Unfair dismissal compensation reduced by new rules

This summer sees the introduction of the Enterprise and Regulatory Reform Bill that will make a big difference for many of Employee Management Ltd's (http://www.employeemanagement.co.uk) HR support clients, given the changes that it makes to the relationship between employer and employee.

The new rules were put forward by business secretary Vince Cable in a bid to assist the UK's flagging businesses and make the country more “enterprise-friendly”. He added that “we want to make sure that the right conditions are in place to encourage investment and exports, boost enterprise, support green growth and build a responsible business culture. The bill will help ensure that people who work hard and do the right thing are rewarded”.

However, the changes will make getting redress far more difficult for employees who want to bring an unfair dismissal claim, with compensation having been capped and charges introduced for bringing a claim. Until now, it has been free for workers to take their case to a tribunal, but they may now have to pay a total of £1,200 - £250 to lodge a standard claim and an additional £950 if it goes to a hearing.

Meanwhile, the proposed cap on unfair dismissal payments means that a limit will soon be in place of 12 months' pay or £74,200, whichever is lower. Typical unfair dismissal settlements are well below the cap, but the bill also allows for the future lowering of the cap to between the current average annual salary of £25,882 and £77,646.

These most recent changes for the clients of HR services and their employees come soon after an increase from one to two years in the time workers have to be employed by their firm before an unfair dismissal claim can be filed. In addition, on the passing of the bill, there will be a halving of the consultation period where 100 or more redundancies are being made, from 90 to 45 days.

The bill also makes a significant change to “protected conversations”. It will enable employers to take their workers aside out of the blue and offer them payment to leave, without the worker being able to use anything said in the discussion as evidence in any claim for unfair dismissal. This does not apply, however, in discrimination cases or where the boss has put undue pressure, which could be construed as improper conduct.

Therefore, the “protection” of “protected conversations” concerns the employer rather than the employee, although firms are only presently protected in this way once a formal dispute has already arisen, such as disciplinary proceedings or a prior performance improvement plan.

Taken together, such changes will help many firms to terminate employment contracts without the need for a protracted formal process. They could also better shield companies from the more vexatious claims from workers. Such firms are, nonetheless, encouraged to contact Employee Management Ltd (http://www.employeemanagement.co.uk) for the highest standard of employment law advice relating to this and other recent legislation.

Editor’s Note: Employee Management Ltd (http://www.employeemanagement.co.uk) are represented by the search engine advertising and digital marketing specialists Jumping Spider Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959 / +34 952 783 637.