The Government
has today confirmed that it is
abandoning plans to introduce a form
of compensated no-fault dismissal
for smaller businesses as had been
recommended by Adrian Beecroft in
May this year.However,
with in the same press release, our
Business Secretary, Vince Cable,
took the opportunity to announce his
“new package of employment reforms”.
In brief:
- Government consultation with
a view to reducing the cap on
unfair dismissal compensation
claims;
- Streamlining employment
tribunal claims;
- Consultation to make TUPE
simpler and more
straightforward;
- Consultation on the proposed
introduction of settlement
agreements, and
- ACAS’ agreement to produce a
new “code of practice for
settlement agreements”
The reforms announced by Mr Cable
are said to sit alongside the
Government’s “red tape challenge to
reduce the existing regulatory
burdens on business”.
These are all impressive
sound-bites – but are they really
needed?
Settlement Agreements – we
already have these, don’t we? They
are what you and I currently call
Compromise Agreements. As far as we
are aware, the new proposals are not
seeking to withdraw the obligation
on employees to take independent
advice before entering into a
Compromise (sorry, Settlement)
Agreement in exactly the same way as
they have to today. Hmmm, perhaps
the changes aren’t as innovative as
the Department for Business,
Innovation and Skills would have us
believe?
Unfair Dismissal Claims
Compensation Cap – the idea here
as I understand it is to reduce the
maximum award for unfair dismissal
compensation in ordinary cases from
its current limit of £72,300 (which
has simply increased in line with
inflation for the past 12 years) to
a limit of either 12 months’ net pay
or a multiple (1, 2 or 3 times) the
national medium average earnings of
£25,882, whichever is the
lower figure.
There are a few obvious points
to make in response to this
proposal:
- Higher earners, and probably
many of those with families, who
pay the most tax will be hit the
hardest by these changes if they
are introduced. Some will see
this as a good thing; others
will not.
- Businesses may save a bob or
two as a consequence of these
reforms, but isn’t there a risk
that, by making unfair dismissal
claims cheaper for employers,
the Government is incentivising
unfair and unlawful treatment of
staff? Whether or not the
Government sees this as a
vote-winner, it is surely going
to lead to an increase in
employment tribunal claims and I
thought the whole point of these
proposals was to try and reduce
the number of claims?! I don’t
get the sense that these
proposals have been thought
through at all.
- Is there really a business
case to reduce the cap on unfair
dismissal compensation?
According to the most recent set
of employment tribunal
statistics, the number of unfair
dismissal claims over 2011/12
reduced last year
(notwithstanding the fact that
the cap on unfair dismissal
increased). Furthermore, I can
say with confidence that it is
only a very small fraction of
employment tribunal claims for
unfair dismissal which result in
a judgement or an award anywhere
close to the statutory cap on
compensation.
- What will those employees
who may suffer from these
changes do to try and increase
the amount of compensation they
can receive through a tribunal
claim following their unfair
dismissal? I think this,
together with the recent
increase in the qualifying
period for unfair dismissal
claims from 1 to 2 years’
service, is bound to increase
the number of related dismissal
claims of discrimination or
whistle-blowing or other such
claims, for which there is
currently no limit on the amount
of compensation a tribunal can
award.
Yes, there is a reasonable amount
of regulation which affects the
workplace but we are not as heavily
regulated as some other
jurisdictions one could mention.
According to the Government’s own
press release, the World Economic
Forum Global Competitiveness Report
cited the flexibility of the UK’s
labour market as one of the main
reasons for improving our global
ranking to 8th position from 10th
last year. Is the Government trying
to fix something that isn’t broken?
There is plenty of help on hand
for businesses to help them tackle
difficult situations with employees
and avoid the risk of employment
tribunal claims. I think the
Government would be thanked more for
introducing more schemes to make
that advice more accessible to
businesses rather than introducing
changes to the law which reduce
costs at the expense of the rights
of ordinary workers.
For more information, contact
Will Clayton. |