The Report criticises the current unfair dismissal scheme as being “so lengthy and complex it is hard for employers to implement”. The recommendations within the Report are “particularly aimed at lifting the burden on small and medium sized businesses, which do not have the human resources or expertise to deal with complex Tribunals”.

The Report highlights abuse of the current unfair dismissal scheme particularly within the public sector, “where often managers are forced to offer underperforming staff large settlements because they fear costly Tribunal rulings”. It is suggested that changes to the dismissal scheme would potentially minimise the threat of unfair dismissal claims being made to the Employment Tribunals.

The Report recommends that an underperforming employee should be “given the chance to argue their case and suggest (but not demand) time to improve, or to be transferred to a less demanding, lower paid job”. Where this cannot be agreed the Report suggests that a new scheme of ‘Compensated no fault dismissal’ should be introduced.  This would see underperformers being dismissed with notice and a payment equivalent to that of redundancy. An employee would then be unable to make a claim for unfair dismissal to a tribunal.  (Although, all the protections of dismissals for reasons relating to race, gender, sexuality etc would still remain.)

The proposals contained within the Report aim to increase economic efficiency and growth for British Businesses.  The changes particularly relate to poor performers/employees who “coast along” and “work well below their true capacity, secure in the knowledge that their employer will be reluctant to dismiss them”. A situation which is far too common, due to employer’s fears of costly Tribunal proceedings and rulings being made against them.

The Report suggests that the new scheme could encourage growth if underperforming employees were replaced with competent, fully performing staff. It is suggested that the workplace would become more competitive which would lead to higher productivity and in turn stimulate a growth in the economy.

However, the Report has been criticised (and even admits) there is a risk that employees may be dismissed by employers simply because their employer dislikes them.   It is also argued that such a scheme would have the opposite effect to that which is intended, by creating large scale job insecurity and actually slowing growth in the economy.

It is expected that the Government will publish the Report later on this year and although the Government has commented that it is “unlikely” that the reforms will be implemented, it appears that the Government is committed to reforming employment legislation and the Tribunal system. Therefore, both employers and employees alike wait in anticipation for further reforms, if any, to be officially announced.

Author: By Allison Grant, Partner, for Lester Aldridge LLP