The Department for Business Innovation & Skills (BIS) is currently seeking views on a proposal to introduce “compensated no-fault dismissals” for micro-businesses (those with fewer than ten employees). The deadline for responses is 8th June 2012.
The Government’s thinking is that dismissing someone can be an especially daunting and complex process for small businesses. BIS envisages that such employers would be able to dismiss a member of staff simply by paying a set amount of compensation, without following a formal dismissal procedure or identifying any fault on the employee’s part.
The individual would be prevented from bringing a tribunal claim for unfair dismissal (although not other types of claim, such as discrimination).
This is a controversial proposal, which some may feel would shift UK employment law uncomfortably close to the US regime of “employment at will”. Yet the central concept is well worth exploring – and not just so far as small employers are concerned.
Unfair dismissal law as it currently stands is hugely uncertain and unpredictable, often triggering lengthy and expensive employment tribunal litigation. An alternative system under which employers could pay fixed ‘indemnity’ compensation on dismissal merits serious consideration.
This would make it quicker and easier for employers to implement dismissals in cases where a clear decision has already been made that an individual must go. They could dispense with time-consuming processes, which are often seen as little more than a charade.
Choosing this option would, however, come at a price. The success of such a scheme would depend on the indemnity being set at a sufficiently high level (although there would need to be an exception allowing employers to dismiss for serious misconduct without paying anything).
If set at an appropriate level, the indemnity would be deter employers from sacking arbitrarily and provide adequate incentive for them to manage potential staff terminations properly – for example by obtaining medical evidence before dismissing for ill health, or holding a redundancy consultation meeting. There could be a reduced ‘tariff’ in cases where the employer had followed the appropriate process.
It remains to be seen whether, and if so how, BIS’s ‘no-fault’ proposal for micro-businesses is taken forward. Potentially, it could create a platform for a more comprehensive and radical reinvention of unfair dismissal law.