Employment Law Reforms

The Government aims to reform employment law to assist businesses and to stimulate economic growth. These reforms include extending the qualifying period to bring a claim for unfair dismissal from one to two years, capping compensation at one year’s pay and introducing fees for Tribunal Claims. Under the previous Government, most employers would argue that the pendulum had swung too far in favour of the employee, but opinion is divided as to how far back it should go.

Employees, who commenced their employment on 6 April 2012, may be under the mistaken belief that their right to claim unfair dismissal arises in April 2013 – however, the right will not crystallise until April 2014.

From this summer, the unfair dismissal compensatory award will be capped at one year’s gross pay. Is this fair? No cap exists for claims based on discrimination and there is no cap on claims for personal injury. While the purpose of the cap is to prevent such claims acting as a disincentive to employment and to make it easier for employer’s to dismiss underperforming workers it remains to be seen whether the amount of compensation that a prospective employee might be awarded is a relevant factor in an employer’s decisions to hire and fire. Only one in 350 compensation claims results in an award equivalent to one year’s salary most are for around £5000 so the cap does not affect the awards commonly made but instead affects perceptions of what might be awarded.

Also coming this summer, is the introduction of fees ranging from £250 to £950 for pursuing claims at a Tribunal. Presently, an employee pays nothing for issuing a claim. The Government says that the deterrence of claims is not the reason behind the fees, and that the objective is for users of the Tribunal system to bear some of the costs. There will be exemptions for those with a low monthly income and as this commonly applies to those without a job, again it remains to be seen what effect this will have in practice.

Many employers will welcome these changes, as they should reduce unrealistic expectations about awards for unfair dismissal making it easier to reach settlement agreements without a costly tribunal hearing, although I suspect that they will only have a modest effect on decisions about hiring and firing. It would be interesting to hear what local people (both employers and employees), think about the reforms and what reforms you would like to see in place?

For more information on employment law, please contact James Twine on 01752 292351 or email jtwine@wolferstans.com