In this month’s round-up of recent employment law news we consider George Osborne’s "shares for rights" scheme, details of the proposed new cap on unfair dismissal awards, recently published Employment Tribunal statistics for 2011/2012, and changes to employer pensions duties from 1 October.

Trading shares for employment rights

On Monday 8 October 2012, at the Conservative party conference, George Osborne announced further employment law reforms.  The new proposal is for a type of employee ownership arrangement, under which employees would give up some of their employment rights (e.g. right to claim unfair dismissal, right to a redundancy payment, right to request flexible working and right to request time off for training) in exchange for shares in their employer worth between £2,000 and £50,000.  Any growth in value of the shares would be exempt from capital gains tax.

The government proposes to consult on the new scheme this month, and publish legislation later this year, with the new arrangements apparently due to come into force from April 2013.  The arrangements will be voluntary for current employees.  However employers could make the arrangements mandatory for new recruits.  Whilst George Osborne indicated the scheme would be best for small-medium sized companies, although it is clearly proposed to apply to companies of any size.  

The proposals have produced a fairly polarised response, and it remains to be seen what the detail will look like when the full consultation documents are published.  Watch this space!

Proposed changes to cap on unfair dismissal awards

We have reported in recent e-bulletins that the new Enterprise and Regulatory Reform Bill contains a power to vary the statutory cap on compensatory awards in unfair dismissal cases.  Details of what this new cap might look like have now been published in the Government consultation paper, Ending the Employment Relationship.  The proposal is to have a system of two caps in operation. Firstly, the amount any individual employee could be awarded could be capped at 12 months’ pay. In addition, there would be an overall cap applied, in circumstances where 12 months’ pay was in excess of the overall cap.  The overall cap could be set between one and three times median annual earnings in the UK (currently £25,882 - £77,646).

The consultation is open until 23 November 2012 and can be accessed here

Employment Tribunal statistics 2011/2012

On 20 September 2011, the Ministry of Justice published its report on employment tribunals and EAT statistics for April 2011 to March 2012.  This provides full details of the number of claims raised during this period, the types of claims, and the levels of compensation awarded in each.  Highlights are as follows:

  • 186,300 claims were accepted by employment tribunals during this time, representing a 15% decrease on the previous year;
  • The average award in unfair dismissal claims was £9,133, while the median award was £4,560. Only 2% of all unfair dismissal awards were over £50,000;
  • The largest amount of compensation awarded by a tribunal was just under £4.5 million, in a race discrimination claim. The median awards for discrimination claims ranged from £4,267 (religion or belief discrimination) to £13,505 (sexual orientation discrimination);
  • The number of costs awards rose from 487 in 2010-11 to 1,411, although this statistic is skewed by a case in which 800 claimants were ordered to share the liability of one costs award. If those 800 awards are counted as one single costs award, the total number of costs awards was in fact 612.  81% of those 612 awards were awarded to respondents.

The full report can be accessed here

Changes to employers’ pension duties from 1 October 2012

1 October 2012 saw the commencement of the five and a half year staging period over which employers will be required to start automatically enrolling eligible job holders into a qualifying pension scheme, and make mandatory contributions.  Employers with more than 250 employees have staging dates between 1 October 2010 and 1 February 2014, with the specific applicable date depending on the precise number of employees employed.

To coincide with the first staging date, provisions in the Pensions Act 2008 repealing the stakeholder pension designation requirements also came into effect on 1 October 2012.  As a result, the previous requirement on a UK employer employing five or more employees to designate and facilitate access to a stakeholder pension scheme has been abolished. However, transitional provisions allow an employer to continue deducting contributions from the salary of an employee who is an existing member of a stakeholder scheme after 1 October 2012.  If an existing member asks his employer to stop the deductions, the employer must tell the employee that it is no longer required by law to deduct contributions and pay these to the scheme on his behalf, but that the employee can still make payments directly to the scheme, provided this is permitted by the scheme rules.

The effect of this is that an employer will no longer be obliged to provide access to a pension scheme until it becomes subject to the duty to auto-enrol its eligible jobholders.