Managing the end of the employment relationship

As the government continues its overhaul of current employment legislation, it has launched a consultation on ways to ensure the best outcome when businesses are required to end their relationships with employees.

The move follows the introduction of legislation which doubled the amount of time an individual must have worked at a company before being able to make a claim of unfair dismissal, as well as the introduction of fees for making an employment tribunal claim from April 2013.

Firstly, the government is consulting on reducing the amount that individuals can be awarded for successful unfair dismissal claims.

While the current compensation cap is £72,300, the average award is much less than this limit, and tends to be between £5,000 and £6,000. Nevertheless, the government is proposing that either the compensation cap should be reduced or the award should be limited to up to 12 months of the individual’s pay. There is still no cap on compensation in discrimination cases.

Secondly, the consultation paper considers how to encourage the use of settlement agreements and how they would be applied in practice. These simplified compromise agreements would enable employers to provide employees with a payment in return for leaving the business and waiving their right to take their case to an employment tribunal.

A further consultation is considering streamlining the procedures for preliminary hearings, making it easier to sift out weak cases and enabling judges to encourage and facilitate the use of alternative forms of dispute resolution at all stages of the tribunal process.

“Our starting point is that Britain already has very flexible labour markets,” said Business Secretary Vince Cable. “But we acknowledge that more can be done to help small companies by reducing the burden of employment tribunals, which we are reforming, and moving to less confrontational dispute resolutions through settlement agreements.”

At Palmers Solicitors, we can advise on all areas of employment law, including dismissals, the drafting of compromise and settlement agreements and representation at employment tribunals. For more information and advice, please contact Lara Murray at lmurray@palmerslaw.co.uk