Employment Law Review

Business, Innovation and Skills written statement – made on 14th September 2012.

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Photo of Vincent Cable Vincent Cable The Secretary of State for Business, Innovation and Skills

The coalition Government made a commitment to review employment legislation to ensure it provides the flexibility for employers without compromising fairness for employees. We have reported to Parliament at various points during the course of the employment law review and the employment-related law red tape challenge, the steps we are taking to reform UK employment legislation.

The Government have already taken significant steps in reforming employment law including extending the period for eligibility for unfair dismissal from one to two years, streamlining employment tribunals, creating a universally portable Criminal Records Bureau check and removing the default retirement age.

We are today taking a number of further steps which will lead to further changes and reforms that will help reduce burdens on, and increase certainty for, businesses, especially small businesses. We are seeking to address both the perception and the realities of the burden of employment legislation through the employment law review, and are implementing a strong package of reforms. The set of measures which we are announcing today respond to business concerns that we need to do more to help them tackle issues at the end of the employment life cycle. Building on work that has already been implemented, such as the doubling of the qualifying period for unfair dismissal from one year to two years, we are now seeking to put in place a range of further measures to help businesses to effectively deal with dismissal, which will:

Create certainty about employers’ liabilities;

Provide clarity on dismissal and tribunal processes;

Give business confidence to use settlement agreements to end employment relationships where this is necessary thereby avoiding the tribunal process completely.

These measures will reduce risks to employers, increase their flexibility to deal with workplace issues and decrease the costs of resolving disputes. Business will have the support to resolve workplace disputes earlier and, if they proceed to employment tribunal, they will experience a quicker, more efficient process.

Publishing a consultation (“Ending the Employment Relationship”) to support the use of settlement agreements and reduce the unfair dismissal compensation cap.

We are already taking a power in the Enterprise and Regulatory Reform (ERR) Bill to facilitate the greater use of settlement agreements, and to amend the cap on unfair dismissal awards. This consultation will seek views on the principles underpinning the use of settlement agreements, guidance on their use and model documents for use by employers.

The consultation will also propose reducing the unfair dismissal compensation cap, including the option of a cap of 12 months’ pay alongside an upper limit. This maximum level rose significantly under the previous Administration. Our proposed changes will give business certainty about the maximum possible liability in respect of an individual unfair dismissal claim (for example, someone who is paid £20,000 cannot be awarded more than £20,000).

Publishing the Government response to the call for evidence on dismissal and the idea of compensated no - fault dismissal.

Following analysis of the submissions and of international dismissal regulations, we have decided that we will not be pursuing the idea of compensated no-fault dismissal.

There were more than 250 responses to the call for evidence. The majority of respondents did not support no-fault dismissal and fewer than 40% of employers thought that it would be beneficial to business. Concerns were raised about the potential negative consequences of the proposal, including the potential for it to damage employee morale (which in turn could decrease productivity) and the risk that micro-businesses would find it more difficult to recruit. Furthermore, no-fault dismissal would not protect an employer from discrimination claims and so would not secure peace of mind.

In contrast, respondents were almost universally positive towards settlement agreements, as this tool settles all claims giving employers confidence to resolve problems quickly.

The issue of no-fault dismissal has been subject to much debate in the press over recent months. Officials have examined the responses carefully, alongside assessing international comparisons, and summarised the feedback and our analysis in the Government response. The Government have considered, or are already taking forward, the majority of proposals from Adrian Beecroft’s report on employment law, published earlier this year.

The call for evidence also considered the ACAS code of practice on discipline and grievance. A number of issues were raised and we will work with ACAS to ensure these are addressed. In particular, there is a need to make the code more accessible to small business and clarify how their size and resources should be taken into account. This includes making it clear that small businesses can move straight to a final warning if an issue is having a serious impact on their business. The Government are amending the Business Link guidance to more accurately reflect the contents of the ACAS code and guidance. The revised guidance will be published shortly.

Publishing a consultation on the recommendations following the “Fundamental Review of Employment Tribunal Rules” by Mr Justice Underhill.

Mr Justice Underhill has made a number of recommendations to simplify and streamline the employment tribunals system. We are today launching a 10-week consultation. That would allow us to implement changes to the rules through secondary legislation next year.

In addition to the consultation we will be introducing amendments to the Enterprise and Regulatory Reform Bill to implement three of the additional recommended changes to primary legislation identified by Mr Justice Underhill.

Publishing the Government’s response to the call for evidence on TUPE, and commitment to consult on potential changes.

The call for evidence closed earlier this year, and we have completed our analysis of the responses. These broadly reflect a number of common concerns from business and business organisations, for example that:

employee liability information should be provided by the transferring organisation earlier than 14 days before transfer; there is no provision for the post-transfer harmonisation of terms and conditions of employment with existing employees; the regulations gold-plate the acquired rights directive by including service provision changes in the scope; pensions are a concern in transfer situations for various reasons. (Pensions legislation is being reviewed separately under the red tape challenge).

We will be publishing the Government response to the call for evidence and signalling our intention to consult on potential changes. We will be developing proposals for a consultation later in the autumn.

Also in line with the introduction of employment tribunal fees next year, the Government will extend the current HM Courts and Tribunals Service system to protect access to justice for those who cannot afford to pay the fee. Given the concerns raised by business respondents to the employment tribunal fees consultation, such as whether to take into account access to savings and capital, the Government will undertake a review of remissions as part of a wider review required for the introduction of universal credit. The review will aim to produce a single remissions system for courts and tribunals which is simpler to use, more cost-efficient and better targeted at those who can afford to pay fees do so, while continuing to provide access to the courts and tribunal system to those who cannot.