What will the two-year unfair dismissal rule achieve?

George Osborne confirmed yesterday that the qualifying period for unfair dismissal claims will be increased from one year of service to two. As I said yesterday the economic impact of this will be negligible. We already have one of the lowest levels of employment regulation in the developed world. It is not regulation that is stopping our economy from growing.

But will this change make life easier for managers? I’m not even convinced it will do that. Apart from the few headbangers who steal, start fights or otherwise misbehave at work, the people who you want to sack fall into two categories. Firstly there are the hiring mistakes. We all make them and you tend to realise pretty quickly when you’ve messed up and recruited the wrong person.

The second category is more difficult. These are the people who have been with the organisation for a while but, for some reason, are not cutting it any more. Often this has more to do with attitudes than skills. The business has moved on and there is a divergence between the employee’s way of working and how the company wants people to operate. In some cases this may be because someone has not been properly managed or developed for years. In others, it may be a personality clash with a new manager who wants to do things in different ways. Sometimes, people just get bored and cynical about the organisation.

Managers often struggle with people in this second category. Rather than try to manage their performance or develop them, private sector organisations tend to pay them off using compromise agreements. Public sector organisations tend to work round them, shunting them off into project roles until they can engineer a redundancy situation. But the key point about the people in this second category is that they usually have long service. In fact, it is often because they have such long service that things have been allowed to deteriorate to such an extent.

I have no data on this but in my experience, the employees who give managers the least trouble are those with between one and five years service. After a year, they have understood the organisation and are starting to perform well. For the next few years they are still fresh and enthusiastic. The cynicism of the long-termers still hasn’t set in. I can think of only a handful of situations where I or any of my colleagues have had to discipline people in those early years for poor performance. Most ‘problem employees’ are either new hiring mistakes or old lags who have been neglected and allowed to drift.

In short, then, the only reason why a manager might want to sack someone with between one and two years service is because that manager had failed to monitor the person’s performance properly in the first year. What the extension to two years does, therefore, is allow lazy managers to keep poor performers in their jobs for a year longer before firing them. That’s hardly going to improve the performance of the company is it?

OK, I appreciate that there may be other reasons for dismissal, such as work suddenly drying up, but redundancy pay doesn’t cut in until two years anyway so it’s not as if it is expensive to lay people off after, say, eighteen months.

Will the proposed change reduce the burden of claims on the courts and save money that way? According to the government it will reduce tribunal claims by 2,000 per year. That’s around one percent. Big deal!

Removing protection for employees with one to two years service will have no effect on economic growth and make little difference to the performance of companies. It won’t save a lot of public money either. It will give a few slack managers a get-out-of-jail card but that’s about it.

Update: Here is CIPD Chief Economist John Philpott’s take:

Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy. Although the policy change will undoubtedly be welcomed by the de-regulation lobby, it isn’t the way to boost growth and jobs.

In addition, it is unlikely that raising the threshold from one to two years will have its intended effect of reducing the number of employment tribunal claims because employees are increasingly bringing claims linking unfair dismissal with discrimination claims which can be made from day one of employment. ONS figures suggest that an extra 12% of employees would potentially be denied the chance to claim unfair dismissal due to length of service as a result of the change – hardly likely to make much of a dent in overall tribunal numbers given that only a small proportion of these would make any claim.

Update 2: This piece in the Lawyer from barrister Anya Palmer:

We already know from the unemployment statistics that there is no correlation between the qualifying period and unemployment rates.  The benefit contended for is entirely specious.

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3 Responses to What will the two-year unfair dismissal rule achieve?

  1. Pingback: What will the two-year unfair dismissal rule achieve? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. James F says:

    I wonder whether moving the deadline for making this type of difficult and unpleasant decision might just lead to procrastination. An employee who’s a bad fit, who is in reality holding down a job which might otherwise be given to someone who’s a better fit – who would be more productive – might be kept on because the company is uncomfortable about making this type of decision.

    I know that my company is agonising over a decision right at the moment and are now trying to find out when the new rules come in so that we can defer taking a painful but probably necessary decision. This may just be an indictment of our company’s decision-making processes or it might reflect the size and relative lack of maturity of our HR processes. But even in larger, more established companies, there will be border line cases where the moving of the deadline, means that a difficult issue goes unresolved.

    The point is that this will actually lead to reduced productivity in one case I’m aware of and will potentially do the same in many other cases.

    I suppose if a large number of companies are cynical enough to take staff on in the expectation that they’ll lay them off shortly, then this creates new types of commercial opportunity. But are lots of companies like this? Surely the large majority take people on expecting to keep them and, as you say, they discover if they’ve made a recruitment mistake pretty quickly.

  3. Jon says:

    The Government has dealt a hammer blow to workers rights. How can employees afford over £1,000 for a hearing, when employers are already treating workers like they did in this case http://is.gd/gWac7Z which happened under existing legislation.

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