Employment Relations Minister Jo Swinson has announced plans to reduce the number of workplace disputes reaching an employment tribunal.
The plans, which were published on 17 January, include:
- introducing 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
- developing government guidance on the issues that should be considered when deciding and negotiating the level of a financial settlement in settlement agreements. Employment relations body Acas is also drafting a new Code of Practice on settlement agreements for employers and employees at the government’s request
- making template letters available to encourage the use of settlement agreements.
Settlement agreements – or compromise agreements, as they are currently known – are legally binding agreements between employer and employee, which can be used to resolve employment claims that the employee could bring.
Such agreements end the employment relationship and usually include a severance payment to the individual by the employer, in return for the employee not pursuing any claim in an employment tribunal.
There were 46,300 unfair dismissal claims in 2011-12 and the average award made was £5,000. The average UK salary is £26,500.
Jo Swinson said: “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. Tribunals should be the last resort not the first port of call.
“Settlement agreements can be a helpful tool and work in the interest of both employer and employee. Simple guidance will mean that these arrangements are more readily available to those in small businesses, not just large corporations.
The measures are being taken forward in the Enterprise and Regulatory Reform Bill which is expected to receive Royal Assent this spring.
On the same day as the proposals were announced the government also launched consultations on proposals to reform The Transfer of Undertakings (Protection of Employments) or TUPE, the legislation that protects employee rights when the business they work for transfers to a new employer.
The government says that measures included in the consultation, which closes on 11 April, are designed to make business transfers “easier for all concerned”.