17 Sep 2012

The Government’s Employment Law Reforms will Result in Little Benefit or Change for Employers

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The Government’s latest employment law reforms unveiled last week by Business Secretary, Vince Cable, may have attracted a good deal of publicity but, in reality, they are unlikely to have little impact for either employers or employees.

Mr Cable is justifying the proposed measures on the basis that “We have been looking across the range of employment laws with a view to help making it easier for firms to hire staff while protecting basic employment rights.”

So, what are the proposals and how will this change the way the law works at the moment?

In order to give employers “more flexibility and confidence in managing their workforce” it is intended to reduce the maximum that can be paid to an individual if successful with an unfair dismissal claim at an Employment Tribunal. Currently, the ceiling is £72,300 which is very high and would be regarded as punitive by all employers. However, the average compensation actually awarded at Tribunal for unfair dismissal is around £6,000. There has been no indication that it is a goal to reduce the average compensation paid and so it is believed that little will change.

The rationale that reducing the maximum compensation available for unfair dismissal claims will persuade employers to recruit also has to be questioned. A Government survey reported by Personnel Today earlier this year revealed that unfair dismissal did not feature on a list of the top 10 regulations deterring businesses from taking on staff. Consequently, the threat of having to pay unfair dismissal compensation does not discourage employers from recruiting.

The plans to use settlement agreements will also go ahead. We have already expressed our view and concerns on this matter in an earlier article on this site. Suffice to say that they are nothing new because, currently, we can use compromise agreements to deal with underperforming employees and there is little difference between settlement and compromise agreements.

The measures also include proposals to make it easier for Tribunal judges to dismiss weak cases. This facility exists within current legislation but has proved ineffective.

In summary, therefore, there is little in the proposals which is new and which is not available already. The status quo is being maintained. The biggest concern is that all elements seem to have been discussed for a considerable period of time but there has been little progress on their implementation. Even now the proposals are going for consultation which means more delay.

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