Following the chancellor of the exchequer's announcement at the Conservative Party Conference yesterday that the Government will increase from one year to two years the qualifying period for gaining employment protection rights against unfair dismissal, John Philpott (pictured), chief economic adviser at the CIPD, said: "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."
Nigel Crebbin, employment partner at Berg Legal, added: "Given the Government's emphasis on reducing the legal burden on business, the introduction of fees for tribunal claims and extending the unfair dismissal qualifying period to two years are not surprising changes. So much employment law flows from the European Union and so we could not change it without breaching our obligations as a member state. However, that's not the case with these changes, where the Government's hands are not tied by Brussels.
"Nevertheless, the reforms will add to the tension of an already fractious relationship between the Government and the trade unions and while extending the qualifying period for unfair dismissal will be music to the ears of many employers, the legality of the change may well be challenged by employee groups and equality organisations. When the qualifying period was last two years, this was claimed to be discriminatory against women, as they tended to have more child care obligations and shorter periods of continuous employment. It will be interesting to see whether the current statistics will support a similar challenge when the new qualifying period is introduced in April 2012."
