W “no fault” dismissal rule could be brought in to make it easier for very small firms to lay off unproductive staff, business secretary Vince Cable (pictured) said yesterday.
Cable launched a consultation on proposals to allow firms with fewer than 10 staff to lay off staff more easily, though they would have to compensate those made redundant.
He hopes this would boost employment, arguing that firms may hire more staff if it is easy to lay them off in a downturn or if they are unproductive.
Business groups welcomed the move, but the Chartered Institute of Personnel and Development argued it created a “perverse disincentive for growth,” as it could make small firms think twice about increasing their workforces to over 10 workers, as they would then lose their right to no-fault dismissals.
Meanwhile the Institute of Economic Affairs (IEA) argued that cutting corporation tax to 20 per cent will boost investment and simplify the tax system. The IEA believes a lower rate of corporation tax will attract foreign cash to the UK and help pension funds, boosting the economy.
“These proposals would not place a major fiscal burden on the country – accounting for increased investment, it may well be close to self-financing,” said Professor Philip Booth from the IEA.
“The proposals could partly be financed by reducing exemptions given to companies and they would bring about a much-needed simplification of the tax system.”