1. Dealing with dismissal and ‘compensated no fault dismissal’ for
micro businesses
June 2012
Contact:
Petra Wilton
Director of Policy and Research
Petra.wilton@managers.org.uk
Tel: 020 7421 2726

2. Executive Summary
The Chartered Management Institute (CMI) is pleased to submit this response for consideration as
part of the policy consultation on workplace dismissal rules. It summarises our research into
managers’ views on regulations affecting small businesses and demonstrates that there is strong
support for replacing the current fair dismissal rules to make it easier to dismiss staff, particularly
among smaller businesses.
CMI welcomes efforts to reduce the legislative burden upon managers. However, in our view more
must be done, particularly for small businesses, to ensure managers do not rely solely on the last
resort of dismissal, but focus their efforts on better recruitment, training and performance
management. By ensuring that the right people are employed and that they are supported and
developed 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 smaller
organisations which lack dedicated legal and HR resources, and policy in these fields has certainly
been evolving and changing over recent years. As such, employers will need to understand the
benefits of the proposed reforms and the Government will need to work more closely with professional
bodies 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 of
employers and employees alike.
As the chartered professional body for management in the UK, we would be happy to work with the
Government to help communicate with employers regarding any legislative changes. It is clear that
managers view the current legislation on workplace dismissals as a disincentive for employers to
recruit and as such this is counter-intuitive to growth. Our surveys consistently rank professional
bodies 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 reform
Two recent CMI member surveys sought managers’ views on potential options for reform, Future
Forecast: 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 to
reform employment law and workplace rules. In total, between the two surveys, a total of 1,475
responses were received from across the UK, drawn from industry sectors across the economy and
from 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 showed
there 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 compared
to 50 per cent in organisations with over 250 employees, while net support stood at just under one
third for SMEs compared to seven per cent for larger organisations. It is clear that, with in-house
expertise such as HR and legal already in place, large organisations are better able to cope with
current dismissal legislation. In contrast, smaller organisations, especially those with fewer than 50
employees, 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. Around three-quarters (76 per cent) of the 701 managers are in favour of a moratorium on new
regulations affecting small businesses, showing strong feelings around how the current regulations
affecting small businesses. Unsurprisingly, support for this position is particularly strong among
managers 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 businesses
a 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 2012
Comparative employment reform measures
The Economic Outlook survey also explored managers’ views on a range of other comparable
employment 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 54
per 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 for
introducing fees to employment tribunals with1 per cent net agreement. However, among smaller
organisations the net agreement is above 20 per cent.
There is strong support, especially among larger organisation for reforms to parental leave to enable
more sharing between parents and also for extending the right to request flexible working to all. While
there is net support across all managers surveyed, the position of larger organisations highlights they
are more equipped to understand the changes and put in place measures to limit the impact on their
business.
CMI has supported reforms to parental leave and the right to request flexible working for a number of
years. As in the majority of situations, when managed effectively flexible working and parental leave
arrangements can improve employee engagement and create a more diverse talent pool, which will
ultimately have a positive impact on business performance.
Performance management
It is CMI’s belief that, while a reduction in red tape is desirable – especially for those small businesses
without dedicated personnel in areas such as HR – when looking at ways to encourage growth, our
focus should equally be on better management.
Recent research by CMI and Penna into the business benefits of management and leadership
development surveyed almost 4,500 managers, including over 300 CEOs and 550 HR managers. It
showed that management and leadership development activities can lead to increases of up to 32 per
cent 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 used
performance management, making it the most common practice and confirming its central role in both
HR activity and management and leadership development.

4. However, the overall mean rating of effectiveness of HR practices on a 5-point scale, as rated by HR
Directors and CEOs, was 2.77. This suggests that there is significant room for improvement in this
area, 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 be
relied upon for managing staff. In many cases better recruitment practices and the training and
management of existing staff can ensure performance is such that the need for dismissals can be
avoided altogether.
In terms of organisational priority, CMI’s Future Forecast 2012 report show that medium and large
organisations appear to be more focused on managing performance, developing their people and
increasing employee engagement in the coming year. For example, only 36 per cent of managers in
small organisations describe people development as a high priority, compared to 48 per cent across
medium and large organisations.
We welcome the current BIS work on management and leadership, to which CMI has been
contributing, and believe the need for far more professional and qualified managers needs much
greater national focus as a key catalyst for economic growth.
About CMI
The Chartered Management Institute is the only chartered professional body in the UK dedicated to
promoting the highest standards of management and leadership excellence. CMI sets the standard
that others follow.
As a membership organisation, CMI has been providing forward-thinking advice and support to
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