Experts from all areas of business have agreed that, while the benefits case for introducing compensated no-fault dismissal is unproven, there is a strong risk that it could damage employment relations.
The coalition government’s request for evidence on the controversial measure, which was put forward by venture capitalist Adrian Beecroft earlier this year, is due to close this Friday amid calls from a number of quarters to abandon it.
Mike Emmott, employee relations adviser at the Chartered Institute of Personnel and Development, pointed out, for instance, that, according to the government’s own research, unfair dismissal failed to even figure in the list of top 10 regulations that discouraged employers from hiring new staff.
“Adrian Beecroft’s proposal for a system of compensated no-fault dismissal is objectionable and unnecessary,” he said. “It is objectionable because it would be a licence for bad practice in managing people and damage the reputation of the whole micro-business sector.”
It was also unnecessary because employers facing a possible tribunal claim could already offer staff a compromise agreement and tailor the level of compensation to their particular circumstances, Emmott added.
“There is no evidence that no-fault dismissal would make a positive contribution to economic growth in the UK by encouraging the smallest firms to recruit more employees,” he said. “Indeed, by increasing job security and reducing employee engagement, it would be more likely to damage growth.”
Little industry support
Terry Scuoler, chief executive at manufacturers’ association, the EEF, agreed. He said that there was little industry support for introducing the measure. Moreover, its benefits appeared “pretty limited” and “we’ve seen no evidence that it would increase recruitment”, he added.
Instead the controversy was “distracting attention from the issues that really matter to business” and the government would be better off focusing on other proposed regulatory change such as reducing the 90-day consultation period for collective redundancies to 30 days, Scuoler said.
The Employment Lawyers Association, which campaigns to make employment law clearer and more workable for employers and employees, meanwhile, also warned that introducing no-fault dismissal legislation could have negative repercussions.
While it might cut the number of unfair dismissal claims, it could also lead to an increase in other claims from aggrieved staff, for example, under discrimination or whistleblowing rules.
In addition, rather than boost recruitment, the proposals could actually curtail it. “There is a danger that companies with up to nine employees may deliberately limit their own growth and expansion so that they can retain the ability to carry out a CNFD,” the ELA said.
But the measure could likewise make people think twice about working for a small business, knowing that “they would have less employment protection than with a larger employer and could be sacked at will”, it added.
