Was Vince Cable right to get a Beecroft in his bonnet?

The Business Secretary Vince Cable described the Beecroft Report which amongst other things proposed a change to the laws relating to unfair dismissal as "bonkers" Beecroft responded to this description of his report by calling Vince Cable a “socialist” (I am not sure whether that is actually an insult – I know some people who are very proud to call themselves socialists). So were Beecroft’s proposals in relation to unfair dismissal really that crazy?

The Proposals

Beecroft proposed that the law relating to unfair dismissal be changed in the following ways:

·         An employer can dismiss an employee without giving a reason regardless of their length of service. This would be known a “compensated no-fault dismissal”.

·         There would be what Beecroft describes as a brief consultation before the decision to dismiss the employee is taken.

·         The employee would be paid an enhanced payment as compensation for leaving in this manner in a similar way that an employer would pay an employee a redundancy payment.

The Potential Benefits

Beecroft believes that the current laws regarding unfair dismissal do not take into account that circumstances can change during an employee’s employment. The employee may be promoted and not be able to fulfil their new role properly, there may be changes in customer demands or technology which make the employee unsuitable for the role.

Beecroft is of the opinion that his proposed changes to the law relating to unfair dismissal would reflect the commercial needs of businesses and by making it easier to dismiss an employee it would actually make companies more inclined to take on staff.

The problems

So what are the problems with these changes? Beecroft is right in that the current unfair dismissal laws do not take account of situations where an employee is promoted and it turns out that their new role is beyond them or if there are changes in customer demands or technology. It is however the case that employers can dismiss employees fairly on the grounds of capability although this can take some time (often around three months).  There is also the possibility of dismissing somebody on the grounds of redundancy if technology changes means that they are surplus to requirements. This brings into question whether or not these changes are actually needed.

There is also the issue of the process of dismissing an employee in such a fashion. Beecroft stops short of advocating allowing a manager to come in and sack an employee on the spot saying that there should be a brief consultation. He does not expand on what form this consultation should take nor does he deal with the issue of what happens if the process is not followed properly. Does this mean that the employee could still claim unfair dismissal if they felt the process was not carried out correctly?

It is also the case that employees would still be able to make discrimination claims arguing that their dismissal was a discriminatory act (e.g. on the grounds of race or sex) so there would still be a risk of an employment tribunal claim being made against the employer.

Further; on a practical level, even if you are dismissing somebody under the grounds of compensated no fault dismissal it is still a difficult conversation to have with an employee. Not all business owners/managers like having that type of conversation and so they may still avoid going down this route instead preferring to cope with the situation by letting the employee in question continue working in the hope that things may get better or the employee will leave of their own accord.

Often the arrival of a new manager can mean that they want to clear out existing staff members. These proposals would make it fairly easy to do this; however, what happens if the business realises that it has hired the wrong manager? They can easily get rid of him or her but they will potentially have lost a number of staff who that particular manager had sacked on a whim that they may have wanted to retain. There may also be some morale issues with the workforce if they feel that they are going to be sacked at any time for no good reason. This may lead to staff members leaving for more “friendly” employers because they do not want to work in such an environment leading to increased staff turnover which would be costly for employers.

Conclusion

I feel that these proposals have not been properly thought through and will be kicked into the long grass and quickly forgotten. The intention of the paper was to propose how to cut red tape. The reality is that much of the legal obligations for employers derive from the EU (e.g. maternity regulations, agency workers regulations, TUPE, part-time workers rights, and discrimination law) and unless there is a fundamental change in the UK’s relationship with the EU these obligations will not go away and a majority of the red tape will remain. The reality was that the Beecroft report just proposed tinkering around the edges and succeeded only in generating a political row for a few days.