Unfair dismissal rule changes officially confirmed

Changes to unfair dismissal rules have today been confirmed by Business Secretary Vince Cable and Chancellor George Osborne.

 

The decision will see the qualification period for the right to claim unfair dismissal extended from one to two years. This will come into force on 1 April 2012. Ministers say the move could save British businesses £6 million a year.

 

Changes to the unfair dismissal rules follow the ‘Resolving Workplace Disputes’ consultation published in January this year which also proposed measures to encourage early resolution of disputes, the speeding up of the tribunal process and measures to tackle weak and vexatious claims.

 

The Government claims these combined proposals should see the number of unfair dismissal claims drop by around 2,000 a year.

Business Secretary Vince Cable said: “The priority of this government is to increase growth in our economy. We have one of the most flexible labour markets in the world but there is more we can do to give British business the confidence it needs to create more jobs and support the wider economy to grow.

 

“Businesses tell us that unfair dismissal rules are a major barrier to taking on more people. So today we have announced that only after working for the same employer for two years can an employee bring an unfair dismissal claim.”

 

John Cridland, CBI Director-General, commented: “Extending the qualifying period for unfair dismissal is a very positive step. 

“We have been urging the Government to do everything it can to make it easier for firms to grow and create jobs, and this will give employers, especially smaller ones, more confidence to hire.”

However, Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD), said: “While watering down unfair dismissal rights is seen as a way to boost recruitment and improve job prospects for young people and the long-term unemployed, the short-run impact will be limited by the overall weak state of the labour market while in the long-term any positive effect on hiring is likely to be offset by a corresponding increase in the rate of dismissals.

 

"The vast weight of evidence on the effects of employment protection legislation suggests that while less job protection encourages increased hiring during economic recoveries it also results in increased firing during downturns. The overall effect is thus simply to make employment less stable over the economic cycle, with little significant impact one way or the other on structural rates of employment or unemployment.

 

“There is no evidence that UK employment suffered significantly in the 1970s as a result of the introduction in 1975 of a six month qualifying period for rights against unfair dismissal or that there was any substantial benefit when the qualifying period was subsequently raised to two years in the 1980s before being lowered to one year in 1999.

 

“Moreover, while there is no available evidence of the effect of these changes in unfair dismissal rights on workplace productivity, there are prima facie reasons for expecting that the current one year qualifying period strikes an appropriate balance between enabling employers to make reasonable decisions on employee potential and giving employees a sufficient sense of job security to actively engage with the organisation they work for.

 

“Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy. Although the policy change will undoubtedly be welcomed by the de-regulation lobby, it isn’t the way to boost growth and jobs.

 

“In addition, it is unlikely that raising the threshold from one to two years will have its intended effect of reducing the number of employment tribunal claims because employees are increasingly bringing claims linking unfair dismissal with discrimination claims which can be made from day one of employment.

 

"ONS figures suggest that an extra 12% of employees would potentially be denied the chance to claim unfair dismissal due to length of service as a result of the change – hardly likely to make much of a dent in overall tribunal numbers given that only a small proportion of these would make any claim.” 

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