New employment rules for small firms could allow firing without explanation

  23rd November 2011      
 Company News

Business Secretary Vince Cable is contemplating new rules this morning meaning that firms with 10 or fewer employees would be able to sack staff without a risk of a tribunal as long as they pay compensation.

The introduction of such rules would mean that staff members who work for small businesses – or ‘micro firms’ – would lose their right to claim unfair dismissal.

The reason behind these proposed changes, Cable says, is that he wants the process for getting rid of staff to be “simpler and quicker”.

Announcing a consultation regarding changes to employment law and legislations, Vince Cable said his aim is to help firms to expand without making existing staff feel insecure.

He has also confirmed plans to enforce a rule from meaning that people cannot make claims for unfair dismissal if they have worked at the firm for less than two years — increasing the current one year time period. This will come into effect from April.

The Business Secretary said that the proposals would not erode workers’ rights but would cut “unnecessary bureaucracy” and reduce the number of cases going to employment tribunal, which has increased by 40% since 2008.

Cable has insisted, however, that he isn’t trying to encourage a “hire and fire” culture and said: “There is a genuine concern that if you take measures which create substantial job insecurity this will affect people’s general confidence in life and willingness to spend, but we have to balance that against the need to create an environment in which firms will expand and take on new employees”.

Shadow Business Secretary Chuka Umunna said that, while the Labour party agreed the tribunal system needs reform, “Watering down people’s rights at work by doubling the service requirement to claim for unfair dismissal from one to two years is not a substitute for a credible plan for growth.”

He continued: “Instead of seeking to make it easier to fire people, the government should be looking to make it easier to hire people at a time when their reckless economic policies have pushed up unemployment to a 17-year high”.

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