UK News

Government considers making it easier to dismiss employees

December 2010

The UK government is actively considering increasing the qualification requirement for protection from dismissal from one to two years as a means of increasing employment.

Unfair dismissal rights

Employees who have a years’ service when they are terminated have the right to claim unfair dismissal, with current maximum compensation of £65,300.  To avoid expensive claims employers must be careful to ensure that there is both a fair reason for dismissal and that they have followed a fair process, which can be very time-consuming.

The government is considering whether to increase the period of qualifying service for unfair dismissal in order to encourage employers to take a chance on hiring new staff.  For a time during the 1980s the qualifying period was increased to 2 years and some argue that this helped to increase the overall numbers of people in employment.

However, since the 1980s the UK has enacted a very large amount of employment protection that applies from day one of employment, particularly in relation to discrimination.  Awareness has increased in the workforce that many anti-discrimination rights require no qualifying service and that there is no cap on the compensation available for a successful claim.

As discrimination claims are complex, and expensive to deal with and expose employers to significant reputational damage and uncapped compensation, increasing the period of qualifying service for plain unfair dismissal claims may motivate affected employees to pursue discrimination claims to seek some financial redress.  The government is expected to issue a consultation document before reaching a final decision.

Commentary

Under the current regime employers can terminate an employee during the first year of employment by giving the notice required under the contract or statutory minimum notice (whichever is longer).  However, the first anniversary of employment may pass before the need to terminate is recognised.  Active management during probation periods is useful to focus attention on whether or not an employee is working out.  Even if employers do not operate formal probation periods it is a good idea for managers and HR to diarise a review of employee performance well before the first anniversary of the start date.

For further information or to discuss the issues raised, please contact Colina Greenway on +44 20 3051 5711

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