On Friday the Department for Business, Innovation and Skills announced further plans to reform employment law as part of the Enterprise and Regulatory Reform Bill.

The plans put forward by the Business Secretary, Vince Cable in the consultation ‘Ending the Employment Relationship’, include reducing the cap on unfair dismissal compensation from £72,300 to the lowest of either a yet to be specified figure, or a figure related to the employee’s annual salary. Although at the moment the maximum compensation payout is only awarded to employees in around 1-2% of cases per year, it is argued that the current cap creates an unrealistic perception for both employers and employees on the level of likely award should a claim go before a tribunal.

A second consultation is also planned into reforming the Employment Tribunal Rules in a bid to make it easier to withdraw cases and provide a more streamlined case management system. Amongst the issues to be consulted on include:  

  • requiring judgments to include a 14-day deadline for payment, with interest accruing 14 days from the day after the judgment was sent to the parties; and 
  • treating lay representatives in the same way as legal representatives when awarding costs.  

The Business Secretary, has also announced his support for “settlement agreements” where the employee would leave with a good reference provided they waive their right to pursue unfair dismissal proceedings at a tribunal. How different to the existing regime of compromise agreements this will actually be awaits to be seen, although it is proposed that employees would be prevented from raising the existence of any proposed settlement agreement in any subsequent claim for unfair dismissal.

The Government has decided not to adopt proposals of a compulsory no-fault dismissal, where it would have become easier for smaller employers to fire under-performing staff, instead deciding employers would gain the same protection through the further use of settlement agreements.  

A consultation into the Transfer of Undertakings (Protection of Employment) Regulations 2006 is also planned following a review of the call for evidence which indicated the legislation does not meet small business needs. The Government also plans to work with ACAS on making the ACAS codes on grievance and discipline more accessible to small businesses by providing them with interactive tools and checklists.  

Overall the aim of the Government’s announcement is to help employers and reduce the burden on employment tribunals, in a bid to get businesses hiring again. The consultations are due to end on 23 November 2012, with legislation likely next year. Therefore even if the Government is correct in its assessment of the impact of the proposed changes it will still be some time before they filter through to the real economy.