The introduction and implementation of a new statutory code and guidance to encourage greater use of settlement agreements, along with setting a limit on unfair dismissal payments, are the next steps in the government’s response to the Ending the Employment Relationship’ consultation.
The proposals include plans to:
- introduce a 12 month pay cap on the compensatory award for unfair dismissal
- make template letters available to encourage the use of the new settlement agreements, alongside a statutory code of practice which will include an explanation of improper behaviour
- not set a guideline tariff for settlement agreements; government will instead develop guidance outlining the issues that should be considered when deciding and negotiating the level of financial settlement
Jo Swinson said:
We are committed to finding ways to support both businesses and employees when a working relationship breaks down. The measures I have announced today will do just that.
Central to this is promoting the benefits of good communication, better management, and early dispute resolution, as this can lead to the best outcomes for everyone. We are working closely with Acas to get the rules and procedures for Early Conciliation right, and welcome the views of interested parties in our consultation.
Settlement agreements can be a helpful tool and work in the interest of both employer and employee. Creating a code and simple guidance will mean that these arrangements are more readily available to those in small businesses, not just large corporations.
Employment Tribunals are costly for everyone, in terms of money but also time and stress. We need to tackle unrealistic expectations about the levels of compensation awards, especially when only 1 in 350 people who make a claim for unfair dismissal receive an award of more than their own salary, and the average award is less than £5,000. Tribunals should be the last resort not the first port of call.
Settlement agreements will help resolve workplace disputes without the need to resort to an Employment Tribunal. Government will not be taking forward proposals to introduce a guideline tariff for settlement agreements, in response to concerns that it could set unrealistic expectations for employees or could be viewed by employers as a maximum from which they would try to negotiate down from.
To provide greater certainty about the maximum liability that can be paid in an individual unfair dismissal claim the government will introduce a 12-month pay cap on the compensatory award for unfair dismissal. There are no plans to change the overall limit of the cap which currently stands at £72,300.
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The government is also launching three consultations on:
- proposals to implement the Acas Early Conciliation (EC) process
- proposals to reform The Transfer of Undertakings (Protection of Employments) (TUPE), the legislation which protects employee rights when the business they work for transfers to a new employer
- reforming the regulatory framework for employment agencies and employment businesses
Acas will be publishing a draft Statutory Code for public consultation shortly.
The government also announced today plans to help British businesses tackle long-term sickness absence in the workplace with a new independent assessment and advisory service. This new service will ensure employers receive bespoke, independent advice for cases of sickness absence lasting more than four weeks.
The government started a systematic review of employment law in 2010. This Employment Law Review (ELR) is now half way through its work and aims to provide clarity, certainty and give businesses the confidence to manage their workforce effectively. The Review sits alongside the employment law-related Red Tape Challenge to reduce regulatory burdens on business.
The package of employment reforms announced today includes:
Ending the employment relationships: government response
Publication of the government response on plans to introduce a 12-month pay cap on the compensatory award for unfair dismissal. It will also set out the principles that will underpin the statutory code and guidance to encourage greater use of settlement agreements. There were 46,300 unfair dismissal claims in 2011 to 2012 and the average award is £5,000. The average UK salary is £26,500.
Acas early conciliation consultation
The consultation will set out how the EC process will work in practice. The government announced in November 2011 its intention to introduce early conciliation (EC), the first part of the conciliation process. Government is now consulting on how the process will operate in practice and on a draft set of rules and procedures.
Consultation on reforming the regulatory framework for employment agencies and employment businesses
The consultation will set out proposals to reform the current recruitment sector legislation. Government is proposing that regulation should be minimised and, for the most part, focused where individuals are most at risk of exploitation.
The consultation will set out proposals to reduce burdens on business, whilst protecting fairness to employees. Proposals include the removal of service provision changes and the 14-day limit on supplying pre-transfer employee liability information. Read a full copy of the government’s response to Ending the Employment Relationship consultation
Read the Acas Early Conciliation consultation document
Reforming the regulatory framework for employment agencies and business consultation document
Find out more about the TUPE consultation and submit your views