No-fault dismissal will not create jobs
Labour & European Law Review Weekly Issue 273 14 June 2012
The government confirmed on Monday that it will include an innocuous-sounding clause in the Enterprise and Regulatory Reform Bill to allow the introduction of “settlement agreements”.
Originally trailed as another name for compromise agreements, it now transpires that these are, in reality, a version of compensated no-fault dismissal originally suggested by venture capitalist, Adrian Beecroft, in his report published at the end of May.
Under these new measures, employers will be able to offer a pay-off to an employee they want to get rid of, who is (in theory) free to accept or reject it. Whatever they decide to do, they cannot use the fact of the offer as evidence in any subsequent unfair dismissal Tribunal case.
Now hailed as a measure to boost business confidence, the government said only a few weeks ago that there was no demand from business for the idea.
And nor from the public as a whole, it would appear. Half the respondents to a YouGov poll of 1640 adults in Great Britain, published last week, said either that it was already too easy for companies to dismiss employees or that the current balance was about right.
The poll, carried out ahead of last Friday’s closing date for the government’s call for evidence on so-called “no-fault” dismissal for micro businesses (those with ten or fewer employees), supported the thrust of Thompsons’ response to the consultation.
Although 49 per cent of those surveyed thought that businesses with fewer than ten employees should be exempt from some regulatory requirements, 33 per cent disagreed on the grounds that all companies should have to abide by the same rules, regardless of their size.
In its submission, Thompsons argued that there was no evidence supporting the contention that deregulation equals improved economic success and that it was difficult to see how introducing a system of “no-fault” dismissal would be beneficial to any organisation, irrespective of its size.
Instead, it said that the evidence provided by the government in the form of international case studies showed that where compensated no fault dismissals have operated, experience has indicated that it can actually cause micro-businesses to lag behind other businesses.
The Chartered Institute of Personnel and Development has also come out against the proposals, urging ministers to acknowledge that “watering down” employment rules would only damage employee relations and not increase employment.
Likewise the EEF, the manufacturers’ organisation, said in its submission that there was little support from industry for the concept of compensated no-fault dismissal, that its benefits would be limited and that it would make little or no difference to recruitment plans.
It also said that the proposals risked undermining the gains that employers have made in increasing flexibility and productivity by working more collaboratively with their employees.
Click on the link to read Thompsons’ submission on Dealing with dismissal
To access the full results of the YouGov poll, go to the YouGov website
To read the call for evidence, go to the Department for Business Innovation & Skills website