The governments new Employment Bill will increase demand for legal expenses insurance, as it adds to the legal minefield already facing small businesses, say insurers.

Legal expenses insurers are expecting a flurry of calls for advice following the publication of the bill on November 8.

Lawclub Legal Protection and Abbey Legal Protection said the bill would add to pressure on small to medium-sized enterprises (SMEs), already struggling to cope with 40 changes to employment legislation brought in over the past two years. It would also lead to increased interest in legal expenses cover and the advice lines the firms offer, they claimed.

The bill will come into effect in April 2003.

Trade and Industry Secretary Patricia Hewitt said it simplified the rules on maternity, paternity and adoption leave and pay, and modernised the employment tribunal system with steps to help resolve disputes internally.

However, Lawclub business development manager Kieran Tierney said: "The pace and volume of changes mean that SMEs are more likely to breach rules inadvertently because they're unaware of the new regulations or their full impact."

Lawclub corporate business development manager Andy Dyer said Lawclub experienced a jump in calls for advice every time new legislation was introduced. He said the calls did not lead to a corresponding jump in claims, because the advice given often headed off potential legal problems and added the legislation changes prompted greater demand for cover.

Abbey's legal services director Murray Fairclough also blasted the new bill's effect on SMEs.

"Far from being simplified, the burden will actually increase on small businesses," he said. "It's increased the sheer volume of employee regulations."

Fairclough said new dispute resolution procedures would still require employers to seek legal advice, with no guarantee the process would be cheaper or faster.

He said the increased maternity and paternity leave would be a financial strain for many small businesses.

But Abbey business development manager Leo Gibbons said the bill would highlight the advisory services offered by legal expenses companies.

Legal enquiries from SMEs

  • In the past year, employment-related calls have risen by 15%
  • Redundancy procedure enquiries have increased by 20% in the past two months (due to recessionary environment)
  • 135,000 tribunal applications were posted lasted year - a 60% increase over a three-year period, with a 25% increase in the past year
  • Disciplinary awards have increased by more than 30% in the past year.
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    Source: Abbey Legal Protection

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