By Claire West

Business leaders believe a package of labour market investments and reforms, including an alternative to redundancy, could help stem the tide of job losses as the recession pushes unemployment towards three million.

A report by the CBI and Siemens plc also highlights longer-term issues and warns that levels of employment regulation are at a “tipping point”, having added £70bn to business costs since 1998.

The report stresses that the UK must work much harder to remain an attractive global jobs destination, and that there is a need to improve skills levels and assess the real impact of employment laws on future job creation.

Although firms are doing their utmost to protect jobs by introducing flexible working and pay freezes, the CBI predicts that unemployment will continue rising to peak at 3.03 million in the second quarter of 2010, so action taken in the short term could still save jobs and businesses.

The CBI calls for:

– Government to implement an Alternative to Redundancy (ATR) scheme as soon as possible. This would give organisations the choice to use the existing redundancy path, or to place an employee on ATR for a set period of up to six months. The employee would not work during that time, but would be paid an ATR allowance equal to twice the rate of Job Seekers Allowance – paid half by government and half by the employer. There would be no extra cost to the government and while on ATR an employee could seek new work. The ATR is not the same as a wage subsidy, or short-time working. The scheme allows the firm to take the employee back into work when the ATR period expires or if business improves earlier. If demand fails to pick up then full redundancy rights are preserved, and would include the 6 months extra of ATR service. An ATR scheme would only be implemented following consultation, as is the case with redundancy. It helps firms retain skills during a short and sharp fall in demand and gives workers greater security of returning to work.

– The government must review the length of consultation for redundancies, to check if the laws are working as intended. Currently, firms must give a consultation period of at least 90 days where 100 or more employees face redundancy in a three-month period. This timeframe prolongs uncertainty for staff and delays firms trying to adapt to rapidly changing circumstances.

– the 2011 hike in employer National Insurance contributions should be deferred. These rises would mark a further tax on employment at a time when the economy could be making a weak recovery. The lodging of employment tribunal claims under multiple headings must also be tackled.

– The CBI believes the UK has reached a tipping point on employment regulation. New laws since 1998 have added £70bn to business costs – equivalent to employing 215,090 people in full time-jobs at average earnings throughout that period. While the CBI is not calling for existing laws to be removed, all future legislation should be tested by the question: how will this help create sustainable jobs?

– Higher skills levels are vital. The demand for science, technology, engineering and maths (STEM) skills is set to rise in the coming decade, and the UK must improve its performance in these areas. Employers, colleges and universities must work more closely to improve the skills of those in the workforce, and more support is needed for apprenticeships. For those who have lost their jobs, Jobcentre Plus is coping well but could improve the way it matches jobs to a candidate’s abilities.

– Young people are being particularly hard hit by the recession, and the CBI is especially concerned by the rise of 16-18 year olds not in education, employment or training (NEET). Unemployment among young people – from school leavers to graduates – can be a deeply scarring experience which sets up longer-lasting social and employment issues. Government must target more assistance at young people.

John Cridland, CBI Deputy Director-General, said:

“The worst of the recession may be over, but businesses still face a long convalescence and the dole queues will continue to grow. The alternative to redundancy scheme could save jobs by giving businesses more leeway as the economy recovers.

“We considered various forms of wage subsidy and support for short-time working, but this approach is better. Businesses will be more able to cope with sharp drops in demand and prepare for recovery, while workers benefit from improved financial support and a door that is kept open for six months.

“This is not about businesses ducking their redundancy responsibility – in fact if a scheme runs for six months and a redundancy is still made then the business will end up paying more.

“Businesses also feel that the sheer volume of workplace legislation in the UK has reached a tipping point. The costs of new regulations are almost equal to a quarter of a million jobs. While we do not want to see laws unpicked, we do urge the government to think differently about future laws and their impact on day-to-day activities. Future rules must pass the ‘sustainable jobs’ test.”

Looking to the future, the UK will need a greater number of skilled engineers and scientists to meet its 2020 environmental commitments. The key to this is a stronger focus on STEM skills, and encouraging adaptability so that workers can shift between different sectors and technologies.

Andreas J. Goss, Chief Executive Siemens plc and North West Europe, said:

“To compete successfully in a global market the UK needs a highly motivated, adaptable and skilled workforce. Government can help by ensuring a good standard of highly literate and numerate workers coming through an education system where there has been investment in STEM subjects.

“Industry can play its part by identifying the growth areas to invest in such as renewable energy and green infrastructure solutions. Industry leaders like Siemens must partner with schools and universities to inspire the next generation to choose careers in science, technology, engineering and maths. We have a chance to stay ahead if we build our ‘pipeline of talent’ here in the UK.”

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