Replace right to claim unfair dismissal with Compensated No Fault Dismissals, says leaked report commissioned by David Cameron

Compensated No Fault Dismissals would 'not increase unemployment'
The report argues that "Compensated No Fault Dismissals" would "not increase unemployment." It says:

Employees for whom there is not a job are made redundant. It is only where a job needs doing but is not being done well that Compensated No Fault Dismissal will be used. The result will be that a more able employee will be recruited.

However, the report concedes that there would be some losers under the proposed system of "Compensated No Fault Dismissals." It says:

The downside of the proposal is that some people would be dismissed simply because their employer did not like them. While this is sad I believe it is a price worth paying for all the benefits that would result from the change.

Cameron and Osborne support radical proposals for Compensated No Fault Dismissals, says Telegraph
The Daily Telegraph states that the confidential report - dated 12 October 2011 - has been circulated around Whitehall, and has the backing of David Cameron, George Osborne and of some "business leaders." It says:

The report is understood to have the support of both the Chancellor and Downing St, although the proposals are likely to meet with strong opposition from some Liberal Democrats and trade unions. While Downing Street is aware that the proposal will be controversial, it is equally concerned that the scale of the economic crisis is such that dramatic measures are required to promote growth.

It says that the report is likely to be published by the Coalition Government in the near future:

Downing Street was not planning to release the analysis but is now expected to publish the report later this year, partly to counter inaccurate reports that suggested the report advocated cutting maternity rights.

The BBC reports that at least one Liberal Democract cabinet minister doubts the likely effectiveness of the proposals:

Downing Street sources told the BBC's Robin Brant no decisions had been made yet, but they added it is "unlikely we would go further on unfair dismissal." Our correspondent said an adviser to one senior Liberal Democrat cabinet minister told him they believe such a move could undermine consumer confidence by creating large scale job insecurity, although that claim was countered by Downing Street.

Reactions to the proposals
Reactions to the proposals are coming in thick and fast. These include the following:

• Employment law expert Darren Newman describes the proposals regarding Compensated No Fault Dismissal as "fiendish and wrong." However, he also notes that "I still think it is workable as a legal proposition. Don't rule out something like this actually being introduced."
  
• Barrister Jamie Anderson tweeted the following in response to the proposals: "I just simply cannot fathom that this is being contemplated." Anderson followed this up with a blog post, in which he says: "If the report is suggesting and the government is giving consideration to the wholesale withdrawal of the right not to be unfairly dismissed, then my view is that it would simply be a bridge too far for any government to achieve. The end result will be headlines for the government, but an issue quietly dropped in the months to come. The concept of unfair dismissal has become engrained in our national psyche. The social benefits of having the law in place , encouraging good industrial practice, a pleasant working environment and decent management outweigh any regulatory burden."
• Barrister Anya Palmer tweeted that "a no-fault dismissal compensation scheme is not a "right to sack unproductive workers". It's a right to sack any worker."
• Abolishing unfair dismissal will achieve nothing This is the title of a new post from pseudonymous HR blogger Rick, on the Flip Chart Fairy Tales blog. Rick says: "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. The government needs 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."
• The CIPD has asked its members what they make of the proposals. The CIPD has set out its own views via three tweets. Tweet 1: "#Beecroft proposes abolishing unfair dismissal, "slacking" employees shld be tackled by effective perf mgmt over time, not summary dismissal." Tweet 2: "Nothing in #emplaw to stop effective managers dismissing poor performers. Govt should be asking what can be done to raise mgmt standards." In a third tweet, The CIPD points to its May 2011 report Work Horizons: the economic rights and wrongs of employment regulation for "Detailed #CIPD views on the "rights and wrongs" of employment regulation."
• The BBC quotes the following response to the proposals from the CIPD's John Philpott: "If you look at the evidence on unfair dismissal, I mean there isn't actually anything to suggest that watering down those rights would create any more jobs and indeed the job insecurity it would create would actually be bad for the economy and businesses. I think if you look at our productivity problem, it's down to poor investment, poor training and poor management."
  
• Sacking employees is like doing housework - Should unfair dismissal laws be scrapped? A new post from Matt Huddleson on his Employment Law Sense Check blog. Matt says: "Scrapping unfair dismissal laws really is not the answer here. Managers need to take the initiative, and take responsibilty for ensuring the performance of their staff. If they are satisfied with the performance, fine. If not, then it is time to take action... otherwise it is the manager themself who is performing poorly."
• TUC General Secretary Brendan Barber has issued his reaction to the proposals, Reuters reports. Barber says that "if people are constantly in fear of losing their jobs it will lead consumers to spend even less. But while this proposal does nothing for growth, it does show the kind of economy those close to the prime minister want to create -- one in which nasty bosses are given full licence to undermine those trying to maintain decent standards."
• Labour MP Michael Meacher writes: "Leaks from [Beecroft's] report indicate he is proposing the virtual phasing out of all employment rights, to the point where even someone who had worked for a company for 20-30 years would have no comeback if they were summarily sacked. For Beecroft, labour is a mere commodity of production whose cost should be pared down to the irreducible minimum, and if the associated impedimenta of workplace rights can be stripped out, so much the better."
• Writing on the Jobsworth blog, Michael Scutt argues that "like many proposed reforms of supposedly unpopular laws [Beecroft's proposals] might look well and good from a high level, but just wait until it is you, or your wife, son, daughter, parent who is said to be slacking and thus sent packing. It's all very well when it's someone else who is on the wrong end of the stick, but that is the essence of bad law. This is a fundamentally wrong proposal."
  

About the report
The Daily Telegraph says that the leaked report on reforming the UK employment law framework was compiled by venture capitalist Adrian Beecroft, and was commissioned by Prime Minister David Cameron.

In his introduction to the report, Beecroft argues that "much of employment law and regulation impedes the search for efficiency and competitiveness."

He believes that "many regulations, conceived in an era of full employment, are designed to make employment more attractive to potential employees. That was addressing yesterday's problem. In today's era of lack of jobs those regulations simply exacerbate the national problem of high unemployment."

He concludes that the current economic crisis "demands radical changes to encourage employers to take on more staff, and thus to grow."

The Coalition Government's reassessment of employment law will not end here. Beecroft's report alludes to already-published or forthcoming reports on a range of other issues, including the following: health and safety laws; sickness absence; the national minimum wage; and the compliance and enforcement regimes.

What else does Beecroft recommend?
In the leaked text, Beecroft makes reference to "two issues [which] stand out as being the keys to encouraging growth and employment." However, the two leaked pages of Beecroft's report only include a summary of his proposals as regards unfair dismissal. It remains to be seen what the other key issue in "encouraging growth and employment" identified by Beecroft might be.

UPDATE 1 (Wednesday 26 October 2011): Anna Birtwistle: Why Compensated No Fault Dismissals could cost employers dearly In a guest blog post for XpertHR, solicitor Anna Birtwistle presents her own perspective on Beecroft's recommendations that unfair dismissals be replaced with Compensated No Fault Dismissals. She argues that these proposals - if enacted - could cost UK employers dearly.

UPDATE 2 (Thursday 27 October 2011): Business Secretary Vince Cable has strongly criticised Beecroft's proposals to replace unfair dismissals with Compensated No Fault Dismissals, the Guardian reports. According to the Guardian:

Discussing the proposal for no fault dismissal, [Cable] said "No evidence has been advanced that I have seen that it will improve labour market flexibility in general, or have any beneficial effect, but if anyone can produce any, we will look at it. "He pointed out that unemployment did not shoot up during the recession owing to flexibility in the labour market. He said: "There was a great deal of flexibility shown by our employees as well as the employers. I go round a lot of our industrial plants. The unions have their formal positions, but it is very clear they are committed to their companies and are very flexible about working practices so the world has changed an awful lot in the last 30 years in a positive way."

The Institute of Directors (IoD), meanwhile, has come out strongly in favour of Beecroft's proposals. IoD Director General Simon Walker says:

The IoD strongly supports radical change to employee dismissal processes and fully backs 'Compensated No Fault Dismissal' as part of a solution. Ministers would do well to act upon Mr Beecroft's suggestions, freeing up wasted time and money from litigation and ensuring it is instead channelled into job creation and business growth. The IoD knows of countless examples of businesses being vindicated at tribunal, yet saddled with tens of thousands of pounds of expenses. Employers will create more jobs if they are confident that, if things do not work out, they will be able to remove staff without facing such risks.

UPDATE 3 (Thursday 27 October 2011): "Let us be clear: these proposals would apply to all employees, not just lazy or unproductive ones." So says Barrister Anya Palmer, writing in the Guardian. She argues that "29 million employees [...] stand to lose out," should the proposals be enacted. She also calls into question the basis for Beecroft's claims that replacing the right to claim unfair dismissal with Compensated No Fault Dismissals would help boost economic growth and encourage employers to hire. Palmer writes:

The government has repeatedly suggested that if only it were easier to fire, businesses would be more willing to hire. But when you look for evidence of that, all they ever give you is "employers tell us". Is this what they call "evidence based policy"?

UPDATE 4 (27 October 2011): Are unfair dismissal rules really holding employers back from creating new jobs in 2011? Where is the statistical evidence to back up the report's  claims that the current unfair dismissal rules are holding employers back from creating new jobs in 2011? Is Beecroft guilty of hiding behind what Barrister Anya Palmer terms the "employers told us" approach?

UPDATE 5 (28 October 2011): The Beecroft Report: The Twitter Response - Michael Scutt presents an excellent round-up of Twitter responses to Beecroft's proposals, on the Jobsworth blog.

UPDATE 6 (28 October 2011): Two more pieces written in response to Beecroft's proposals:

• Should workers lose their most basic employment rights? The Lawyer presents a round-up of reactions to the Beecroft proposals, including a link to Anna Birtwistle's article for XpertHR.
• In a new blog post, Jane Pound of Signal Business Consulting describes how Beecroft's proposals "left me with a wry smile on my face." Pound writes: "Better management capability, through the implementation of clear, robust performance management processes, with opportunities to learn and improve are in the long run the driver of sustained productivity, not the removal of valuable employment rights. Thankfully  the Business Secretary, Vince Cable is reported as saying this proposal is frankly rubbish .. so the debate goes on, but there is a bigger question to be answered here about management capability ..."

UPDATE 7 (Saturday 29 October 2011): Today's Financial Times includes an article entitled How to sack slackers and end free lunches for layabouts by Luke Johnson of Risk Capital Partners. Johnson comes out strongly in favour of Beecroft's proposals. Johnson says:

I cheered loudly when I read that the British government plans to change the law so bosses can sack idlers. I have spoken to hundreds of entrepreneurs in recent years about obstacles to progress. Their biggest single complaint has been about the minefield of employment legislation. [...] I hope the Beecroft initiative represents an initial step in a long overdue revolution in attitudes. A new job in the private sector comes about because an entrepreneur believes another staff member will add value. Parliaments everywhere should boost every incentive to enable this to happen. Remove employment barriers and I am confident animal spirits will flow, inventiveness will surge and opportunities for gainful work will surely increase.

UPDATE 8 (Monday 31 October 2011): The CIPD has rejected Beecroft's proposals, arguing that they distract from the real issue: the UK's "crisis of management and leadership skills." The CIPD's Katerina Rüdiger says: "Headline grabbing proposals which call for making it easier to 'sack the slackers' are at risk of masking the real question we should be asking: why are so many UK workers still underperforming? The reason is not stringent employment legislation - indeed the UK has one of the most de-regulated labour markets across OECD countries - but a crisis of management and leadership skills. Firing underperforming workers does not address the root cause of this problem; the Government should instead focus on supporting employers to improve management capability. One third of the UK's workforce has managerial responsibilities so it's not difficult to see the potential for improved management and leadership capabilities to unlock productivity and address the problem of workplace performance in a way that works for everyone: employers, individuals and the UK economy." See: Compensated No Fault Dismissal proposals mask UK's 'crisis of management and leadership skills,' says CIPD

UPDATE 9 (Monday 7 November 2011) Beecroft update: Compensated No Fault Dismissal proposals to be 'pushed through'? Immigration checks to be scrapped? Additional detail has also emerged regarding both the commissioning of Adrian Beecroft's report (only two pages of which have been leaked so far, which set out the "Compensated No Fault Dismissal" proposals), and other recommendations allegedly set out by Beecroft. Beecroft's other recommendations are reported to include the following: scrapping immigration checks for new workers; and reducing obligations requiring SMEs to provide pensions for their employees. Beecroft's controversial report - which was dated 12 October 2011 - was commissioned by David Cameron's Director of Strategy, Steve Hilton, the FT reports. We round up the additional information on Beecroft's proposals to have emerged from these reports.

UPDATE 10 (Wednesday 9 November 2011): Beecroft update: Nick Clegg vetoes Compensated No Fault Dismissal proposals  Deputy Prime Minister Nick Clegg has reportedly vetoed controversial proposals - set out in a leaked Government report  - to replace the right to claim unfair dismissal with new "Compensated No Fault Dismissals" in order to boost economic growth. The Guardian reports that Clegg has intervened to block the recommendation for Compensated No Fault Dismissals to be introduced on the grounds that they would have - in the words of a "senior Whitehall source" - a "chilling effect" on the UK labour market. The source also dismisses the Beecroft report as "flimsy."

Will the removal of employment rights see a rise in union membership? Writing on the Flip Chart Fairy Tales blog, Rick explores a potential unintended consequence of any decision to enact Beecroft's proposals: Could they drive UK workers back to trade unions? Rick argues that"it would be surprising if some workers, having been deprived of their employment rights, did not seek the protection of a trade union. Much of this will depend on the behaviour of employers. If, the day after the measure becomes law, there is a mass dismissal of all the 'dead wood' and 'slackers', it might be enough to throw a formerly compliant workforce into the arms of a trade union."

UPDATE 11 (Thursday 10 November 2011): "We need to accelerate the work on employment law." This is according to Conservative MP for Epsom and Ewell Chris Grayling, in a recent interview with the Daily Telepgrah. Grayling used the interview to voice his support for Beecroft's recommendations for Compensated No Fault Dismissals, and to call for a "big bang approach on regulation."

Grayling said he wants to see "a situation where the fault isn't always with the employer, that the employer is always wrong ... I think there needs to be much greater levels of responsibility of the individual."

In Grayling's view:

We've got a very poor record on unnecessary red tape; extra cost to business; people being asked to do things they don't need to; over the top regulation, misinterpreted regulation, poor guidelines. And we've made a start ... but I hope that what we are about to do now is take a real step forward and to accelerate ... We need to accelerate the work on employment law as well.

UPDATE 12 (Thursday 10 November 2011):
Vince Cable has stated in a Radio 4 interview earlier today that we will have to wait for Osborne's autumn statement - to be delivered on 29 November 2011 - for an "absolute commitment" as to whether or not the Coalition Government plans to push ahead with the Compensated No Fault Dismissal proposals. This is according to a transcript of Cable's Radio 4 interview, put together by Anya Palmer. According to the transcript, Cable said:

[W]e're not making an absolute commitment at this stage, I think we will have to wait for what the Chancellor says at the end of the month, but I have made it very clear that I don't think that you encourage confidence in the workforce if they are massively insecure, but we have got to look at the technical proposals and judge them on their merits and look at evidence, because policy has got to be rational...

He also made mention of a proposal to reform the employment tribunal system, put together by his own department. According to the transcript, Cable said:

[M]y own department has come forward with a serious proposal for reforming tribunals, so that small businesses do not get sucked into very expensive time-consuming tribunals around the dismissal process, and we are also saying that people have to work for two years for an employer before they have access to the tribunal unfair dismissal system.  We are thinking of other ideas too for helping to resolve disputes in the workplace in a way that do not create excessive bureaucracy and difficulties for employers.  But I have also made it very clear that a general measure that creates large scale insecurity and worries about job security is not helpful.

UPDATE 13 (Tuesday 22 November 2011): Reform favours Compensated No Fault Dismissal proposals
Think tank Reform has used its latest report to set out a number of recommendations for the Coalition Government to consider. These include a support for the controversial suggestion - set out in a leaked Government report authored by Adrian Beecroft  - that the right to claim unfair dismissal should be replaced by new "Compensated No Fault Dismissals" in order to boost economic growth.