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Charles Orton-Jones: Why Beecroft is right and Cable must be overruled

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I am depressed today. You should be too.

It looks like Vince Cable is going to ditch the Beecroft Report, and we’ll miss the opportunity to improve beyond measure industrial relations in the UK.

This is a disaster.

Adrian Beecroft makes many recommendations in his report, but one idea in particular is the crux. I’m talking about the proposal that small firms should be able to fire workers with a month’s notice and a small redundancy payment, a so-called “compensated no-fault dismissal”.

There are other things of interest in the report.

Flexible working would not be an automatic right, but be at the discretion of the employer. Employees would be personally responsible for any racist remarks they make on the job. The TUPE laws would be amended, for example creating an exemption for businesses going into administration. There would be no requirement for firms to enrol employees into a pension scheme; they would have to sort out their own pension arrangements.

But the explosive idea is the one about dismissals.

Let’s just imagine if David Cameron grew a spine, ignored St Vince, and implemented it.

Businesses would be able to get rid of any employee they didn’t want. No more three-step dismissals. No more elaborate hearings, at which the employee can select a representative to be present.

Employers could effectively write out a small cheque and get rid of anyone in 30 days.

There would be three big advantages.

First, firms could dispense with the whole HR apparatus. There would be simply no need to retain the HR function, nor resort to legal consultants, as the new system would be so simple.

Result? Firms could use the money saved to hire more front-line staff.

Second, the number of tribunals would plummet. This is a massive point in favour of Beecroft’s report, one under-appreciated by its (many) critics.

Tribunals are the bane of small businesses. And they have got out of control. In the last year for which there is data the number of tribunals rose 56 per cent. The total number has doubled since 2001. A CBI survey says 54 per cent of respondents had dealt with a claim, up from 34 the year before.

And the success rates at tribunals is shockingly, pitifully, low.

Only 1 per cent of equal pay claims are found by a court to have merit. For age and sex discrimination the figure is 2 per cent. Nine out of ten unfair dismissals claims are without merit.

In the words of the CBI: “the system is broken”.

Beecroft’s dismissals reform would end this tribunal bonanza. Not entirely – as dismissal on grounds of sex or race would still be impermissible, but they would be far harder to prove under the new system. We could be looking at tribunal frequency falling by 90 per cent, back to where, on the evidence, they should be.

Result? Huge cost and time saving for employers.

Third, employers could employ on a whim. Currently a firm must think long and hard about signing up a new recruit. Get it wrong and it is difficult to get rid of the unwanted worker.

With the new system it would be possible for firms to experiment. For example, a manufacturer could hire a reseracher to investigate potential overseas markets. If the new division wasn’t working, it could be unwound in a month. If it works… jobs all round.

And best of all, entrepreneurs could be free of the headache of employment legislation. Instead of researching the vagaries of the three-step dismissals procedure, they could get back to running their firms. They would be free of the toxic tribunal system, which brings bitterness and anger into the boardroom so regularly.

Result? An upswing in job creation, and a lowering of costs for pursuing innovative business ideas.

Compared to these advantages the downsides seem so small. So workers could be fired more quickly. Big deal. Why on earth would anyone want to work for an employer who didn’t want them? Do they really want to be forced out over months of acrimony?

A worker can walk out of a job with a month’s notice. Why should a firm not have the same right?

In fact, I’ve yet to read a good reason. HR professionals hate the proposals. Of course they do! Same with employment lawyers. Vested interest.

Ultimately the only way workers get rich is by employers fighting over them for their labour. That is the only reason anyone gets paid more than the minimum wage.

Anything which hampers a vigorous labour market can only reduce wages.

For these reasons both employees and entrepreneurs should fight for their right to form contracts free of State meddling. Both should rally round the Beecroft Report.

Sadly, at this stage it is the union barons, HR whiners and the so-called Business Secretary who hold the upper hand in the battle.




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