26th Oct 2011
Radical proposals to allow employers to sack unproductive workers without explanation would “not be beneficial” to themselves, their staff or the economy, experts have warned.
A leaked final draft report, commissioned by the Prime Minister and written by Adrian Beecroft, a venture capitalist and Conservative Party donor, suggests that UK workers should be banned from making unfair dismissal claims because of the “terrible impact” they have on the “efficiency and hence competitiveness or our businesses, and on the effectiveness and cost of our public services”.
The confidential document, which was leaked to the Telegraph after being circulated around Whitehall, continues: “The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation.”
Beecroft claims that public sector managers in particular have been forced to offer under-performing staff large settlements because they were afraid of costly tribunal hearings. This situation made public authorities “reluctant to dismiss unsatisfactory employees” and to “accept inefficiency that they would not tolerate if dismissal of unsatisfactory employees was easier”.
As a result, workers were simply left to “coast along” and firms were afraid of hiring new staff, who were “unknown quantities” and could prove impossible to sack, thus inhibiting economic growth.
The report, which was dated 12 Octcober, 2011, concludes that, as unfair dismissal legislation was introduced 40 years ago by the British Government, there was nothing in European law to prevent it from being axed – although regulations preventing employees being sacked due to their gender, race or sexuality would have to remain in place.
But Beecroft acknowledged that simply scrapping existing laws would be “politically unacceptable” and so recommended a replacement in the shape of ‘Compensated No Fault Dismissal’. This proposed regulation enables employers to sack unproductive staff if they are given basic notice and redundancy pay.
He conceded that the downside of the scheme was that employers could fire workers simply because they “did not like them”, but believes it is a “price worth paying for all the benefits that would result from the change”.
David Cameron and other members of the Cabinet are understood to be considering his recommendations, but Downing Street sources told the BBC that no decisions had been taken as yet, adding that it was “unlikely we would go further on unfair dismissal”.
John Philpott, chief economist at the Chartered Institute for Personnel and Development, meanwhile, said that any changes to existing legislation would be counter-productive and fail to address the labour market’s real problems anyway.
“If you look at the evidence on unfair dismissal, I mean, there isn’t actually anything to suggest that watering down those rights would create any more jobs and, indeed, the job insecurity it would create would actually be bad for the economy and businesses,” he told the broadcaster. “I think if you look at our productivity problem, it’s down to poor investment, poor training and poor management.”
Amy Paxton, a senior employment consultant at Wolters Kluwer’s Croner business, also believed that it was important to look at the bigger picture.
“We would be very surprised if these proposals are implemented as they would not be beneficial to either employers or employees,” she said. “We should also not forget the bigger picture here. There are other costs associated with firing and hiring such as recruitment and training costs and, therefore, the suggestions contained in the leaked report may make little financial difference to the employer.”
Organisations with poor performing staff would instead be better off looking at their performance management policies and procedures as training and development could often solve problems in a low-cost and effective way, Paxton added.