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Written by  Jonathan Lord
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Vince Cable Vince Cable

Business Secretary Vince Cable has launched a consultation over plans that could make it easier for small firms to sack employees, sparking a split between employers and unions.

Speaking at the British Chambers of Commerce's annual conference, Mr Cable called for views on the idea of "compensated no-fault dismissal" for small businesses with fewer than 10 employees.

The notion means someone could be fired without explanation and with payment of a set amount of compensation.

The Government's controversial plans to allow micro firms to dismiss employees more easily have gone out to consultation.

The Department for Business, Innovation and Skills has launched a call for evidence on whether current dismissal procedures are too onerous, too complex and whether or not there is a lack of understanding in their application.

Views are also requested on the idea of compensated no-fault dismissal for micro-businesses, that is those firms with fewer than ten employees. Under such a system, a business would be able to dismiss a worker from a micro-business, where no fault had been identified on the part of the employee, with the payment of a set amount of compensation.

Announcing the plans, Business Secretary, Vince Cable, said:

"The UK already has one of the world's most flexible, adaptable labour markets, making it one of our strengths and it stands up very well in international comparisons. However, we recognise that there is room for improvement which balances the needs of business while ensuring that the necessary employment protections are upheld.

"We are already implementing a radical package of reforms to the Employment Tribunal system and increasing the qualifying period for unfair dismissal from one to two years. These are all measures that will help improve the way businesses hire, manage and end a working relationship.

"But we also recognise that not all jobs work out for both parties the staff member doesn't quite fit or simply the relationship has irretrievably broken down.

"And for micros in particular, who often don't have legal or HR teams, the process to let a staff member go can be a daunting and complicated process. We want to give businesses the confidence to hire new staff and make sure when a dismissal needs to be made, they aren't tied up in red tape. This is an effort to see how extensive the problem is and shed some light on the desire for a change to the rules."

Through the Call for Evidence, the Government says it is seeking to establish a strong evidence base on the current understanding of the dismissal process, including awareness, understanding and use of the ACAS Code of Practice on Discipline and Grievance. The Government will be seeking the views of employees, business organisations and all other interested parties.

However, according to the Chartered Institute of Personnel and Development (CIPD), compensated no-fault dismissals will create perverse disincentive to growth.

Mike Emmott, Employee Relations Public Policy Adviser at the CIPD commented:

"There is no economic case to be made for the watering down of employment rights for businesses of any size. Businesses have far more to lose in lost productivity from a de-motivated and disengaged workforce than they stand to gain from the ability to hire and fire at will.

"The consequences for the UK's economic growth could prove particularly perverse when it comes to micro-businesses, who may be discouraged from hiring their tenth worker and may even struggle to recruit high calibre employees because they are seen as low-road employers."

TUC General Secretary, Brendan Barber, also criticised the move:

"Scrapping protection against unfair dismissal, even for people who have given years of loyal service, will do absolutely nothing to boost the economy. If people are constantly in fear of losing their jobs it will lead to even less consumer spending."

However John Cridland, CBI Director-General, said that the CBI had been calling on the Government to reduce the regulatory burden on businesses.

"This announcement is a step in the right direction, which will help reduce unemployment in the long-term," he said.

"Businesses tell us the current dismissal process needs to be reformed. Introducing compensated no-fault dismissal would give firms confidence to hire, as employer and employee can part ways with no fault on either side, and workers would have sufficient money to allow them time to find a new job.

"This reform would work for both parties and should be available to high-growth as well as small firms."

Click here for full details on the Department for Business, Innovation and Skills website

Last modified on Thursday, 22 March 2012 02:15
Jonathan Lord

Jonathan Lord

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