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Law for Business

Knowhow - guidance - precedents

20 SEP 2012

Government announces employment law reforms to help small businesses


The Government has recently announced various employment law reforms that it will be consulting about, aimed at reducing burdens on businesses and increasing certainty, especially for small businesses.

In summary, the proposals include: 

  • How to end employment relationships in a fair and consensual way through settlement agreements. Employers can currently settle employment claims before or during tribunal proceedings by entering into a compromise agreement with the current or former employee (this is an agreement regulated by statute) or a COT3 agreement (which is only possible through ACAS). The Government wants to introduce a standard template "settlement agreement" to make settling claims more straightforward.

  • Reducing the cap on compensation for unfair dismissal claims, currently £72,300, to to the lower figure of either the national median average earnings (£25,882) or the employee's annual net salary. However, if an employee brings a claim for discrimination they may still be awarded a higher amount, as compensation for discrimination is unlimited.

  • Proposals to streamline employment tribunals by making it easier for judges to dismiss weak cases. It is envisaged that there will be a judicial "sift" once the claim and response have been submitted, providing an opportunity for claims with no merit to be struck out.

  • The introduction of employment tribunal fees from summer 2013. Straightforward claims will cost £390 to take to a hearing and claims such as unfair dismissal and discrimination will cost £250 to lodge, and £950 to take to a hearing. However, many employees on low incomes may not be required to pay the full fees and the tribunal will have powers to order unsuccessful employers to refund the fee to the employee. There is currently no fee required to pursue an employment tribunal claim or appeal. The changes are aimed at discouraging vexatious claims and encouraging employees to look for alternatives such as mediation so that tribunals are a last resort.

The proposals will undoubtedly be welcomed by SMEs concerned about the risks involved in taking on or dismissing staff. It remains to be seen whether these measures will achieve the Government's aims of reducing burdens and increasing certainty for businesses.

Liz Timmins

Jordan Publishing Company Administration and Governance

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