This week the government unveiled details of a number of proposals to shake up employment laws.

The changes are in response to the Beecroft report, released in October, which claimed that unfair dismissal rules are having a major impact on British businesses and sought to remove employee rights.

David Cameron backed the report but it met strong opposition from Lib Dems, Labour and Unions. However, Vince Cable has now announced that from April 2012 the period within which employees are not entitled to claim unfair dismissal will extend from 1 to 2 years.

He also revealed a set of proposals and reforms for consideration that will further reduce the number of unfair dismissals.

Why Are Employment Law Changes Necessary?

The number of employment tribunals has risen by 40% in the past three years, and are costing businesses a vast amount of money. By introducing these reforms, the government believes businesses will save £40 million a year.

These reforms are backed by businesses who claim that they have no power to fire employees who are under performing or 'coasting' as the report puts it. Small businesses are especially in fear of tribunals as they can be very costly. This has led to a reluctance to take on new staff as SMEs (small and medium enterprises) can't then justify sacking them if they don't work out.

However, there is opposition from Labour and Unions who believe this amounts to stripping away employee rights, will not decrease the number of tribunals and will lead to a 'hire and fire' culture.

Giving more power to SMEs could lead to more managers taking the autocratic business approach made famous by Steve Jobs and Alan Sugar, and they've done pretty well in business.

So what is the government proposing to do to employment law and how will it affect businesses and employees?

Extend Unfair Dismissal Entitlement Period From 1 to 2 Years

Currently employees are only able to claim for unfair dismissal after a year of employment. this will extend to 2 years as of April 2012. This doubles the amount of time employers have to suss out new employees. This could lead to employees not feeling safe in their job for their first two years but it also gives employers a longer time to try out employees in a number of roles before letting them go.

As the overall aim of these proposals is to reduce the number of tribunals, doubling the time that employers have to fire employees without reprisal seems a sensible solution. This could lead to employers taking more risks in hiring staff as they have longer to try them out.

Discrimination cases are exempt from this new law.

Create "Protected Conversations"

The proposed 'protected conversations' will allow employers to have frank and open discussions with employees about their performance without the conversation coming back to haunt them in a tribunal. At the moment any performance meetings are subject to strict rules and so don't always fix the problem. Opponents to the changes believe this will actually create more legal disputes as these conversations won't be properly documented and instead amount to who to believe.

Essentially, a 'protected conversation' will allow an employer to sit an employee down and tell them exactly what they're doing wrong and how they need to improve. Honesty is one of the main factors here as it allows employers to speak their mind.

Reduce Consultation Period For Redundancies

The government is proposing to cut the consultation period for large scale redundancies (over 100) from 90 days to 30 days. This benefits businesses greatly that need to cut staff to save costs and is likely to be the biggest contributor to the proposed £40 million saving. A one month consultation period would be a lot cheaper than three months.

However, this proposal has unions and Labour united against it. They claim it dramatically cuts support for staff being made redundant as they will have less time to find a new job.

Introduce a "Rapid Resolution Scheme"

The idea of the 'rapid resolution scheme' is to settle cases quickly. Few details have been released regarding the scheme but the shorter the case period the lower the cost for a business. Any scheme would be likely to reduce legal costs and stress caused to both parties.

Allow "Micro Businesses" to Fire Staff Without Fear of a Tribunal

'Micro businesses' is the term for a company that employees fewer than 10 staff. Small businesses are usually hit hardest by employment laws as they can become burdened with staff 'coasting' but can do little to replace them for fear of a costly tribunal which could hit the business hard financially.

'You're fired'

The fear of employee rights is blamed for SMEs  hesitating over taking on new staff for fear. This proposal would remove that fear and allow micro businesses t0 take more risks when hiring staff.

This proposal has been hit with claims of starting a 'hire and fire' culture. However, for a business with 5-10 employees, what can they do when one is not performing? For the businesses in this category, one bad employee is at least 10% of their workforce. If over 10% of employees at a global company with over 100,000 employees was under performing they would have a serious problem!

One of the more positive views of this proposal is that it will put the right people in the right jobs. It will allow small businesses to ensure all their staff are right for the role and that they can keep them on for a long time and develop.

There is no benefit in hiring and firing for SMEs as the low numbers mean everyone has an important role which needs developing over a long time, at the moment many businesses are scared to take new staff on in case they don't work out and they can't fire them. This new proposal will free up jobs for those that fit the role and encourages job seekers to find employment within a company and career that suits them.

Charge Employees for Starting Tribunals

Controversially, one proposal for reducing the number of tribunals is to implement costs for employees. This could either be a deposit at the start of a tribunal or ongoing costs depending on the size of the claim. If the employee wins their tribunal they will recover all costs so this shouldn't discourage strong claims. However it should reduce the culture of claiming for the sake of it. Not only should this reduce the number of tribunals but it should also ease the burden on employers unfairly claimed against as they won't have to pay as much of the overall costs.

Claims Must Go Through ACAS Before a Tribunal

The government is hoping that by passing all unfair dismissal cases through ACAS (Advisory, Conciliation and Arbitration Service) before they go to a tribunal will solve many disputes early.

ACAS claim their service can save £3,700 for employers and £3000 for employees compared to a tribunal. Last year an impressive 3/4 of cases were solved by ACAS without going to a tribunal. This could easily be the best way to cut tribunals and improve the claim process.

While the proposals set out in this article are not guaranteed to lower unemployment they will benefit businesses greatly as they are able to streamline operations and make sure they only hire the right staff. A great benefit to employees and employers alike is that people will end up in the right jobs. No company can afford to hire employees that don't work out and it will encourage employees to find the right job, not just any job.

Image courtesy of say_cheddar on Flickr.