'Fire at will' plan vetoed but Cable still seeks way to avoid tribunals

Plans to make it easier for employers to dismiss under-performing workers were outlined by the Government yesterday – but employees will not be forced out against their will.

Vince Cable, the Business Secretary, has vetoed controversial proposals for bosses to be able to fire staff "at will", which were made to Downing Street by Adrian Beecroft, a venture capitalist and donor to the Conservative Party.

His plans were backed by David Cameron, George Osborne and many Tory MPs, who are pressing for more measures to cut business costs to boost growth. But they provoked strong opposition from the Liberal Democrats and a split in the Coalition. "The Tories keep trying to keep this zombie alive but it is dead," one Liberal Democrat source said yesterday.

Instead, Mr Cable announced changes to the law to make it easier for companies to reach "settlement agreements" in which staff agree to leave voluntarily in return for a pay-off. The crucial difference with Mr Beecroft's blueprint is that, under Mr Cable's plans, a settlement would have to be mutually agreed by the firm and the worker. The offer of such a deal would not be admissible if a case eventually went to an employment tribunal.

Dismissing the Beecroft plan for "no-fault dismissal", Mr Cable said: "Settlement agreements are smart, fair and pro-business reforms which deliver results for employees and employers. It empowers employers by enabling them to keep their workforce flexible and encouraging alternative ways of solving workplace problems rather than resorting to a tribunal. But, crucially, it does so in a way that keeps the necessary protections for employees in place."

Other elements of Mr Beecroft's original proposals that have been blocked include his controversial call to scrap plans to extend maternity and paternity rights. That would have undermined Mr Cameron's pledge to make Britain the most family-friendly country in Europe.

The CBI welcomed yesterday's proposals. Neil Carberry, its director for employment and skills, said:"Simplified settlement agreements will give firms the confidence to have a frank conversation about ending employment on fair terms, without the fear of a drawn-out and costly tribunal claim."

But Paul Kenny, general secretary of the GMB trade union, said: "This is no-fault dismissal by another name."