Labour’s employment shake-up ‘makes Britain worse than France’

Labour is making Britain’s employment law “worse than France” with new workers’ rights that put bankers and lawyers in line for unlimited payouts if they win unfair dismissal claims.

In a series of private meetings last month, business leaders warned the Government that multinational companies will shun Britain if new laws championed by Angela Rayner, the former deputy prime minister, come into force.

Angry City bosses told officials at the Department for Business and Trade that scrapping a compensation cap on successful claims will make Britain less competitive than European countries such as France, Spain and Italy.

At one meeting between government officials arranged by lobby group TheCityUK, several attendees highlighted that the UK was moving in the “180-degree opposite direction to what our competitors have done” on the Continent.

The meeting – which was attended by legal and human resources executives at a number of Magic Circle law firms and City giants – stressed that it would leave Britain in a less competitive position than countries such as France, which is known for its onerous labour code.

“We will end up with worse labour laws than France,” said one person at the meeting. “And that’s really saying something.”

Unlimited payouts in France posed such a risk that Emmanuel Macron, the French president, intervened in 2017. The so-called “Macron scale” capped damages based on an employee’s length of service, following years of warnings from companies that costly and lengthy court cases discouraged them from hiring in the first place.

By contrast, ministers in Britain now plan to scrap a cap in 2027. Workers who win an unfair dismissal claim can currently claim a maximum of either their annual salary or £118,223, whichever is lower.

Ministers agreed to remove the cap as a concession to trade unions after Labour abandoned plans to give workers a day-one right to claim unfair dismissal.

Under a compromise brokered by Kate Dearden, the employment rights minister, workers entitlement to take their bosses to tribunal will now kick in after six months, down from the current two-year period.

The plans were agreed after two days of secret talks that excluded some of Britain’s biggest business groups. The move enraged some bosses who say the removal of the compensation cap was rushed into legislation without proper consultation.

An attendee of the recent Department for Business and Trade meeting said there was clear “frustration” that primary legislation had been rushed through Parliament “at a very late stage”. The source said: “Nobody was consulted properly ahead of time.”

Business leaders have called for a similar Macron-style cap to be introduced in the UK for high earners in order to ease pressure on an already strained employment tribunals system.

“It would be a route out,” said one executive. “Highly paid people are more likely to sue and gum up the courts. A three year wait for a tribunal will drag on both parties and settlements will be more difficult.”

They added: “As it stands at the moment [France’s] system looks more pro-business than ours.”

Plunging confidence 

Frustration at the changes comes against a backdrop of plunging business confidence. 

The Institute of Directors’ Economic Confidence Index fell to -63 in February, down from -48 in January and close to record lows. 

Anna Leach, chief economist at the IoD, said: “Taxes and regulatory compliance remain prominent concerns.”

A separate survey by the Confederation of British Industry was not as bleak but still found a majority of private sector businesses expect activity to decline in the coming months.

Ms Dearden told The Telegraph that the new workers’ rights regime was “not about punishing the employer” and said “most” awards would continue to be below six figures.

She said: “When there is a finding of unfair dismissal it is crucial that any award is based on compensating the successful claimant fairly for the loss they have suffered and is not about punishing the employer.” 

Ms Dearden signalled that the Government would continue to work with business to find a solution.

Business lobby groups are understood to be drawing up their own proposals to reduce the risks before suggesting them to Government.

One option that could be put forward is guidance for employment tribunals to take into account base salary only, excluding bonuses and share options, when considering claims by bankers.

Another option would be to instruct the Ministry of Justice to issue directions about how the calculation should be made to the tribunals. 

“You could certainly send a very strong signal without legislation,” said one legal expert involved in the discussions.

[Source: Daily Telegraph]