Dismissal on a whim - why not?

[Justloadit]

Far toooo much personal time required in HR environment, and in my business I can not afford all this unproductive time.

There are many cases in which employees are stealing and sabotaging your business, however the burden of proof is in the employers hands, and let me tell you it takes years to catch them.

Theoretically it sounds very simple, however when turning it into to practice, it is extremely difficult to implement.
Small companies just do not have the resources to monitor the employees performance, and how many customers do you know who even take the time to fill in these sheets?
Lets take an example this employee of this company came to my personal home to do a job, now I am requested to fill in a performance sheet in front of him, do you think I am going to be truthful? On the one hand he knows the inside of my house now, and with e crime wave the way it is I am now concerned that this person has intricate details of my personal space, and if he gets fired because of my performance rating, what's stopping him from a revenge attack?

Sorry but the performance clause is not so easy to implement.

[Greig Whitton]

That would work for annual cycle businesses, but I was referring more about when the economy picks up or when we suddenly get a few extra customers. Its not a predictable cycle. Sometimes it last a month or two, sometimes a year or two. So the time period isn't always known, nor is it a specific project.

The lack of predictability is precisely what makes fixed term contracting such a viable option. Few things in business (or life) can be forecast with 100% accuracy. If you want to grow your business, then you have to take some risks. However, when it comes to employment, you aren't without recourse. If you take the risk of retaining fixed term employees because business is going strong, only for the tide to turn, then you can always retrench due to operational requirements.

Ah, but remember, I'm a little guy making widgets. Its not something I did on purpose. Recruitment is a bit of a lottery for me. The guy looked brilliant in the interview, promised the world. I was wrong, now its a painful process to rectify.

This. This right here is the real crux of the problem. Most of us don't come from business backgrounds, so we learn the hard way through trial and error. But that doesn't mean that our employees (or customers, or suppliers, or other stakeholders) should take the fall for our mistakes.

There are many resources and support that South African entrepreneurs can use to develop their business skills proactively. But most of them have no interest in doing so. They excel at building widgets, so they stick to what they are familiar with. When they discover that being awesome at building widgets isn't good enough when running a business, they blame the system for their pain. If it isn't labour regulations it's taxation, or the Consumer Protection Act, or Broad-Based Black Economic Empowerment, or something else.

Again, I'm not saying that our regulatory frameworks are perfect - far from it! A lot of the non-negotiable issues that require regulation could be handled in a far quicker, easier, and simpler fashion (especially for SMEs). But I'd bet everything I own that no matter how simplified our regulation might be, most guys would continue to run their business reactively and blame the system instead of being proactive, planning ahead, and developing the skills that they will need in the future.

I realise that it is possible to fire someone. Have the initial contract and expectations properly done in detail, monitor performance, provide feed back, provide support and direction, present them with their shortcomings, provide warnings and assistance .... and eventually get rid of them, followed by the probable ccma hearing. It just shouldn't be such a long and expensive process.

I absolutely agree with you. The process should be simpler, quicker, easier, and less expensive. But, per my point above, I believe that most guys would still blame the system regardless of whether it was streamlined or not because they would be spending all of their time making widgets instead of using some of it to learn how to build a better business.

I'm sure many business owners would love it if they could fire employees on a whim (which is what this thread was originally about). But then where do we draw the line? Can they choose whether to pay their taxes on a whim? Can they cancel commercial contracts on a whim? Can they waive liability to their customers on a whim?

The rules that we have can (and should) be a lot simpler, but that doesn't change the fact that we need some rules.

[Greig Whitton]

Sorry but the performance clause is not so easy to implement.

I agree with you, but what's the alternative? Firing employees on a whim because you made a mistake and hired the wrong person, or because you just don't like their face any more?

There are many cases in which employees are stealing and sabotaging your business, however the burden of proof is in the employers hands, and let me tell you it takes years to catch them.

Again, what's the alternative? Firing someone without consequence because you suspect that they might be stealing? Guilt before proven innocent?

[BusFact]

I agree with you, but what's the alternative? Firing employees on a whim because you made a mistake and hired the wrong person, or because you just don't like their face any more? ....Again, what's the alternative? Firing someone without consequence because you suspect that they might be stealing? Guilt before proven innocent?

This may sound harsh, but yes this is the alternative I feel should be in place. If the company I that currently supplies me stationery, falls under any of the above categories, I would start buying from someone else. Why should my book keeping service provider, sales provider or packaging service be any different? The flip side of course is that I would not be able to expect their dedicated service, and the unit cost of their time would most likely be slightly higher, because they have to take care of themselves, rather than the employer.

I'm sure many business owners would love it if they could fire employees on a whim (which is what this thread was originally about). But then where do we draw the line? Can they choose whether to pay their taxes on a whim? Can they cancel commercial contracts on a whim? Can they waive liability to their customers on a whim?

I'm not suggesting one is able to break a contract on a whim. I'm saying that the employment contract should not unilaterally enforce an indefinite term. An employment contract should be an overdraft facility, not a 30 year home loan - to use a banking analogy. Taxes are their own animal Its the "contract" part of commercial contracts I have an issue with. Long term high value commercial contracts are written up and defended by teams of legal reps. Most SME's work on an order to order basis. The contract part normally concerns product spec, pricing, delivery terms and product failure. There is seldom a requirement that you must continue placing business with them.

This. This right here is the real crux of the problem. Most of us don't come from business backgrounds, so we learn the hard way through trial and error. But that doesn't mean that our employees (or customers, or suppliers, or other stakeholders) should take the fall for our mistakes.

There are many resources and support that South African entrepreneurs can use to develop their business skills proactively. But most of them have no interest in doing so. They excel at building widgets, so they stick to what they are familiar with. When they discover that being awesome at building widgets isn't good enough when running a business, they blame the system for their pain.

Dead right Greig, can't fault you at all. However why should this all be necessary? If we want to create business (a general term I'm using instead of jobs), surely we want the expert widget maker, making widgets and not wasting his time taking HR legal courses. And if we make hiring mistakes, surely an employee shouldn't benefit from that mistake either - at expense to customers, suppliers and stakeholders?

When they discover that being awesome at building widgets isn't good enough when running a business, they blame the system for their pain. If it isn't labour regulations it's taxation, or the Consumer Protection Act, or Broad-Based Black Economic Empowerment, or something else.

Once again I agree with you. We can be a bunch of whiners. When we fail we are going to blame someone other than ourselves and the Government is often an easy target. But don't you think that being awesome at building widgets should be good enough to have a successful business? Is all the admin and HR really necessary?

Almost everything you've said is sound and makes sense in our current environment. I just don't think that this environment is conducive to encouraging efficient business and could me made much simpler.

[Greig Whitton]

If the company I that currently supplies me stationery, falls under any of the above categories, I would start buying from someone else. Why should my book keeping service provider, sales provider or packaging service be any different?

Terminating a supplier contract (e.g. for failure to meet documented deliverables) isn't that different from dismissing someone for consistently failing to satisfy their contracted performance standards. Yes, your employee might take you to the CCMA but, by the same token, your supplier might take you to court for alleged breach of contract.

The obvious counter-argument is that you don't have to draw up a formal contract for your suppliers and that you can switch to different providers on a whim. However, this isn't entirely true. Even if you don't have a formal documented contract, there will still be a legally binding verbal agreement that can be enforced. Your supplier may decide that enforcing that agreement isn't worth the trouble, but that's probably because they have other clients and market opportunities to focus on. An employee, by contrast, will probably lose everything when they are fired. Yes, they can apply for a job somewhere else, but that will take time. In the meantime, they still have bills to pay, families to support, etc.

I'm not suggesting one is able to break a contract on a whim. I'm saying that the employment contract should not unilaterally enforce an indefinite term. An employment contract should be an overdraft facility, not a 30 year home loan - to use a banking analogy.

Great analogy, and I agree with you. I believe that employers should be entitled to employ people on longer fixed terms (e.g. 5 years) without the risk of permanent employment thereafter.

However why should this all be necessary? If we want to create business (a general term I'm using instead of jobs), surely we want the expert widget maker, making widgets and not wasting his time taking HR legal courses.

Because businesses don't operate in isolation from the rest of society. They intersect with customers (and their families), employees (and their families), other businesses, etc. The need for (some) regulatory oversight is obvious and small businesses can't be excluded because the cumulative impact of thousands of SMEs doing as they please is no less risky than a large listed company doing as it pleases.

And if we make hiring mistakes, surely an employee shouldn't benefit from that mistake either - at expense to customers, suppliers and stakeholders?

The employee's benefit is accidental. However, dismissing the employee to correct the mistake imposes a loss (to the employee) that is both immediate and predictable.

But don't you think that being awesome at building widgets should be good enough to have a successful business? Is all the admin and HR really necessary?

I think that being awesome at building widgets is good enough if you want to be a widget builder. But building a business that can build awesome widgets is not the same thing as building the widgets yourself. You can't enjoy the opportunities of business ownership without embracing the responsibilities and risks that accompany those opportunities. Business owners who are averse to those responsibilities and risks should stick to building widgets instead of businesses.

Deep down, I think that many small business owners don't actually want to be business owners. What they really want is a well paying job with long term job security where they can just focus on doing what they love doing. They believe that they can have that by starting their own business because they don't bother doing their research and learning what running a business actually involves.

Almost everything you've said is sound and makes sense in our current environment. I just don't think that this environment is conducive to encouraging efficient business and could me made much simpler.

I agree with you 100%. We absolutely need a simpler business administrative environment. But such a change would only reward the guys who are seriously committed to building a business - it won't stop the whiners from whining or the blamers from blaming government for not making things even easier.

[Dave A]

I just love this interchange. It's like talking to government on issues like this.

Almost everything you've said is sound and makes sense in our current environment. I just don't think that this environment is conducive to encouraging efficient business and could me made much simpler.

I agree with you 100%. We absolutely need a simpler business administrative environment. But such a change would only reward the guys who are seriously committed to building a business - it won't stop the whiners from whining or the blamers from blaming government for not making things even easier.

The problem with the answer is it is deflection.
The question was about improving the business environment, which would in turn improve the economy, result in more jobs, etc.
The point is conceded, but it's suggested it can't be implemented because it's still not going to stop the whiners.

Hey - let the whiners whine. As you say, they're going to whine anyway whether you do nothing or something.
The mission is to grow the economy to reduce unemployment, make higher wages more affordable for business etc., not to stop the whiners whining.

We have to face up to the challenge before us - the regulatory environment is not conducive to the growth we desperately need. This isn't theory - the proof is in the pudding we're eating right now.

And if a big part of the solution is to reduce the emphasis on job protection, the sooner we swallow that pill, the sooner we're going to turn the tide.

[Greig Whitton]

The mission is to grow the economy to reduce unemployment, make higher wages more affordable for business etc., not to stop the whiners whining.

We have to face up to the challenge before us - the regulatory environment is not conducive to the growth we desperately need. This isn't theory - the proof is in the pudding we're eating right now.

And if a big part of the solution is to reduce the emphasis on job protection, the sooner we swallow that pill, the sooner we're going to turn the tide.

Dave, you initiated this thread with the express purpose of soliciting reasons for why employers should not be allowed to dismiss on a whim and I have done my best to present sensible reasons.

If you want to turn this thread into a debate about whether allowing employers to dismiss on a whim will lead to more job creation then there are two questions to consider:

#1: Will allowing employers to dismiss on a whim lead to more jobs and economic growth?

The intuitive answer is "of course". But actual research is less clear. Consider, for example, this presentation at the Annual Labour Law Conference held in Johannesburg last year.

#2: If allowing employers to dismiss on a whim does lead to more jobs and economic growth, where do you draw the line with respect to other business regulations like contract law, health and safety, consumer protection, etc.?

[BusFact]

The obvious counter-argument is that you don't have to draw up a formal contract for your suppliers and that you can switch to different providers on a whim. However, this isn't entirely true. Even if you don't have a formal documented contract, there will still be a legally binding verbal agreement that can be enforced. Your supplier may decide that enforcing that agreement isn't worth the trouble, but that's probably because they have other clients and market opportunities to focus on. An employee, by contrast, will probably lose everything when they are fired. Yes, they can apply for a job somewhere else, but that will take time. In the meantime, they still have bills to pay, families to support, etc.

Not sure what verbal agreement you are referring to here. If my plastic supplier delivers a few orders late and causes me problems with my customers. I look for another supplier. No hearings, no processes, no contracts. My orders for the next month simply get emailed to another company.

You are right the employee can be put in a serious predicament. That is a reality and pretty much why the legislation exists. Though what about the potential employee who would have replaced the fired employee, done a better job, earned the company more money so they paid more taxes and gave their suppliers more business? He too has bills to pay and a family support, but instead cannot because the vacancy remains filled.

If the intention is to protect jobs on the wider scale to prevent economic crashes, why not simply say you can fire on a whim as long as the position is filled within a month?

Protecting weaker employees does not seem like sound policy. You know survival of the fittest and all that ...

Deep down, I think that many small business owners don't actually want to be business owners. What they really want is a well paying job with long term job security where they can just focus on doing what they love doing. They believe that they can have that by starting their own business because they don't bother doing their research and learning what running a business actually involves.

I'm sure most people would love that sort of job The problem again, and we seem to agree on this, is that owning a business should not require extensive research and learning. It does in this real world, but why should it be that way?

All your comments are good advice and reasonable for how things are. I'm pushing for change on how things could be better, because the current situation does not make sense to me.

[BusFact]

#1: Will allowing employers to dismiss on a whim lead to more jobs and economic growth?

I don't know either way for sure. In any event I think the focus should not be on jobs. It should be on creating businesses. But I'm back in my fairy tale land again.

#2: If allowing employers to dismiss on a whim does lead to more jobs and economic growth, where do you draw the line with respect to other business regulations like contract law, health and safety, consumer protection, etc.?

You've brought this up before and I'm not really following the argument. A contract should still be enforceable by law. I'm saying an employment contract should have no term clause in it, nor should it imply one. The contract is never broken, it is simply brought to a close by one of the parties, just like the employee can do now. You should still be able to insert a term clause in if both parties want one, and then it must be enforced.

[Dave A]

Dave, you initiated this thread with the express purpose of soliciting reasons for why employers should not be allowed to dismiss on a whim and I have done my best to present sensible reasons.

Actually, my purpose was to initiate a debate where pro's and con's could be raised. (Actually, it's my objective for having anything posted on TFSA - both "for" and "against" comments are welcomed - preferably with reasons / motivation).

Sorry if the question part of the title misleads. (I'm not sure if I'd just said "why" or "why we should allow it" would have improved things any).

And make no mistake, I appreciate your points and input - perhaps even more so because they don't correlate neatly with mine. If we didn't have and allowed for different points of view here, what's the point of having a forum. The very point is to be able to compare different views, and when appropriate adjust our own thoughts accordingly.