Unfair dismissal compensation

Consultation continues on limiting compensatory awards to the lower of 12 months’ pay and an overall cap on compensation, currently £74,200, with a view to this coming into force in Summer 2013.  In the meantime the annual rises for compensation limits have come into effect from 1 February 2013.  The maximum unfair dismissal basic award rises to £13,500, the compensatory award to £74,200 and the cap on a week’s pay to £450.  This will apply to all dismissals which take effect on or after 1 February 2013.

Revised Unpaid Parental Leave

On 8 March 2013 the amount of unpaid parental leave that can be taken per child increased from 13 to 18 weeks but it is limited to a maximum of 4 weeks per year.  The age limit on children eligible for parental leave will increase from 5 years to 18 years in 2015.

Shared Parental Leave

The Government proposes to implement shared parental leave of up to 50 weeks of shared maternity leave and 37 weeks of pay by 2015 in addition to fathers’ 2 weeks’ paternity leave and pay after the completion of the two weeks’ compulsory leave for mothers.  Surrogate and adoptive parents will also be eligible for this leave as well as agency workers.  Consultation on the proposals closes on 17 May 2013 and the Government intends to publish its response in the Summer.

New ‘employee shareholder’ employment contracts – shares for rights

Pre-Budget this was being widely promoted to be effective in Autumn 2013. Post-Budget the proposal is that the first £2000 of shares are now to be exempt from Income Tax and National Insurance Contributions (NICs) in return for a waiver of certain employment rights an employee may have the new status of ‘employee shareholder’.  Under this new status employee owners will receive shares between £2,000 and £50,000 which will be exempt from capital gains tax in return for which they will give up certain employment rights.  The Department for Business, Innovation and Skills has published an Impact Assessment on affected groups under the Growth and Infrastructure Bill clause 23. The Impact Assessment provides a useful table summarising which employment rights will be given up and which will be retained by those taking up this new status. However, the House of Lords has voted against this concept of ‘employee shareholder’ so their future is uncertain.

Immigration Reforms

New codes of practice for skilled migrant workers from outside the EU area will apply from 6 April 2013.  These include minimum rates of pay for each occupation.

National Minimum Wage

The Government is set to consolidate the NMW Regulations and will publish the improved set in April 2013 which should be more easily understood.

Collective redundancies

The current 90 day minimum consultation period where employers are proposing to make 100 or more redundancies at one establishment will be reduced to 45 days with effect from 6 April 2013.  This will give businesses the flexibility to respond to changing market conditions and to restructure more effectively, and ensure that employee uncertainty is not unnecessarily prolonged.  In addition, employees on fixed-term contracts will not be exempt from the scope of the rules and new non statutory ACAS guidance will be introduced to help employers deal effectively with the key issues arising in the context of collective consultation. 

Employment Tribunal Reform

Employers can expect to see by 2014 mandatory pre claim conciliation requirements with ACAS so parties are offered the option of reaching agreement on claims at an early stage.  The Government is also consulting on new Tribunal Rules where an early strike out will be permissible and the cap on costs of £20,000 removed which are expected to come into force in Summer 2013 when it is widely expected that fees will be payable at the commencement of proceedings in the Tribunal and for the hearing itself at the same time. 

Settlement agreements

A model template is now being proposed by the Government for employers and employees who seek a clean break on the termination of employment at the behest of one party or the other after non-discloseable settlement negotiations in Summer 2013.  There will still be a requirement for taking legal advice on the agreement.


Consultation continues on the “service provision change” provisions and whether this concept should be abolished altogether to remove unnecessary burdens on business with a lead in period.  Other proposed changes will be introduced in October 2013 including removing the employee liability information requirement, relaxation of the restrictions on post-transfer harmonisation, reliance on post-transfer ETO reasons and collective consultation requirements by the transferee before the transfer are to count.

Working Time and Time Off

The Government has not yet published its response regarding the annual leave proposals, which include bringing the UK law into line with the EC Judgment in Stringer so that workers who are unable to take annual leave during one holiday year will be able to carry over unused leave to the next holiday leave. 

Income tax

Income tax for high earners will fall from 50% to 45% in April 2013 when new policies and tax measures come into play, hopefully providing to George Osborne a much needed boost to his plans for the economy and an increased revenue stream.  The personal allowance rises to £9,440 in April 2013.  The Government has also provided new statutory residency test with effect from April 2013.

Executive remuneration

Planned reforms in reporting for financial years ending on or after October 2013 include specific information on executive pay in relation to which shareholders will have enhanced voting rights by way of a binding vote on the report at least once every 3 years in order to increase their right to determine remuneration of the directors.

Political Affiliation Dismissals

Following the Redfearn decision, the qualifying period of 2 years will be removed under a new provision in the Enterprise and Regulatory and Reform Bill 2012-2013 where the principal reason for the dismissal is or relates to the employee’s political opinions or affiliation.  This will not be an automatic unfair dismissal.

Protection of Freedoms Bill

This achieved Royal Assent on 1 May 2012.  There are planned changes to the vetting and barring scheme and the Disclosure and Barring Service.  Formerly known as Criminal Records Bureau checks, the DBS check will be instantly accessible online and portable.  These changes will come into force by Summer 2013

Auto-enrolment Pensions

Various staging dates between January and November 2013 will apply to employers for moving eligible job holders of between 500 and 49,999 in number into a pension scheme.   Draft regulations have been published for consultation to amend the pension protection provisions following a TUPE transfer to align them more closely with the auto-enrolment requirements.  The Regulations are intended to come into force on 1 October 2013.

Repeal of the Third Party Harassment and Discrimination Questionnaire provisions in the Equality Act 2010

These will take effect during 2013 by provisions in the Enterprise and Regulatory Reform Bill 2012-2013.

Whistleblowing Disclosures

A public interest requirement will be included in the definition of a qualifying disclosure and is this expected to come into force in Summer 2013 in the Enterprise and Regulatory Reform Bill 2012-2013.  An employee will no longer be able to blow the whistle for alleged breaches of his or her own employment contract.  A change in the Bill also removes the requirement for the disclosure to be made in good faith replacing this with a power to the tribunal to order a reduction in compensation of up to 25%.  There will also be a new provision making employers vicariously liable for the detrimental acts of its workers.  The EU Commission has adopted new guidelines to staff on whistleblowing if and when they discover corruption, fraud or other serious irregularities.

Flexible Working Rights

This right to work flexibly for all employees with at least 26 weeks’ continuous service has been postponed until 2014, but ACAS is now consulting on a new draft statutory code of practice to help employers deal with the duty to consider requests in a reasonable manner.  Consultation closes on 20 May 2013.

Diversity - Women on Boards

Although the level of disclosure on gender diversity is improving, the Government has moved ahead with draft regulations requiring listed companies to report on gender balances of managers in the company.   A manager is defined as “a person who has authority and responsibility for planning directing and controlling the activities of the Company…”.  The aim is to enable CEOs to understand the composition of their workforces and monitor attrition rates.  Companies with reporting years ending after October 2013 will need to consider the regulations when preparing annual reports. 

In the interim the European Commission has also published its proposed Directive on the increasing number of women in non executive Board member positions between 40% and 49% in publicly listed companies by 1 January 2020 at the latest.  Quotas will not be introduced but Boards will be required to take certain steps where there are less than 40% of women non-executive directors.  Small and medium sized companies with fewer than 250 employees and with a turnover of less than €50 million or a balance sheet under €43 million will be excluded. 

Studies suggest a more diverse and collective mind set, which incorporates a wider range of perspectives, reaches more balanced decisions.

All these measures are part of the Government’s objectives in its ambitious plans for growth:

  • To create the most competitive tax system in the G20
  • To make the UK the best place in Europe to start, finance and grow a business
  • To encourage investment and exports as a route to a more balanced economy
  • To create a more educated workforce that is the most flexible in Europe