No-fault dismissals and EIS – other titbits from the Autumn Statement


Autumn StatementLast week Chancellor and plasticine man-child George Osborne delivered his Autumn Statement to Parliament, laying out how the Government would be tweaking their budget for the coming months in order to drag the UK out of the economic doldrums and back to healthy growth.

The centrepiece of his plan was up to £40 billion in Government-supported loans for SMEs, which would use the UK’s favourable credit rating to allow businesses to borrow at up to 1% below the standard rates of interest. There were also freezes and delays on hikes in fuel duty and train fares to help put the brakes on quickly-rising transport costs.

Nestled further into the Chancellor’s statement were some more nuggets that may be of interest to freelancers, contractors and small businesses. The first is news that the Government is looking into introducing compensated no-fault dismissals for small firms with below ten employees. Although it sounds like a complicated concept, it essentially means those firms would be able to sack staff for any reason they see fit, whenever they like. For more information on the process that must be adhered to currently to fire an employee, see our guide to how your employment can come to an end.

Speaking last week Business Secretary Vince Cable said of the possible introduction:

“We are seeking views on a proposal to introduce compensated no-fault dismissal for micro firms – that is those with 10 or fewer employees. Now I stress that we are seeking evidence on both sides. We don’t want to dent job security and consumer confidence and we have to seek a balance here.”

The proper definition of compensated no-fault dismissals is as follows:

If discrimination was not involved an employer could dismiss an employee at any time without giving a reason and paying the employee only for his or her contracted notice period. Unfair dismissal is a UK concept and not an EU one, and so there are no legal barriers to doing this.

The measures are certainly pro-business (and somewhat anti-employee), and the Government will hope they reduce the burdensome red tape that has been putting small businesses off taking on employees.

The other measure addressed in the autumn statement was an extension of the Enterprise Investment Scheme. This will not be of any direct interest to freelancers, but those starting up and looking for investment may be able to use it woo potential investors. Any person investing up to £100,000 in a qualifying business will be able to claim 50% tax relief, regardless of the rate at which they pay tax.