Changes to unfair dismissal period will encourage growth

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On 6 April this year, the qualifying period for unfair dismissal increased from one to two years’ continuous employment, taking us back to the pre 1999 position. Trade unions have moved swiftly to condemn the increase, arguing that it will create a ‘hire and fire’ employment culture.

But it is important to keep the change in perspective, look at the wider picture and consider the potential for this to encourage employers to recruit in an uncertain economic climate.

There is always a balance to be struck between the competing rights of employers and employees. The aim behind the change is not to leave employees exposed to a hire and fire culture, but to ensure that the UK labour market has the flexibility needed to aid economic recovery, whilst still ensuring that it is fair for both employers and employees.

Of course, reforms to employment law will not solve the current economic crisis on their own. But the hope is that they will give businesses a much needed confidence boost when considering whether or not to recruit. There is little doubt that more recruitment and less unemployment will significantly boost economic growth.

The media will no doubt pick up on a minority of unscrupulous employers who are reckless when it comes to hiring and firing employees. But it is important to remember that the vast majority of businesses approach recruitment, and the obligations that come with being an employer, in a responsible manner.

In this time of economic uncertainty, for understandable reasons, many businesses are choosing to sit on what spare cash they may have, rather than investing it. Taking on new employees can easily be seen as a potentially very expensive exercise. Companies are naturally concerned that, once they recruit a new member of staff, employment laws may not give them the flexibility that they need in order to readily review and reconsider such recruitment decisions. After all, what happens when, for example, a business faces an unforeseen downturn in demand for its products or services and the business is forced to contemplate cutting costs?

Employers can sometimes find that it takes longer than a year to decide whether a new employee is worth investing time and money in. In such circumstances, giving employers an extra year in which to reach that decision could be beneficial to both employers and employees. With a two year qualifying period for unfair dismissal protection, there is more time for both the employer and the employee to sort out any initial problems, without making rash decisions about resigning or dismissing. Employees will also have longer to prove themselves and improve their performance, if they initially struggle to settle into their new job.

It is worth remembering that increasing the qualifying period for unfair dismissal is just one part of a wider government initiative to reduce 'red tape' and ensure that employment laws foster a flexible, effective and fair labour market. With the outlook for economic growth for the rest of this year looking decidedly uncertain, UK business desperately needs a helping hand.

The idea that this change will encourage a 'hire and fire' culture is almost certainly over-stated. Employers rarely want to dismiss employees; it is something that they do reluctantly. After all, it can often be a difficult and potentially costly process. Employers want to get recruitment decisions right. But they need the flexibility, post-recruitment, to be able to continually assess whether an employee is going to make the grade or not and whether their services are still required.

By giving both employers and employees more time to work through any initial teething troubles, there is the prospect that this change in the law could result in fewer dismissals, not more. Also, if the government is right, this change in the law has the potential to encourage the creation of more new jobs in the first place.

Ben Stepney, solicitor, Thomson Snell & Passmore

 

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