Government warns against its own employment reform proposal

The Department for Business Inovation and Skills has produced a report which suggests that Government plans for 'compensated no fault dismissal' may be detrimental to the economy. The introduction to the report states that: 'Though the UK has a competitive employment framework by international standards, the Government believes that steps can be taken to improve it. Through the Employment Law Review, the Government is pursuing an ambitious programme of reforms to develop the framework to encourage firms to take on staff and grow. As part of this work, BIS recently issued a call for evidence seeking views on the issue of dismissing staff. The call seeks views in particular on the concept of ‘compensated no-fault dismissal’ for businesses with fewer than 10 employees, which would allow these employers to dismiss an employee where no fault is identified, provided a set amount of compensation is paid. The aim of such a reform would be to allow small businesses to have the right number of people at the right time. Uninformed economic reform, however, can have adverse and unintended consequences. The Government is therefore seeking to understand the potential economic impact, including the wider impact on both employer and employee confidence, of no-fault dismissal. Bearing this in mind, BIS undertook a study of international labour market regulation. Following an initial assessment of international data BIS identified three countries with particularly relevant features to the no-fault dismissal proposal: Germany, Australia and Spain.' The report goes on look at interesting case studies from other countires which seem to suggest that such a change is not desirable.