Announcement

Reforms to job laws to help business

Vince Cable outlines the most radical reform to the employment law system for decades.

As part of the Government’s plan for growth and the Red Tape Challenge, Business Secretary Vince Cable has proposed cutting unnecessary demands on business while safeguarding workers’ rights.

A package of measures will retain key protections for employees, but also fundamentally improve the way employers take people on, manage disputes and let people go. These include:

  • An overhaul of employment tribunals, which is expected to deliver £40 million a year in benefits to employers.
  • a call for evidence on whether the 90 day minimum consultation period for collective redundancies is restricting businesses and should be reduced.

Vince Cable said:

“Our labour market is already one of the most flexible in the world. This flexibility benefits businesses, staff and the wider economy. But many employers still feel that employment law is a barrier to growing their business.

“We’re knocking down that barrier today - getting the state out of the way, making it easier for businesses to take on staff and improving the process for when staff have to be let go.”

Unfair Dismissal

In response to the suggestion that dismissal laws are too onerous for small businesses in particular, the Government will launch a call for evidence on two proposals.

Firstly it will seek views on a proposal to introduce compensated no fault dismissal for micro firms, with fewer than 10 employees. Secondly, it will look at ways to slim down existing dismissal processes, how they might be simplified, including potentially working with the Advisory, Conciliation and Arbitration Service (Acas) to make changes to their Code, or supplementary guidance for small businesses.

Simplifying the employment tribunals system for businesses will result in fewer claims each year. These reforms will deliver direct net savings to business of more than £10 million a year with wider benefits to employers estimated at more than £40 million a year.

Vince Cable added:

“Let me be clear: we are not re-balancing employment law simply in the direction of employers. Our proposals strike an appropriate balance and we are keeping the necessary protections already in place to protect employees.

“Our proposals are not - emphatically not - an attempt to give businesses an easy ride at the expense of their staff. Nor have we made a cynical choice to favour flexibility over fairness.

“We know that disputes at work cost time and money, reduce productivity and can distract employers from the day-to-day running of their business. Tribunals should be a last resort for workplace problems which is why we want disputes to be solved in other ways.”

Cutting employment regulation

Of the 159 regulations examined in the employment theme of the Red Tape Challenge more than 70 regulations, over 40 per cent, are to be merged, simplified or scrapped. The Government will:

  • Publish a call for evidence on proposals to simplify the Transfer of Undertakings (Protection of Employment) - TUPE - rules which many businesses say are too complex and bureaucratic.
  • Close a whistleblowing case law loophole which allows employees to blow the whistle about their own personal work contract.
  • Merge 17 National Minimum Wage regulations into one set.
  • Consult in the spring to streamline the current regulatory regime for the recruitment sector.
  • Create a universally portable CRB check that can be viewed by employers instantly online.

Response to Resolving Workplace Disputes

Requiring all employment disputes to go to the Advisory, Conciliation and Arbitration Service (Acas) to be offered pre-claim conciliation before going to a tribunal and from April 2012 increasing the qualification period for unfair dismissal from one to two years.

Publishing a consultation in the new year on ‘protected conversations’ which allows employers to discuss issues like retirement or poor performance in an open manner with staff - without this being used in any subsequent tribunal claims.

Appointing Mr Justice Underhill to lead an independent review of the existing rules of procedure governing employment tribunals. This review will look to address concerns that they have become increasingly complex and inefficient over time and are no longer fit for purpose.

A further consultation on measures to simplify compromise agreements, which will be renamed ‘settlement agreements’. A compromise agreement is a type of employment contract, which means when the working relationship has broken down to an irretrievable status, employees receive a negotiated financial sum to end their contract, and agree to not bring further claims against their employer.

Announcing plans to consider how and whether to develop a ‘rapid resolution’ scheme which will offer a quicker and cheaper alternative to determination at an employment tribunal. Any proposals would be the subject of a consultation.

Modifying the formulae for up-rating employment tribunal awards and statutory redundancy payments to round to the nearest pound. We anticipate that the reduction in redundancy pay and subsequent reduction in associated compensation payments made in employment tribunals will have a direct net saving to business of £5.4. million each year.

Some of these changes will require the Government to introduce primary legislation, subject to the Parliamentary timetable.

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