The radical findings of the report say that British workers should be banned from claiming unfair dismissal so that firms and public sector bodies can find more capable replacements.
The report is understood to have the support of both the Chancellor and Prime Minister, although the proposals are likely to meet with strong opposition from some Liberal Democrats and trade unions.
Whilst the Government is aware that the proposal will be controversial, it is equally concerned that the scale of the economic crisis is such that dramatic measures are required to promote growth.
David Cameron has been keen to press ahead with putting small business and entrepreneurship at the forefront of his business agenda with his backing of StartUp Britain and other similar campaigns to encourage the creation of new businesses.
The report says: “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.”
Mr Beecroft in particular highlights abuses of the law where managers have been forced to offer under-performing staff large settlements because they fear costly tribunal rulings. Stating “[They] therefore accept inefficiency that they would not tolerate if dismissal of unsatisfactory employees was easier.”
It goes on: “A proportion of employees, secure in the knowledge that their employer will be reluctant to dismiss them, work at a level well below their true capacity; they coast along.”
The recommendation is particularly aimed at helping lift the burden of red tape from small and medium-sized businesses, which lack the human resources departments and expertise to deal with complex tribunals.
The report concludes that there is nothing in European law that would prevent the Government from abandoning unfair dismissal laws – although regulations preventing dismissal on the basis of a person’s gender, race or sexuality would remain.
“While this is sad I believe it is a price worth paying for all the benefits that would result from the change”, he says.
Many small business owners agree with these proposals. Jane Caven, MD of HR specialists Sagegreen Consulting said: “If we are to really make a difference and help businesses to grow, employment legislation needs to be less onerous for the smaller employer.
At present, numbers employed and size of business are not taken into account when employers are judged at employment tribunals.
Where this involves an under-performing employee this can have a massively disproportionate impact on the efficiency and profitability of a small business. Yet, this is not taken into account.”
Craven goes on to say that “[For me] the real issue is not to remove the right to claim unfair dismissal per se, as this flies in the face of natural justice, but to address the disproportionate burden of employment legislation on small to medium sized businesses in the UK.
If anything were to be changed, it would seem to make more sense to introduce new, modified regulations that require employers to behave ethically and fairly. This should be in a way that takes into account the impact of issues such as poor performance on smaller businesses.
This would promote fairness for both parties without destroying the delicate balance of trust and confidence that must exist between employer and employee for the relationship to work successfully.”
Amy Paxton, Senior Employment Consultant at Croner, sounded a note of caution saying that “This leaked report, which looks at the reform of employment law, has so far caused intense debate. However, what we would remind employers is that it is only a draft report and until anything is finalised, there are no indications that they should not be duly concerned with the proposals.
“In our experience we would be very surprised if these proposals are implemented as they would not be beneficial to either employers or employees.
“Recent announcements on proposed changes to legislation may make inroads into changing the ways that employees can be dismissed, including the extension of the unfair dismissal qualifying period which comes into effect in April 2012.
“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 within the leaked report may make little financial difference to the employer.
