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Hire and Fire - the future of UK employment law

Meredith Hurst Wednesday, October 26, 2011

In a revelatory report leaked from Westminster, Government ministers propose a drastic change to the employment law landscape.

This gist of the report, written by influential venture capitalist Adrian Beecroft, is that businesses must be left to manage their own affairs in a way that allows them to be efficient in a more competitive domestic and global market.

The report begins by saying that employment law and regulation impedes efficiency and competitiveness. So far, the report is nothing new. Successive governments have claimed that employment law stifles business and competition and we often hear about ways of cutting 'red tape'. This is crowd pleasing policy-making - well it pleases businesses but less so groups representing employees and the unions.

The report goes on to state that regulations conceived in an era of full employment are "designed to make employment more attractive"to employees. This is seen as "yesterday's problem."

The suggestion is that excessive regulation is the cause of high unemployment. This may strike some commentators as perverse because removing underperforming employees will undoubtedly increase unemployment in the short term, despite the report making assertions to the contrary.

The indication is that employers will be able to replace incompetent employees with more competent ones. What however happens to the incompetent employees who are out of work?

The report also fails to consider why certain employees may perform differently from others. Ill-health, disability or family related problems all contribute to a person's abilities in the workplace. The report does however state that employee protection preventing discrimination must be maintained and as with any government announcement, the devil will be in the detail.

The main area of attack however is the current unfair dismissal law which the government asserts has an effect upon competitiveness of businesses and on the effectiveness and costs of public services.

The suggestion is that employers are tied up by lengthy and complex procedures which, if breached, mean that an employee can claim to have been unfairly treated. There is some truth in that. It is the case in capability dismissals, that an employer has to adhere to what is sometimes seen as a long process in order to set targets, monitor performance and ultimately justify its decision to terminate employment.

What the report fails to acknowledge though is that employers do have a relatively wide discretion and that the employment tribunal must avoid the substitution mindset. This in effect means that the employment tribunal cannot dictate how an employer runs its business or treats performance issues.

The sting in the tail however is the drastic suggestion that employers should be able to dismiss an employee at any time without giving a reason. This is akin to theUSmodel of  'employment at will.'

The government asserts that it would not face a challenge from Europe because unfair dismissal is a UK concept. True, but this early confidence does not appreciate the political backlash which will undoubtedly follow. The unions and employee representative bodies are likely to come out in force against this.

To give some certainty, employees dismissed without reason may be awarded their notice and a payment akin to a redundancy payment.

In an attempt to strike a balanced view, the report acknowledges that the downside of the proposal is that people may be dismissed simply because their employer does not like them but then the employer will pay the higher cost of the redundancy-type payment in these circumstances. Watch this space for more news.

See what the Daily Telegraph has to say 

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