Should an employer have the right to dismiss an employee without needing to give a reason? According to current employment law, the Employment and Industrial Relations Act, you can’t dismiss someone unless it is for “good and sufficient cause” and the law also stipulates a whole list of exclusions including “that the employee no longer enjoys the employer’s confidence”.
Put another way, an employer cannot dismiss an employee if such a person is under-performing. Therefore, an employer cannot aim to build a team of top performers since the law protects the mediocre or even perhaps the less than mediocre. Is this fair? Does it make sense? Does a business entity exist solely to create employment for society irrespective of employees’ performance and ultimately profits or to deliver value to its shareholders (the risk takers)?
Let’s be honest, you will very rarely walk into a company and find it full to the brim with top performers (from receptionist right up to top management). The hard truth is that every company has a crop of top performers, mixed with a group of mediocre workers and poor performers. The reason for this is, I suspect, primarily because current employment law indiscriminately protects all employees thereby encouraging (even if unintentionally) mediocrity throughout, which to my mind means “not very good, not very bad” and this to me is unacceptable.
In the UK, the coalition government is currently considering a “Report on Employment Law” which argues in favour of a “compensated no-fault dismissal”. The author of the report is a certain Adrian Beecroft. Google his name or the “Beecroft Report” and you’d be tempted to think that such person is the devil incarnate of Thatcherite proportions.
The UK Labour Party is attacking the Conservative Party as the “nasty party” (again) and it is alleged that Vince Cable, the Liberal Democrat Business Secretary, described the “fire at will” proposal as “bonkers” arguing that “British workers are very co-operative and they are very flexible, so we don’t need to scare the wits out of workers with threats to dismiss them. It is completely the wrong approach.” Yes, the proposal is highly controversial but this doesn’t mean that the idea in principle doesn’t merit further investigation.
The Beecroft Report, in my opinion, seriously considers practical ways of reforming and modernising UK employment law and makes some very interesting suggestions (not all of which I necessarily agree with I hasten to add), and which the current UK government – a coalition of the left leaning Liberal Democrats and the centre-right Conservative Party is “considering”.
No doubt the concept of “compensated no-fault dismissal” would also be controversial in Malta and any party backing it would undoubtedly be labelled the “nasty party” of Maltese politics. Yet, the idea, with a bit of local modification / tweaking, could be a simple though effective way of helping micro businesses achieve high growth which in return would hopefully lead to more job opportunities. The idea of compensated no-fault dismissal is proposed specifically for micro businesses employing less than 10 employees.
A survey conducted by the Institute of Directors (UK) of 1,100 businesses found that 76 per cent backed the idea of “compensated no-fault dismissal” and more than a third said the introduction of the measure would lead to them taking on more workers. The director-general of the IoD, Simon Walker, is on record as saying: “Beecroft’s [proposed] changes to dismissal would reduce regulatory burdens and encourage businesses to recruit more people”. And that is precisely the point: the concept of compensated no-fault dismissal is to encourage employers, particularly micro businesses employing less than 10 persons, to take the risk and employ more people with a pre-known cost should the future require that head count be downsized if growth expectations are, for whatever reason, not achieved.
The Beecroft Report talks about the political difficulty of doing away completely with the concept of unfair dismissal. Therefore, Beecroft advocates an approach, which contemplates the employer being entitled to dismiss anyone without giving a reason, provided that they compensate such employee for the no-fault dimissal. Beecroft sates: “It is not unfair dismissal if the employer simply states he is not happy with the employee’s performance and then consults, gives notice and pays a defined level of compensation linked to the employee’s salary and length of employment.”
I think the report talks of a notice period of one week for every year of employment up to a maximum of 12 weeks together with a tax-free payment related to the employee’s salary, age and years of service, up to a maximum of £12,000. Naturally, such conditions if ever seriously considered would have to be localised and made relevant to Maltese realities.
The argument in favour of compensated no-fault dismissal is that the onus would then be squarely on the employee to perform well enough for the employer to value them as an employee worth keeping. Let’s be frank, if an employee were excellent or even very good – an asset to your business – you wouldn’t contemplate getting rid of them.
In Beecroft’s words: “It would no longer be possible to coast along, underperforming in a way that is damaging to the enterprise concerned but not bad enough for the employer to undertake the whole rigmarole of the unfair dismissal process with its attendant threats of tribunals and discrimination charges.’
I know what some of you are thinking; this idea would never be accepted in Maltese society. You are probably right but I genuinely believe that with a bit of (Maltese) tweaking this idea could be seen as a tool for generating more jobs in the micro business sector. Remember we are here specifically talking about micro businesses and not medium-to-large enterprises employing several hundred / thousand employees; far from it.
I think it is worth the main political parties, the unions and the relevant lobbying groups considering this idea and exploring how it could be applied to the Maltese micro business sector. I am seeing it as a possible tool of generating more jobs and a breath of fresh air to the micro business sector which everyone agrees is the engine of our growth in the economy.
Mr Fenech is managing director of Fenci Consulting Ltd.