 
deliver the benefits that politicians assert. And there is a significant sting in the tail – a new fine for employers who breach employment laws in addition to compensation claims payable to employees. With such a raft of laws affecting workplaces, employers need to take special care to ensure they comply with this red tape in order to avoid the fines, penalties and compensatory awards that can be made against them.

• Robert Phillips is a solicitor at Simpson & Marwick.