Government proposals to bring in ‘no-fault dismissal’ rules could divide the Coalition partners as the controversial Beecroft report is set to be published.
The plans, outlined in the report last October by entrepreneur Adrian Beecroft, aim to slash red tape for employers and make it easier for them to hire and fire staff as they are needed.
The report is due to be published later this week but has already appeared on the internet after being leaked.
It says that “regulations, conceived in an era of full employment” are stifling the business and job growth that will raise the UK economy out of its slump.
The report focussed on small businesses in particular, and said red tape dissuades them from wanting to take on more employees and therefore they grow more slowly than they otherwise might.
“In today's era of a lack of jobs those regulations simply exacerbate the national problem of high unemployment,” the report said.
“While it may seem counter-intuitive, even making it easier to remove underperforming employees will in the short run not increase unemployment as they will be replaced by more competent employees. In the long run it will increase employment by making our businesses more competitive and hence more likely to grow.”
However, the report recognised that the proposal have a downside.
“Some people would be dismissed simply because their employer did not like them,” Beecroft admitted.
“While this is sad, I believe it is a price worth paying for all the benefits that would result from the change. I believe that employers, many of whom already ‘create’ redundancy situations in order to remove underperforming employees, will accept the higher cost in exchange for the speed and certainty it provides.”
In March, the government launched a call for evidence on dealing with dismissal and compensated no-fault dismissal for employers with fewer than 10 staff. This call closes on the 8th of June 2012.
Prime Minister David Cameron is said to be considering the proposals and other proposals in the report, which include changes to collective redundancy time scales, scrapping plans for flexible shared parental leave and reforms to the employment tribunal system.
Speaking while at an event in Chicago, Cameron said: "On the issue of no-fault dismissal and other proposals like that, I am interested in anything that makes it easier for one person to say to another person: 'Come and work for me,' because we need to make our economies flexible.
"We need to make our labour markets work as flexibly as possible and we will obviously need to examine each proposal on its merits."
However, the ‘fire-at-will’ plans were hit by renewed criticism from business secretary Vince Cable who, according to a close source, has labelled them “bonkers”.
A source close to Cable told the Guardian: "The last thing employees want is the dead hand of fear hanging over them about losing their jobs."