Case not proven on no-fault dismissal concept- EEF responds to Government’s call for evidence

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EEF formally responded today to the Government’s call for evidence on dismissal rules and "compensated no-fault dismissal" for small businesses.

The Government was seeking views on:

  • compensated no-fault dismissals for micro businesses (with fewer than ten staff) which would prevent an employee from bringing an unfair dismissal claim in respect of his/her dismissal; and
  • whether dismissal procedures, including the ACAS Code of Practice on Disciplinary and Grievance Procedures, could be made more accessible and easier to use by smaller businesses.

The call for evidence recently received widespread attention in the media, following which a report from a former adviser to the Government, Adrian Beecroft was published. The Beecroft report contains a number of proposals for reform, many of which are supported by EEF and also the concept of no-fault dismissal. The report generated a polarised debate, with the Business Secretary, Dr. Vince Cable, expressing his opposition to the idea.

Summary of EEF response

EEF’s response addresses the specific questions raised by the call for evidence on compensated no-fault dismissal and reform of the ACAS Code of Practice. However, it also looks at how these proposals fit with the Government’s overall programme to reform employment law and make the labour market more flexible.

We broadly support the ACAS Code of Practice, which provides a constructive anchor and useable structure for employers. However, this is not to say that it is not capable of improvement. Greater practical flexibility would be welcomed when dealing with a combination of disciplinary and grievance matters and the Code should clearly differentiate between performance management and disciplinary procedures.

On the more controversial issue of compensated no-fault dismissal, EEF acknowledges that there may be some limited benefits for micro-sized firms of introducing such a system. However, any future consideration by Government of this concept must consider carefully its impact and potential unintended consequences.

Our response makes clear that compensated no-fault dismissal commands little support from Industry and that our members believe it would make little or no difference to recruitment plans. We also believe that the proposals risk undermining the gains that employers have made in increasing flexibility and productivity by working more collaboratively with their employees. It sits uneasily with the need for a flexible two-way relationship between employers and employees as advocated by EEF.

The usefulness of no-fault dismissal to the smallest employers will be reduced by the need to provide a level of compensation to dismissed workers in addition to current legal entitlements of notice period and redundancy. Any such system is likely to impact on the general level of settlements agreed between employers and employees, with the no-fault compensation level becoming the basis for any negotiations and pushing up the costs for employers.

The Government is already considering a number of reforms relating to settlements on termination of employment which are likely to yield much greater employer benefit and help them manage change. The ability to have workplace discussions without fear of subsequent litigation and allowing remodelled compromise agreements to be used where no dispute arises will be of significantly greater use to employers than no-fault dismissal. For example, a protected conversation may progress to a formal offer by an employer of terms, including compensation, to end an employment relationship. This could then lead to a settlement agreement in circumstances which no fault on the part of the employee is alleged and where there is no necessity for there to be any dispute.

EEF is concerned about the debate on compensated no-fault dismissal detracting from pushing forward on other areas of urgent employment reforms, where the evidence and support for change is already much clearer. We are calling on the Government to refocus its efforts on the areas of employment reform that will deliver genuine benefit for business, and have issued a press release to this effect today (click here for press release). The press release includes a five point plan for employment reform, where we believe the Government needs to move faster, i.e:

  • Reducing the 90 day collective redundancy consultation period
  • Employment Tribunal reforms
  • Simplifying TUPE Regulations
  • Introducing protected conversations and making it simpler to reach compromise agreements
  • Clarifying its plans for shared parental leave.

Have your say on future Government proposals

We engage with members about EEF's policy positions in many different ways. The help of many of our members was invaluable in formulating our response to the Government’s call for evidence.

If you would like to have your views heard on future Government proposals or become more involved in the work we do to represent you in the future, look out for our requests in HR briefings for views on particular issues or email Tim Thomas, Head of Employment Policy at tthomas@eef.org.uk, stating the areas of policy in which you are particularly interested.

EEF support

Performance management in the workplace can often cause difficulties for employers, and it is important to underline that dismissals need to be handled appropriately. EEF’s advisers are available to support members handling difficult situations. Contact your local office for more information.

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Media Team 020 7654 1576

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