Report urges employment law shift

25 October 2011 Last updated at 21:40 ET

The report was written by venture capitalist and Tory donor Adrian Beecroft

A report into employment laws commissioned by the prime minister has recommended scrapping the right for workers to claim unfair dismissal.

The report, which has not been made public, argues this move would mean more capable people would replace those sacked, boosting economic growth.

But some senior Liberal Democrats fear it would harm the economy.

Currently, workers who feel they were unfairly dismissed can make a claim after 12 months in a job.

Last year there were 236,000 employment tribunal claims – of which only some were unfair dismissal claims, with an average award for successful complainants of £8,900.

The report was was written by Adrian Beecroft, a venture capitalist and Conservative Party donor.

The coalition government has stated its committed to reforming employment laws.

The chancellor, George Osborne, recently announced new measures aimed at restricting the number of unfair dismissal claims.

He announced that, from April 2011, the qualifying period for a claim for unfair dismissal would be that the individual must have been in the job for at least two years.

‘Coasting’ staff

However, Mr Beecroft’s report goes much further.

It calls for an end to unfair dismissal – a regulation that the report’s author thinks is particularly abused by some in the public sector.

The Daily Telegraph, which has seen the document, quotes the report as saying under current regulations workers are allowed to “coast along” and employers are left fearful of expanding because new staff may prove “unknown quantities” who are impossible to sack.

The newspaper says a final draft of the document, dated Oct 12 2011, says the first major issue for British enterprise is “the terrible impact of the current unfair dismissal rules on the efficiency and hence competitiveness of our businesses, and on the effectiveness and cost of our public services.”

It reports that the document goes on: “The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement.

“This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation.”

‘Unlikely’ move

Prime Minister David Cameron and others in the cabinet are considering the recommendations.

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.

In 2010-11 the cost to the taxpayer of running employment tribunals and the Employment Appeal Tribunal in England, Wales and Scotland was more than £84m, according to the Ministry of Justice.

The Treasury said that more than 80% of applications made to an employment tribunal did not result in a full hearing.

Almost 40% of applicants withdrew their cases, but employers still had to pay legal fees in preparing a defence, it said.

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