Business secretary Vince Cable today rejected calls for “no-fault dismissals” as he unveiled a wide-ranging shake-up of employment laws.
In May, the Beecroft report on employment law, authored by venture capitalist Adrian Beecroft, recommended empowering employers to fire staff for any reason with compensation.
However the Department of Business says there is no evidence this would boost employment and has dismissed the calls.
Employment law has become a key coalition faultline with many Conservatives backing the proposals, with fierce resistance by Liberal Democrats.
Instead, today’s report backs “settlement agreements” meaning employees can leave without going to a tribunal and receive a good reference and payoff in return.
The Advisory Consiliation and Arbitration Service will provide a code of practice for settlement agreements alongside a simultaneous consultation.
The Government is also proposing cutting the cap on compensation for unfair dismissal claims from £72,000 and making it easier for judges to dismiss weak cases at employment tribunal.
The Department of Business will review the Transfer Undertakings (Protection of Employment) rules, which protect employees’ jobs when a business changes owner, as the Government says businesses want a more efficient system.
The Government will also seek to improve guidance for small businesses on the ACAS code of practice and grievance.
Cable says: “We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights.
“We acknowledge that more can be done to help small companies by reducing the burden of employment tribunals, which we are reforming, and moving to less confrontational dispute resolutions through settlement agreements.”
Reeves business services partner Mike O’Brien says: “It will not really change the laws or the rules, but it could well change the mood. It shows that the Government is trying to make doing business easier in the UK and should given greater flexibility and confidence to those on the cusp of making a hiring decision to go ahead and take the plunge.”
But CMS Cameron McKenna employment partner Sarah Ozanne says: “It is questionable whether judges’ instinct for fairness may still make them reluctant to grasp the nettle tightly; the initial shift is based purely on paper and judges may consider that they should not strike out claims without a proper hearing.”
The rules will come into force next summer.