Beecroft Boohoo


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Venture capitalist and Tory donor, Adrian Beecroft has written a report on employment law for the government which has received pretty much universal panning across the spectrum of opinion. Probably the most contentious aspect has been his proposal for the introduction of “Compensated No Fault Dismissal” (CNFD). Most of the other proposals are variations on policies which are already being put in place and are rather less interesting. The angle which Beecroft was meant to bring was one of how to reform employment law to make it fit with the need to promote economic growth generally (and with it, increased levels of employment).

What is Compensated No Fault Dismissal?

Beecroft’s proposal is for there to be an alternative to redundancy for employers who wish to get rid of underperforming workers without having to go through the detailed processes needed to terminate employment without being at risk of unfairly dismissing them. Obviously there is a bit of a logical conundrum here. If the processes he wants to avoid are there to prevent a dismissal being unfair, it would seem to be logical to conclude that what he is really proposing is making potentially unfair dismissals free from being challenged. Which doesn’t sound terribly fair.

While the whole report has been roundly criticised and condemned, particularly for its amateurish look and lack of underlying research or evidence, this criticism has also been a little superficial in that it has often conflated two distinct proposals under the CNFD heading. Beecroft separately proposed an exemption from the unfair dismissal rules along with a range of other employment law regulations like pensions auto-enrolment, flexible working and parental leave for businesses employing fewer than 10 people. There may be some merit in simplifying the regulatory burden for small businesses which, as Beecroft correctly points out, may find the costs of compliance high. Even if it isn’t the most pressing thing for small businesses, it might be something that would be of benefit in encouraging small businesses to grow their workforces.

The real focus of CNFD which has not been commented on much is, I think, on its application to the public sector. Much of the public sector already has very generous redundancy provisions in its employment contracts which provide substantially more than the statutory minimum levels of compensation and performance based dismissal is at least in some parts of the public sector (for example teaching where the unions’ line is that individual performance is so inextricably tied up with external factors that any form of performance assessment is wrong) exceptionally rare. If the government was really Macchiavellian and mischievous it could implement CNFD for public employees in return for an agreement to shelve all of the proposed pensions changes and other cuts and reforms. In practice, introducing CNFD into the public sector would result in a prolonged General Strike – the answer to a lack of commitment to performance management is not to do away with the need for it!

Would CNFD really help increase employment – a personal perspective?

Some added flexibility might in fact be helpful. I currently work for a law firm which sends me out on client engagements at short notice which can be terminated on a month’s notice. The firm has been successful in providing its clients with the ability to have the right number of people in its teams to cover the current workload without them needing to commit to keeping at that level of headcount indefinitely. In other industries, such as IT, a lot of people like going a stage further and working as completely independent contractors and employers are used to switching them in and out as needed without having the cost of redeploying them elsewhere when a particular project completes or is cancelled for any reason. At a time when permanent employees are generally sitting tight and keeping the benefit of their accrued rights rather than taking risks and moving around, it is a good way for companies to get new blood in and for the formerly unemployed, like I was before I started this role and had struggled to find traditional permanent employment, to have access to jobs. I’m not sure that CNFD would have a positive impact on my current employer as it would knock out a significant part of the value that it brings in providing staff to its clients.

So, to some extent, making employment a little less secure can have benefits for employers and workers. But, it is worth remembering that until an employee has been in a job for a year (being extended back to 2 years in separate legislation) they are already relatively easy to dismiss on capacity grounds. Hiring new staff is not really a big risk if they don’t turn out well straightaway. It is only if they develop this way later on in their employment. It is easy to become complacent about a particular job’s demands once you have been in it for a while and also to be resistant to pressure to do more. The proposal for CNFD would prevent anyone from relaxing too much once they had accrued the right to protection against unfair dismissal. For roles which were hard to recruit or retain staff for, or which involved a large investment in training by the employer, there would already be strong incentives for the employer to offer more than the basic CNFD terms (equivalent to statutory minimum payment for redundancy), just as they do for redundancy.

The one advantage that CNFD has for employees over the process for fair dismissal currently in place is that it would allow them to move into new employment with a “cleaner” employment history. If you have been through the full performance management process and failed to meet the required level it is going to be difficult to get another job, not least because when asked why you left, the answer will be uninspiring. A CNFD might have somewhat less stigma (I have been subject to an informal CNFD myself in leaving a job where my performance as a lawyer was regarded as excellent but where the commercial targets that the firm aspired to were moving upwards and away from what I thought was realistic – I had the option of being performance managed to those targets, in the mutual knowledge that they’d be very difficult to meet and that this would lead to uncompensated dismissal for poor performance, or negotiating a settlement to leave in a managed way, reputation intact).

However, what my personal experience really demonstrates, I think, is that where something like CNFD and flexibility in taking on and letting go of staff to move with current economic conditions is of value to business, business has already found ways to achieve these effects. Cutting the employment rights of all employees in this way isn’t deregulatory but is rather, ironically, an unnecessary interference in the market.

 

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4 thoughts on “Beecroft Boohoo

    • Thanks for the comment. I’ll check out your blog.

      I don’t think the criticism has principally focused on the fact that Beecroft is a Tory donor, although it is a factor. Had the report been more thoroughly argued and evidenced, the fact he was a donor would have been a relatively minor criticism in substance. I have no problem eg with union reports on such things, knowing that they will be written from a particular stance. If they have a good point the author’s relationship with a party is secondary.

      Indeed, I’d suggest it would be best and most transparent if the influence acquired it sought through donations were generally to be expressed in terms of publicly available reports which could be assessed and criticised freely rather than by means of private meetings and memos which may not be apparent. I don’t see how Beecroft writing and having to publicly defend his report is worse than eg ecclestone donating/lending money to new labour and then getting a change in policy to favour f1 interests without any scrutiny or accepted causal link.

  1. “Hiring new staff is not really a big risk if they don’t turn out well straightaway.”

    Agreed. I think that the extension of the qualifying period from one to two years is pretty outrageous (or would be if it hadn’t been there before) because the basis of that period is that the employer should be given the chance to ensure that the employee is right for the job, which is absolutely right. But who can seriously say that after a year the employer doesn’t know whether the employee is the right fit? Given the effect of the qualifying period is to effectively allow unfair dismissal (as long as it’s not discriminatory), to extend it from one to two years is illogical and has all the hallmarks of politicial dogma.

    • I’ll have to admit that having only got into advising on employment law regularly this year I haven’t looked at the legislative rationale for the unfair dismissal qualifying period when first introduced, then reduced then reintroduced. However it does make some practical sense to put it at 2 years procedurally. Normally the full appraisal cycle is annual with a first year near miss capable of rectification in the normal way through amended targets and support to hit target in year two. Going straight to performance management after a year would be a sign of the employee being far from suitable (I’ve had performance management processes described to me as “fit in or f off”) or realistically remediable. The effect of the reduction in qualifying period to a year has, anecdotally, made for employers tending towards much more aggressive policing of the first 3 months probation period and firing for capacity failure very early. Counterintuitively going back to 2 years might give people more of a chance to prove themselves through a year. Politically it is worth noting that the change back to 2 years is being pushed by people’s friend, the “socialist” Vince Cable.

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