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Last week the government published the Beecroft Report submitted to BIS at the end of last year.
The government wanted to quell the rumours about what was stated in the report – seemingly preferring the rumours of splits in the coalition and whether (and if so how much) the Prime Minister had to tone down the report for public consumption.
It is rare for legal issues to be quite so high profile but employment law, and its inextricable link with matters of the economy, has a knack of grabbing the headlines in the press as well as the hearts of both Left and Right.
The report appears to be based on the premise that it is a fear of employment regulation that is stopping small businesses being efficient, competitive and therefore growing. I cannot help but feel that more fundamental issues are currently stopping the growth of small businesses – consumer/economic uncertainty and the unavailability of business finance are the two most commonly cited and in my belief the more accurate. It is right that employment laws need to change to reflect the times, but there is a fine line between economic conditions necessitating change and economic conditions being used as an opportunity to make change.
The report makes a number of recommendations, but the one that really catches the eye relates to unfair dismissal. Compensated No Fault Dismissals are recommended, whereby the employer can elect to dismiss someone provided they make an enhanced compensation (equivalent to a redundancy payment) and after a period of consultation. The Government has called for evidence on this proposal in respect of businesses with fewer than 10 employees. Such an erosion of basic employment rights seems difficult to justify on a cost/benefit analysis - although I see that already there are a plethora of studies, graphs and statistics proving beyond any reasonable doubt one side or the other! The economy needs certainty at the moment, to boost confidence, and for that reason I do not believe the concept of CNFDs will prompt, or even assist, an economic recovery.
The report also recommends small business exemptions (for those businesses employing fewer than 10 employees) more generally. My concern is that these may act as an incentive for small business to remain small. If Mr Beecroft is right in his assertion that entrepreneurs are running scared of all this regulation, it is going to be a brave one that employs an 11th person. My preference is for more advice and guidance to be available to small businesses to help the owners and managers become proficient businesspeople, rather than allowing them short-cuts. That is a sound basis for a thriving economy. Employment law is not difficult to grasp (despite what we employment lawyers might say) and it is not hugely onerous. Can it be “trimmed” in some areas? Probably. Does it need wholesale change? Not in my opinion.
The report makes many other recommendations that are well worth a read whatever one’s views. How many of the recommendations will actually become law is the question. But in the meantime, publishing the report and it making the national headlines keeps public and political attention on the importance of encouraging economic growth.
Justin Govier, Partner and head of the Employment team at IBB Solicitors