Coalition government plans to make it easier for employers to sack staff in their first two years of employment without facing unfair dismissal claims will do little to create hoped-for jobs but may destabilise the labour market, an HR body has warned.
 

Under Prime Minister David Cameron’s new so-called ‘employers’ charter’, workers will also have to pay a fee when lodging an employment tribunal claim in a bid to reduce the number of vexatious allegations. Currently staff need to wait a year before they can bring an unfair dismissal claim against their employer, but the change will not require new legislation.
 
The Daily Telegraph also revealed that the government intends to launch a review that could see small companies exempted from some existing employment laws, which includes reducing the length of time that they would have to pay workers statutory sick pay from the current 28 weeks.
 
Cameron hopes that loosening up employee protection legislation will encourage private sector employers to take on thousands of new workers in order to offset the loss of 300,000 public sector jobs over the next four years due to budget cuts.
 
The scheme is due to be officially announced after the Oldham and Saddleworth by-election on Thursday and ministers are expected to contrast the ‘employers’ charter’ with the European Union-led Social Charter, which was introduced by the previous Labour government to boost workers’ rights.
 
But John Philpott, chief economic advisor at the Chartered Institute of Personnel and Development, warned that falls in UK private sector employment during the recession was purely a consequence of inadequate demand rather than any underlying problem in the functioning of the labour market.
 
As a result, the critical determinant in job creation over the year ahead would be the extent to which net exports and investment could offset slower consumer spending, planned public spending cuts and tax hikes.
 
“In this context, it would be particularly inadvisable for the government to introduce a so-called ‘employers charter’ enabling employers to dismiss workers within two years of being hired rather than one year at present,” Philpott said. “Such a move would do nothing for jobs in the short-run against a backdrop of weak economic growth and would at best only have a limited impact on the economy’s underlying job creation potential.”
 
Evidence relating to the effects of employment protection legislation was “equivocal” but on balance suggested that less protection encouraged increased hiring during economic recoveries but increased firing during downturns.
 
“The overall effect is thus simply to make employment less stable over the economic cycle. It is arguable that had a policy akin to the ‘employers charter’ been in place during the recent recession, there would have been more redundancies in a manner akin to what occurred in the 1980s recession,” Philpott said.