The biggest winners in employment tribunal cases are the lawyers The system is balanced against employers. Some businesses now assume any redundancy will bring a claim for unfair dismissal, and where it is possible for the employee to allege racial, sexual or age discrimination, that will be thrown in, too. I have seen large businesses routinely settle unfair dismissal claims under £10,000 to avoid the executive time and legal fees a defence would consume. But these are not the only or even the primary reasons why change is needed. Radical reform of the system will benefit individuals, particularly the unemployed, as much as companies. In a survey of IoD members, many of them running small and medium-sized companies, half said the burden of employment law had stopped them taking on additional staff. The perception of cost and complexity fuels employers" fears of unfair dismissal claims and deepens concerns about taking on risk when they are under economic pressure. The signal sent by a change, to give small businesses a costed way out if a new hire goes wrong, would incentivise employers to take a chance on less qualified or experienced workers. Venture capitalist Adrian Beecroft kicked off the debate by suggesting the current flawed dismissal process be scrapped entirely. However, Instead of arguing over Beecroft's merits, the Government should start building a system where compensation can be agreed between employers and employees in a straightforward way. Where an employer could terminate a worker's contract upon payment of compensation up-front. As in many other aspects of life, we can ensure fairness in all but the most egregious cases by delivering compensation before resorting to the courts. The law would dictate the appropriate level of compensation. Once paid, the former employee would forfeit the right to go to a tribunal. If the option is declined, any exploration of the possibility would be classed as a "protected conversation" and would not be admissible as evidence at a tribunal hearing. Tribunal defence fees cost a company an average of £8,500. That is not much for FTSE companies, but for many small businesses operating on paper-thin margins it is the difference between survival and going under. If businesses could compensate a dismissed staff member instead of going to tribunal, those funds could be invested instead. IoD research shows that three-quarters of directors believe the introduction of compensated no-fault dismissal would have a positive effect. Most entrepreneurs want to take on more staff and this would enable them to do so. The call for evidence on compensated no-fault dismissal is an opportunity to improve our labour market for employees and employers. It should be seized. Only one group wins in protracted litigation - lawyers. It is time to recognise the circumstances under which risk-averse, small businesses would be encouraged to employ more young, less-qualified workers. As the Prime Minister said: "The most important worker's right is having a job in the first place." Simon Walker is Director-General of the Institute of Directors