Dealing with dismissal and 'compensated no fault dismissal' for micro businesses


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Dealing with dismissal and 'compensated no fault dismissal' for micro businesses

  1. 1. Dealing with dismissal and ‘compensated no fault dismissal’ formicro businessesJune 2012Contact:Petra WiltonDirector of Policy and 020 7421 2726
  2. 2. Executive SummaryThe Chartered Management Institute (CMI) is pleased to submit this response for consideration aspart of the policy consultation on workplace dismissal rules. It summarises our research intomanagers’ views on regulations affecting small businesses and demonstrates that there is strongsupport for replacing the current fair dismissal rules to make it easier to dismiss staff, particularlyamong smaller businesses.CMI welcomes efforts to reduce the legislative burden upon managers. However, in our view moremust be done, particularly for small businesses, to ensure managers do not rely solely on the lastresort of dismissal, but focus their efforts on better recruitment, training and performancemanagement. By ensuring that the right people are employed and that they are supported anddeveloped to be effective in their roles, the need to resort to dismissals can be significantly reduced.We recognise the argument that changes in the law can be disruptive to employers, especially smallerorganisations which lack dedicated legal and HR resources, and policy in these fields has certainlybeen evolving and changing over recent years. As such, employers will need to understand thebenefits of the proposed reforms and the Government will need to work more closely with professionalbodies and other employer organisations to support new ways of working. If implemented effectively,this agenda will transform management attitudes and achieve lasting change, to the benefit ofemployers and employees alike.As the chartered professional body for management in the UK, we would be happy to work with theGovernment to help communicate with employers regarding any legislative changes. It is clear thatmanagers view the current legislation on workplace dismissals as a disincentive for employers torecruit and as such this is counter-intuitive to growth. Our surveys consistently rank professionalbodies highly on the list of organisations managers look to for information, advice and guidance,highlighting the important role they have to play.CMI evidence: managers’ opinions on reformTwo recent CMI member surveys sought managers’ views on potential options for reform, FutureForecast: Expectations for 2012 (December 2011) and Economic Outlook: Spring 2012 (April 2012).Both surveyed our members’ views on a number of topical issues, including potential options toreform employment law and workplace rules. In total, between the two surveys, a total of 1,475responses were received from across the UK, drawn from industry sectors across the economy andfrom managers at a range of levels of seniority up to directors and chief executives.Economic Outlook: Spring 2012 surveyed 701 managers on their views on the economy. It showedthere is strong support for replacing the current fair dismissal rules to make it easier to dismiss staff(see Table 1 below). Among SMEs, almost two-thirds were in support of such a measure comparedto 50 per cent in organisations with over 250 employees, while net support stood at just under onethird for SMEs compared to seven per cent for larger organisations. It is clear that, with in-houseexpertise such as HR and legal already in place, large organisations are better able to cope withcurrent dismissal legislation. In contrast, smaller organisations, especially those with fewer than 50employees, have to rely on external expertise, potentially at great time and cost to their business. Net Support Oppose Agreement All (n=701) 57% 38% 19% Replacing the current fair dismissal rules to 1-50 employees (n=286) 64% 32% 32% make it easier to dismiss staff 51-250 employees (n=84) 63% 30% 33% 250+ employees (n=314) 50% 43% 7%Table 1: Results on dismissal rules from Economic Outlook: Spring 2012
  3. 3. Around three-quarters (76 per cent) of the 701 managers are in favour of a moratorium on newregulations affecting small businesses, showing strong feelings around how the current regulationsaffecting small businesses. Unsurprisingly, support for this position is particularly strong amongmanagers working in small organisations. Among those in organisations with 50 employees or fewer,over four out of five (83 per cent) respondents are in favour of the principle of giving small businessesa moratorium. Net Support Oppose Agreement All 76% 11% 65% A moratorium on new regulations affecting small 1-50 employees 83% 9% 74% businesses 51-250 employees 70% 10% 60% 250+ employees 68% 14% 54%Table 2: Attitudes to a moratorium on new regulations from Economic Outlook: Spring 2012Comparative employment reform measuresThe Economic Outlook survey also explored managers’ views on a range of other comparableemployment law reform measures. There is support among smaller organisations (1-50 employees)for extending the qualifying period for protection from unfair dismissal from one to two years, with 54per cent in favour. However, among businesses of all other sizes there is a net disagreement.Managers from large organisation of more than 250 employees are divided in their support forintroducing fees to employment tribunals with1 per cent net agreement. However, among smallerorganisations the net agreement is above 20 per cent.There is strong support, especially among larger organisation for reforms to parental leave to enablemore sharing between parents and also for extending the right to request flexible working to all. Whilethere is net support across all managers surveyed, the position of larger organisations highlights theyare more equipped to understand the changes and put in place measures to limit the impact on theirbusiness.CMI has supported reforms to parental leave and the right to request flexible working for a number ofyears. As in the majority of situations, when managed effectively flexible working and parental leavearrangements can improve employee engagement and create a more diverse talent pool, which willultimately have a positive impact on business performance.Performance managementIt is CMI’s belief that, while a reduction in red tape is desirable – especially for those small businesseswithout dedicated personnel in areas such as HR – when looking at ways to encourage growth, ourfocus should equally be on better management.Recent research by CMI and Penna into the business benefits of management and leadershipdevelopment surveyed almost 4,500 managers, including over 300 CEOs and 550 HR managers. Itshowed that management and leadership development activities can lead to increases of up to 32 percent in people performance and 23 per cent in overall organisational performance.It found that performance management and broader HR practices are part of the ‘best practice’adopted by the highest performing organisations. Over 72 per cent of organisations surveyed usedperformance management, making it the most common practice and confirming its central role in bothHR activity and management and leadership development.
  4. 4. However, the overall mean rating of effectiveness of HR practices on a 5-point scale, as rated by HRDirectors and CEOs, was 2.77. This suggests that there is significant room for improvement in thisarea, creating a cause for concern for managers who have not received training and development.While managers are in favour of reducing the legislative burden, particularly within small businesses,more must be done to stress the position of dismissals as a last resort, a measure that should not berelied upon for managing staff. In many cases better recruitment practices and the training andmanagement of existing staff can ensure performance is such that the need for dismissals can beavoided altogether.In terms of organisational priority, CMI’s Future Forecast 2012 report show that medium and largeorganisations appear to be more focused on managing performance, developing their people andincreasing employee engagement in the coming year. For example, only 36 per cent of managers insmall organisations describe people development as a high priority, compared to 48 per cent acrossmedium and large organisations.We welcome the current BIS work on management and leadership, to which CMI has beencontributing, and believe the need for far more professional and qualified managers needs muchgreater national focus as a key catalyst for economic growth.About CMIThe Chartered Management Institute is the only chartered professional body in the UK dedicated topromoting the highest standards of management and leadership excellence. CMI sets the standardthat others follow.As a membership organisation, CMI has been providing forward-thinking advice and support toindividuals and businesses for more than 50 years, and continues to give managers and leaders, andthe organisations they work in, the tools they need to improve their performance and make an impact.As well as equipping individuals with the skills, knowledge and experience to be excellent managersand leaders, CMI’s products and services support the development of management and leadershipexcellence across both public and private sector organisations.Through in-depth research and policy surveys of its 90,000 individual and 450 corporate members,CMI maintains its position as the premier authority on key management and leadership issues.