Diarmuid Deeney: More labour laws can only harm the recovery

The private sector has been told that it will have to step up to the plate and provide employment for the hundreds of thousands of people who are expected to lose their jobs.

What are the chances of this actually happening and is this a realistic proposal?

Certainly there is some reason for optimism. In the second quarter of this year, 308,000 new jobs were created. But new laws, and proposed new legislation, have, however, been imposed upon the business community, and their impact must be considered.

Last month started off with the Equality Act 2010 which introduced new legal concepts and additional types of claim which can be brought against an employer.

Hot on its heels came the European Parliament's vote to extend maternity leave to 20 weeks on full pay. The vote was a very tight one by the European Parliament's standards – 327 for, 320 against – and shows the divisiveness of the new legislation.

Currently, women are entitled to the first six weeks of maternity leave on 90 per cent pay followed by 33 weeks statutory maternity pay of just under 125 a week. It will be some years, however, before the new provisions come into play and they will have to be approved by national parliaments. The UK is one of a number of EU member states which lobbied against the proposals and there will no doubt be lengthy negotiations before it is possible to reach an agreement.

Then the Minister for Employment Relations, Ed Davey, announced to Parliament that the Government would not be reviewing the Agency Workers' Directive which is due to come into place in October 2011, notwithstanding intensive lobbying from business chiefs.

It now looks as though the UK will be one of the first EU member states to implement the directive which was agreed in Luxembourg in 2008. There are an estimated 1.3 million agency workers in the UK who fulfil a vital role in the job market especially in seasonal work. Employers groups have, however, not argued that the increased protection given to agency workers will impose an unacceptably high administrative burden, especially on small and medium enterprises and micro businesses.

The one thread connecting these proposals is that Yorkshire SMEs will have to come to terms with yet more new and complex legislation. SMEs tend not to have human resources specialists – micro-businesses certainly do not – and the law relating to pensions and discrimination is notoriously complex, even for lawyers.

Into the breach steps Lord Young live on BBC Radio 4's Today italicsprogramme. Fresh from his recent report on litigation in the insurance sector, Lord Young said that extending the qualifying limit for unfair dismissal claims from one year to two years was certainly on the cards.

A Trade and Industry Secretary in the Thatcher government, Lord Young's remit now is to give assistance to small businesses. The Prime Minister is on record as stating that he believes that the Government is institutionally biased against small business and enterprise.

Predictably, there has been a heated debate on the proposals. The TUC believes that it could simply give employers a longer period to dismiss someone without any good reason and bitterly opposes such an extension. Employers' organisations point to the employment tribunals which are creaking under an increasingly heavy workload and point to the fact that when the qualifying limit was previously increased to two years back in 1985, rates of employment rose.

It cannot be taken as a given that an increase in the qualifying limit will lead to a decrease in tribunal claims. Dismissed employees who cannot bring claims for unfair dismissal could still allege discrimination or dismissal for an inadmissible reason such as whistle blowing.

It remains to be seen whether the time limit will be increased but anything which can assist small business is surely to be welcomed. Let us not forget that small and medium-sized businesses provide nearly 60 per cent of British jobs, and 50 per cent of the nation's GDP. Though there will undoubtedly be extensive consultation, no Act of Parliament would be required to bring in any change in the qualifying period. It would be sufficient for Ed Davey to make an order.

The Government must provide assistance to SMEs to help them cope with the changes and provide training and guidance particularly to micro-businesses.

It is now time for a period of stability in our employment laws. We must not squeeze our SMEs too much. If we do so, we jeopardise our chances of achieving economic recovery.

Diarmuid Deeney is a partner working at Kennedys in sheffeld.