‘Quick-fire’ policy proposal may have unwanted consequences, warns expert

Government’s small firms "Compensated No-Fault Dismissal" proposal raises fears


Small businesses face missing out on talented workers if proposals to allow small firms to pay off employees are eventually implemented.

In advance of the Budget 2012, chancellor George Osborne announced a ‘call for evidence’ on the plans that would make it possible for companies employing 10 or fewer employees to avoid standard dismissal procedures by paying unwanted staff to leave.

Some experts warn the plan to reduce red tape, while ensuring small companies do not face unfair dismissal claims, could backfire. Jonathan Exten-Wright, employment partner at law firm DLA Piper, said: “Some organisations may welcome the proposal, believing that it will boost the economy by encouraging small businesses to hire.

“However, there may be some unintended consequences. The proposal may mean that small businesses will find it difficult to hire or retain skilled workers who have the prospect of more secure employment with larger businesses. There is also potential for the move to stifle growth as businesses may be reluctant go over the 10 employee threshold and become subject to unfair dismissal laws.”

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