WIREDGOV

Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD) comments as follows on the Chancellor of the Exchequer’s expected announcement at the Conservative Party Conference on Monday that the Government will increase from one year to two years the qualifying period for gaining employment protection rights against unfair dismissal:

“While watering down unfair dismissal rights is seen as a way to boost recruitment and improve job prospects for young people and the long-term unemployed, the short-run impact will be limited by the overall weak state of the labour market while in the long-term any positive effect on hiring is likely to be offset by a corresponding increase in the rate of dismissals.

“The vast weight of evidence on the effects of employment protection legislation suggests that while less job protection encourages increased hiring during economic recoveries it also results in increased firing during downturns. The overall effect is thus simply to make employment less stable over the economic cycle, with little significant impact one way or the other on structural rates of employment or unemployment.

“There is no evidence that UK employment suffered significantly in the 1970s as a result of the introduction in 1975 of a six month qualifying period for rights against unfair dismissal or that there was any substantial benefit when the qualifying period was subsequently raised to two years in the 1980s before being lowered to one year in 1999.

“Moreover, while there is no available evidence of the effect of these changes in unfair dismissal rights on workplace productivity, there are prima facie reasons for expecting that the current one year qualifying period strikes an appropriate balance between enabling employers to make reasonable decisions on employee potential and giving employees a sufficient sense of job security to actively engage with the organisation they work for.

“Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces which would be detrimental to fostering a culture of genuine engagement and trust between employers and their staff and potentially harmful to the long-run performance of the UK economy. Although the policy change will undoubtedly be welcomed by the de-regulation lobby, it isn’t the way to boost growth and jobs.

“In addition, it is unlikely that raising the threshold from one to two years will have its intended effect of reducing the number of employment tribunal claims because employees are increasingly bringing claims linking unfair dismissal with discrimination claims which can be made from day one of employment. ONS figures suggest that an extra 12% of employees would potentially be denied the chance to claim unfair dismissal due to length of service as a result of the change – hardly likely to make much of a dent in overall tribunal numbers given that only a small proportion of these would make any claim.”