Abolishing unfair dismissal will achieve nothing

A leaked report for the government by venture capitalist Adrian Beecroft claims that unfair dismissal law is holding back economic growth. The report says that employers should be given the right to dismiss underperforming employees without explanation.

This report forms part of the general noise about regulation holding back the economy. We don’t know yet whether Adrian Beecroft will present any evidence to demonstrate the impact of unfair dismissal laws on economic growth but he will have a tough job to do so. We already know that Britain has some of the least onerous employment laws in the developed world and that many of the countries with tougher regulations still manage to grow much faster than the UK.

Furthermore, we also know that the current law allows employers to dismiss lazy workers; it just obliges them to demonstrate that an employee is underperforming and give that person a chance to do something about it. The reason that “a proportion of employees work well below their capacity” is not because the law stops managers from tackling them; it’s because most managers don’t like confronting poor performance. Read the details of almost any employment tribunal case and you will see a story of problems allowed to fester, issues unchallenged and decisions fudged. Most cases that reach the courts are the result of something that wasn’t tackled when it should have been.

Cowardly managers (and I know, because I am one) would love to be able to leave a note on someone’s desk (or better still, send it to their home address) saying, “You’re sacked and I don’t have to tell you why. Here’s a cheque. Don’t come back.” But even Beecroft isn’t suggesting that. His proposed Compensated No Fault Dismissal still involves a hearing and a formal settlement. Cowardly managers would still have to look their workers in the eye and tell them they weren’t performing. Given that this is what most of them shy away from (sometimes for years) I wonder if Adrian Beecroft’s plan would make much difference.

It also doesn’t allow for the possibility that the manager might be at fault. Current disciplinary processes tend to smoke out bad managers who can’t set proper goals and monitor performance. Compensated No Fault Dismissal would allow a manager to simply blame the employee and recruit someone else. Perhaps, if a manager were to get to his fifth Compensated No Fault Dismissal, his bosses might twig that the problem lay elsewhere.

But the most glaring flaw in Beecroft’s proposal is this. He is not proposing to get rid of discrimination legislation. (He’s bold but he’s not that bold.) As any HR manager will tell you, plain old unfair dismissal claims are a doddle. The ones that send even the most sophisticated employers into a tailspin are the discrimination claims. Not only is the compensation potentially much higher but the law is more complex too. Discrimination claims also generate more media hype so there is a heightened fear of bad publicity.

Employees (and their lawyers) know this and, increasingly, those who are in a position to do so are lobbing in discrimination allegations alongside their unfair dismissal claims. Beecroft’s proposal will ensure that everyone does so. If you feel you have been unfairly treated and have no recourse to an employment tribunal that will be the logical thing to do.

One perverse effect of this might be that employers sack their underperforming white male staff while leaving female and minority underperformers in place. But do that too often and the white blokes will start putting in discrimination claims too. It’s a widely held myth that only women and ethnic/religious minority employees can claim under discrimination law. Abolish unfair dismissal and watch the discrimination claims rise.

Adrian Beecroft’s report is based on two flawed assumptions; that employment law is holding back economic growth (it isn’t) and that the law stops employers from sacking underperforming workers (it doesn’t). But even if the proposals we’ve seen so far were enacted, it would not reduce the headache associated with disciplinaries, grievances and tribunal cases. It might even make it worse.

I await the final report with interest but the early signs are not good. We need to encourage economic growth and, though it’s a separate issue, the employment law regime could probably do with a review too. If this is the best the government can do, it’s a pretty poor start.

Update: The leaked pages of the report are here and here. Beecroft advocates paying people under redundancy terms, though he doesn’t say whether this should be the statutory or employer scheme. (Some of these are contractual anyway.) In other words, it would be like paying someone off for redundancy when they were not really redundant. This would, of course, mean that it would still be no cheaper to get rid of all those lazy long-serving public sector employees that we keep hearing about.