The Government had previously announced the possibility of reducing the cap on Employment Tribunal awards and the increased use of settlement agreements but a consultation paper has now been issued providing more detail and inviting feedback. The consultation is open until 23 November 2012.

Views on the following proposals are invited:-

  • A proposal to reduce the cap on the award in unfair dismissal claims (currently £72,300). The new cap could be set at an amount of between one and three years annual median earnings (currently £25,882- £77,646) or twelve months salary, whichever is lower. These proposals do not affect claims which currently have no cap on compensation such as whistle-blowing, discrimination and dismissal due to raising health and safety concerns claims. Although this proposed change appears potentially significant on paper, it is possible that these proposals will not make any substantial difference in practice given that only 2% of compensation awards were greater than £50,000, with the median award being only £4,560 according to last year’s employment tribunal statistics. One possible positive outcome from this proposal could be that both parties have a clearer expectation of the value of any claim from the outset which could help encourage settlement.
  • The use of settlement agreements to help end the employment relationship in “a fair and consensual way”. The Government are looking for views on how best to make settlement agreements work in practice including a proposed new ACAS code of practice on this issue, a model settlement agreement, a guideline tariff designed to help the parties involved agree on the settlement payment and sample letters which the employer can use to encourage settlement with an employee without the recourse to lawyers.

The Government have also indicated that they intend to work with ACAS to improve the code of practice on disciplinary and grievance procedures. It is thought that many small businesses find these notes overly complex, and a simplification will help these businesses make better use of the guidance and improve their internal procedures.

The Government also published its response to its Call for Evidence on TUPE, and it has published a list of issues on which it proposes to consult on. You can read the response here.