David Soskin on red tape overkill

The excellent Luke Johnson of Channel 4 has suggested that there should be a moratorium. I say there should be a bonfire

Is Alan Sugar a good advertisement for entrepreneurship? To create a successful business, you don’t have to be quite so rude – observe courteous James Dyson.

Nor do you need a shiny Bentley. IKEA founder Ingvar Kamprad drives a 15-year-old Volvo. Nor do you need to exclaim: “You’re fired!” when someone fails to meet your exacting standards.

Actually, despite every entrepreneur’s critical need to shed underperformers or excess staff, especially in difficult times, it’s nearly impossible to say: “You’re fired!” in the UK today.

One of the by-products of New Labour is Whitehall’s continuous avalanche of red tape. These politicians – and their civil servants – are not evil men and women. But, sadly, they are completely out of touch with the wealth-creation process and have no experience of it. So, especially in this downturn, they are making it more and more difficult for early-stage businesses to grow and prosper.

It is time to turn the tide. Take employment legislation. The excellent Luke Johnson of Channel 4 has suggested that there should be a moratorium. I say there should be a bonfire.

For starters, small businesses (perhaps those with 100 employees or less) should be able to opt out completely from the bulk of employment legislation. No more consultation periods, employment tribunals, maternity and paternity leave and the other potentially crippling burdens.

In an ‘opted out’ company, if an employer wants to give an employee notice, he should be able to, as set out in the employment contract. Just as if an employee wants to resign for any reason, he or she is free to do so, unchallenged. Imagine if an employee said: “I want to leave in three months’ time. It’s in my contract,” and you responded: “No, you must stay. I will take you to a tribunal and, by the way, you will have to pay your own legal costs!”

It’s all so one-sided. The result is that business growth is being hampered. Many people simply do not want to take on staff.

Unlike the big companies, with their huge resources and HR departments, small businesses have to mind the pennies. Large companies actually embrace more onerous employment legislation with fervour. Why? Because it makes it harder for new companies to compete with them.

Take maternity leave. It is more easily coped with at, say, Sainsburys with its 150,000 staff. But if I want to open a shop on the high street, employing three full-time staff, the now compulsory ‘hold the job open for me’ routine could pose significant problems for the business. It should be made absolutely clear to people applying to ‘opt-out’ companies that the protections offered by full employment legislation will not apply to them. But they have the choice: to work for a small, dynamic, growing ‘opt-out’ company, or seek the security of a larger organisation.

So who benefits from the current regulation? Not employees, because there are far fewer jobs available. If they do leave, it’s much harder to get re-employed elsewhere – jobseekers in the US get new positions in weeks compared with the months it takes their UK counterparts.

The real beneficiaries are large companies, employment lawyers wallowing in their very own Klondike, the ever-growing HR industry, and, of course, the state bureaucracy, which has a vested interest in extending its tentacles.

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