Sacking More People to Boost Employment?

Yes you read it right. The latest suggestion to emerge from a government policy review is to make it easier for employers to fire workers. A report written by Adrian Beecroft, a venture capitalist and Tory donor, has recommended replacing the current right of employees to sue when they are unfairly dismissed with a concept of 'no fault divorce'. The implication of this, of course, is that Mr Beecroft thinks employers should be able to dismiss employees at whim, however unfair or unreasonable the decision may be.

Employment law in this country allows for employers to dismiss staff unfairly at any time up to the completion of one year's service. Furthermore, agency workers have no recourse at all to the law when they are dismissed without reason. This is not enough, contends Mr Beecroft, who suggests that reforming the law would encourage employers to hire more workers.

I'm sure he is right about this. Clearly there are advantages for employers in being able to hire and fire at will. But it seems to me like Mr Beecroft has missed the point about employment being a two-way relationship. In order to create the conditions for economic growth, businesses must be productive. This requires there to be a mutual arrangement of trust and confidence between employer and employee. If you study the most successful companies in the last twenty years, such as Microsoft, Apple, and Google, positive employee relations are a given. This is because it is highly doubtful that productivity would flourish in situations where employees have no sense of job security or stability.

The knock on effects for consumer spending of this uncertainty are equally obvious. If a person is constantly worried about his job, he is unlikely to spend money on the high street. He might choose to delay improvements to his house or purchasing a new car, for example. Mr Beecroft claims to be concerned about the competitiveness of the UK as a place to do business. It could well be argued however that foreign investors would think twice before relocating to a country with a notoriously fearful, insecure and unproductive workforce.

Central to Beecroft's idea is the notion that employers cannot sack workers who perform badly. In this he has clearly failed to understand the existing law. Incompetence is one of five reasons that employers are permitted to give when dismissing staff. Other permitted reasons include conduct (if an employee behaves badly) or sickness (if the employee takes too many days off). If this is not enough then employers are entitled under the Employment Rights Act 1996 to sack people for any other 'substantial reason'. Therefore there are multiple ways in which a firm can fire unproductive workers.

What this ultimately boils down to is a fundamental misunderstanding of the workplace by someone who, as a wealthy venture capitalist who finances the Tory party, has only ever seen it from one side. In order to stimulate growth in the economy, there must be confidence. Confidence cannot exist as long as there is insecurity and apprehension between the key economic actors. As Franklin D. Roosevelt famously said in the midst of the Great Depression - 'the only thing we have to fear is fear itself' - not our bosses.