Scrap unfair dismissal?


A leaked report examining the impact of current employment laws on the UK’s economic growth has once again opened a big, squirming, angry can of worms, what impact would it have for London?

The debates surrounding UK’s employment laws – which critics argue favours the employee – have been brewing steadily for some time. This is despite changes made to the law preventing employees from claiming unfair dismissal when employed for less than a year.

And earlier this month, George Osbourne announced plans to increase the time period before which a worker could claim unfair dismissal from one year to 24 months. “We are now going to make it much less risky for businesses to hire people,” said Osbourne in a keynote speech.

But businesses are still unhappy. And now the publication of a report drawn up by venture capitalist Adrian Beecroft has brought the debate firmly back into the limelight.

The report, leaked to the Daily Telegraph, goes so far as to link Britain’s deficit crisis to current employment laws.

“Britain has a deficit crisis, from which the only escape route is economic growth. Growth needs to be encouraged in every way possible.

Businesses must be able to manage their affairs in a way that allows them to become more efficient, more competitive on a domestic and global basis and hence more likely to grow and employ more people. 

Yet much of employment law and regulation impedes the search for efficiency and competitiveness,” says the introduction. 

Beecroft’s recommendations are for a replacement regulation called Compensated No Fault Dismissal, which would away with the current three step warning system and allow employers to sack underperforming staff with basic redundancy and notice.

This has prompted both waves of support and cries of anger from across the business community.

Right of centre think tank and lobby group the Institute of Economic Affairs aggress firmly with Beecroft: “These leaked proposals show the government is starting to take the needs of British business seriously. They should have the courage to implement them,” said the director general, Mark Littlewood in a statement.

And Littlewood’s not alone, Charles Logan, director of recruitment firm Hays issued a statement saying: “Reports suggesting new changes to unfair dismissal legislation highlight just how constrained many businesses feel by existing employment red tape.

“To remain competitive, it’s vital that the Government takes a fresh approach to employment law so businesses have the confidence to take on new staff.”

Yet sentiments in favour of the current laws were equally strong worded.

“This is outrageous and smacks of treating people like disposable cameras. This is a hire to fire charter. Although the paternalistic style of management has waned, employers do have a responsibility – and this cavalier approach would kill any possible trust and confidence.

“Naturally it would also increase discrimination claims!” fumed Sue Tumelty, MD of the HR Dept., an employment advice centre for small to medium sized businesses. You don’t need me to tell you what Brendon Barber had to say.

But were the laws to change, what impact would they have for London businesses? At present, to avoid an unfair dismissal claim, employers must carry out a 3-4 step action plan whereby the undeforming worker is told about their deficiencies and given second and third chances. This can be a very long and expensive process, says Daniel Naftalin, a partner in the employment department of Mishcon de Reya.

“But the statistics show you that the current laws are not weighted in favour of the employees. Last year there were less than 50,000 unfair dismissal cases and of those only 2,000 led to compensation being awarded to the employees.

“I think the system for unfair dismissal works quite well.”

For Naftalin, there’s no problem with the principal of the law as such – “we want to avoid a hire and fire culture as much as possible” – but with the process which he argues his burdensome and too drawn out.

“From the employer perspective the problem is not so much with the law but with the way it is processed. We need to revise the system and make it more employer friendly.”

Allison Grant, a partner at Lester Aldridge LLP is also unconvinced about Beecroft’s proposed reforms. 

“The Report has been criticised (and even admits) there is a risk that employees may be dismissed by employers simply because their employer dislikes them.  

“It is also argued that such a scheme would have the opposite effect to that which is intended, by creating large scale job insecurity and actually slowing growth in the economy,” she argues.

And she’s not alone. Caroline Harper of youremploymentmatters.co.uk argues that the very nature of a No Fault Dismissal is ludicrous. “There’s no such thing,” she says. “The nearest thing is redundancy. All it takes is a good manager to follow the correct procedures, this looks like  a get out for poor management.”

For Charles Logan the answer is simple; hire properly in the first place: “The debate around unfair dismissal also highlights how damaging poor hiring practices can be. In this challenging climate where there is scrutiny of over all spending, hiring the wrong candidate is simply not an option.

“Organisations need to hire the right person first time.”