Dismissals made easier for small businesses
by Claire Singleton, of asb law
The government recently asked employers, employees and other
interested parties to comment on a proposal to introduce "no fault"
dismissals for businesses with fewer than 10 employees.
The reasoning is dismissal processes are too complex, smaller
businesses do not have HR or legal teams, and when a staff member
"doesn't quite fit" or "the relationship has irretrievably broken
down" there should be an easier way for these businesses to part
company with their employees.
The thinking goes this would encourage businesses to grow as
they'd be less concerned about the costs of dismissing staff.
While the owners of small businesses might welcome this as an
attractive proposal, it does raise a number of questions.
If the aim is to encourage the growth of businesses and the
creation of new jobs, is this going to be undermined if businesses
try to avoid reaching the magic number of 10 employees?
This is also a very low cut off point if one reason for the
measure is the lack of HR or legal team. Many businesses with much
larger workforces do not have dedicated HR let alone legal teams;
even businesses with up to 200 or so employees may not have
in-house HR expertise, often relying either on the Finance Director
or the Managing Director's PA to deal with 'people' issues, with or
without external assistance.
In a period of high unemployment, it may be easier for small
businesses to recruit high-quality staff, but as and when the
economy picks up would they want to stay with a business when they
know that they could be dismissed for no reason at any time?
The success and growth of small businesses is often due to the
dedication and enthusiasm of loyal staff; will they maintain that
enthusiasm and loyalty if their employment is so insecure? Might we
create a two-tier workforce with employees who have no option but
to work for small businesses having a lower level of protection,
and is this really going to promote growth and job creation?
The proposal is in a no-fault dismissal, the employer would pay
the employee set compensation. However, this payment would not
necessarily protect the employer from claims. Much of our
anti-discrimination law stems from Europe, so the no-fault
dismissal scheme cannot be set up to prevent employees claiming
Consider a situation in small businesses that arises when an
employee goes on maternity or long term sick leave. During their
absence someone is taken on to cover the role and is found to be
better than the original employee, or jobs are rearranged so the
business copes with one fewer member of staff.
Either way, when the employee is ready to return, the employer
wants to terminate their employment. The no fault dismissal would
not protect the employer.
And is it so difficult even for small businesses to conduct a
fair dismissal process? It's rather patronising to assume an
employer with fewer than 10 employees is unable to understand and
apply basic principles of fairness.
It will be interesting to see what the response to this proposal
will be. If you want your voice to be heard in the debate, make
sure you respond to the request for evidence before the closing
date of June 8, 2012.