Member Article

Cable to cut compensation for employment litigants

Image by Department for BIS

Business Secretary Vince Cable has today announced plans to reduce the cap on payouts for unfair dismissal at employment tribunals.

The current cap of £72,000 will be reduced to a lower figure, limited either to a year’s salary for a given employee or another lower amount.

The maximum payout is awarded in very few cases - only 1 or 2% - while the median compensation amount is £5,000. However, the Lib Dem minister still believes the £72,000 figure is a deterrent to employers taking on new staff.

He has also announced support for settlement agreements between employers and workers, saving both sides the cost and effort of litigation. The agreements would allow sacked workers to leave with a good reference in return for not pursuing unfair dismissal claims.

Cable has asked the Advisory, Conciliation and Arbitration Service (Acas) to write a new Code of Practice on Settlement Agreements to inform the process.

Acas Chair, Ed Sweeney, said: “We are pleased that BIS has asked Acas to draft a new Code of Practice for employers and employees. By referring to a clear and straightforward Code, employers and employees can be confident that they will know how to handle the termination of an employment relationship fairly.”

The BIS department has also released responses to its consultation on TUPE regulations, which govern the terms and conditions of workers who transfer from one employer to another. Businesses have called for a simplification of these rules and a consultation on specific measures to achieve this will now take place.

The measure to limit unfair dismissal payouts is one of a number of recommendations made in a report compiled for the government by private equity man Adrian Beecroft.

The report included the controversial proposal of “no-fault dismissal”: the suggestion that employers should be allowed to fire workers whether or not they had misbehaved or underperformed.

This recommendation, however, was disregarded by the Business Secretary, who described it as “nonsense” when the report was released. However, around 80% of Beecroft’s recommendations have been adopted or put out to consultation.

The Business Secretary said: “We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights.

“Our starting point is that Britain already has very flexible labour markets. That is why well over one million new private sector jobs have been created in the last two years, even when the economy has been flatlining”

This was posted in Bdaily's Members' News section by Robert Cooper .