No Fault Dismissal is case unproven
This week sees the closing date of the call for evidence from government on the idea of compensated 'no-fault dismissal'. First raised in a report commissioned by the Prime Minister by the venture capitalist, Adrian Beecroft, this controversial proposal would allow employers to dismiss an employee freely and without fear of an unfair dismissal claim, provided the employee was paid a fixed amount in compensation.
The publication of the Beecroft report caused a media storm, during which the Business Secretary, Dr. Vince Cable was reported to have said that the idea was "bonkers" and that it was not the role of Government to scare workers out of their wits. Mr Beecroft retorted in an interview with the Telegraph, calling Dr. Cable a socialist. Despite this spat, the Business Department is asking for evidence on the impact of introducing the idea just for micro-businesses i.e. companies with less than ten employees.
After much careful consideration and consultation with manufacturers, EEF publicly responded to the call for evidence, rejecting the idea on balance. This may seem counter-intuitive, as some companies do tell us that they are sometime frustrated with the process of dismissing underperforming staff. Nonetheless from our conversations with members we see little benefit from the idea, and indeed significant risks.
Employees may think twice, for example, before working for a micro business if they could be sacked overnight. While the protection to employers would be very limited - former employees would only be barred from bringing unfair dismissal claims, which as stand alone claims make up less than 10% of all claims employers face. In addition, the level of compensation to be paid was difficult to determine: too little and workers would be exposed to being sacked and left with almost nothing; too much and some workers might see the compensation as the minimum to be paid for ending their employment. In addition, there was a genuine belief that at a time of immense change in business it would make the process of workforce co-operation more difficult.
For these reasons we have come out against the idea. There is much in the Government's reform programme which we would like to see faster progress on, the idea of protected conversations and greater use of compromise agreements for example. But, it is our view that 'no-fault dismissal' is an unproven concept and the government should concentrate on these other, more important, employment policy reforms.