Currently, employees can’t place a claim for unfair dismissal unless they have been employed for more than 1 year. This means that businesses have a period of 1 year in which they can assess a new employee’s suitability for a role and safely dismiss without fear of a costly compensation bill.
A consultation has been launched today, which will close on 20th April 2011. Following this, the government is expected to confirm the increase.
The aim of this measure is to give businesses more flexibility and cut the red tape holding back businesses throughout the UK.
This will be welcome news to business groups, which have campaigned for a reduction in red tape and legislation. Business groups have cited the upsurge in tribunal claims as evidence that the current system is heavily weighted in favour of employees, with the result that businesses are often crippled by costly legal fees and compensation bills.
However, there is doubt about whether the measure goes far enough. Is this enough to encourage businesses to hire more staff, and will it really help employers? Leading employment law and HR firm Empire HR are urging businesses to exercise caution.
Unfortunately for businesses, there is an exception to the qualifying period rule. There’s no qualifying period if the employee can establish that they were dismissed for a reason linked to a ‘protected characteristic’. Defined by the Equality Act 2010, protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.
The Equality Act also covers 7 different types of discrimination. For example, the Act introduced ‘associative discrimination’ to many protected characteristics meaning that some people will be covered by the legislation merely because they are related to, or associate with some who has a protected characteristic.
The effect of the legislation is that it might actually be very difficult to single out an employee who is not covered by the Equality Act, so employers need to tread extremely carefully when dismissing any employee – regardless of their length of service. In effect, increasing the qualifying period may not be as helpful to businesses as they thought.
Empire HR are concerned that businesses are being lulled into a false sense of security. Steve Cook, CEO of Empire HR explains “the media is full of headlines stating that businesses can dismiss employees for any reason during the first 2 years of their employment. However, any dismissal carries the risk of a claim and in reality, the Equality Act means almost any employee can place a claim regardless of their length of service. Businesses might get some nasty surprises if they fail to get expert advice”.
There’s also speculation that this change might actually lead to an increase in claims. Employees dismissed within the 2 year period are more likely to cite discrimination as the reason for their dismissal because they will otherwise be unable to place a claim at all. Discrimination claims tend to be the most costly – largely because compensation in these claims is uncapped. They are also notoriously time consuming to defend.
Steve Cook confirms “there’s a real prospect of an upsurge in discrimination claims because employees will effectively be clutching at straws so they can place a claim. The discrimination legislation is now so wide in scope that most employees will be able to claim because they have at least 1 protected characteristic”.
Despite these points, it is positive that the government appears to be focusing on the needs of businesses during these tough times. Businesses will welcome any measure designed to ease their burden, and small businesses in particular are likely to see this change as very encouraging.
The consultation also deliberates the introduction of tribunal fees, and measures to deter vexatious claims. The full consultation document can be found here: http://www.bis.gov.uk/assets/biscore/employment-matters/docs/r/11-511-resolving-workplace-disputes-consultation . Business owners are urged to contribute to the consultation. In the meantime, Empire HR is advising business owners and managers to seek advice prior to the dismissal of any employee. As Steve Cook points out “making a mistake is just too costly in this economic climate”. Empire HR are providing expert guidance on dismissals on their website, and have added a recorded guide to the dismissal procedure. Please visit www.empirehr.com for further information.
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