Ending the employment relationship - government response published

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In our e bulletin no 54 we referred to the government’s proposals to streamline employment law with the aim of making it easier for firms to recruit staff while protecting basic labour rights.

Two key issues were set out in consultation paper Ending the Employment Relationship namely, the reduction in the unfair dismissal compensation limit and the use of settlement agreements in place of compromise agreements. On 17 January, the government published its response to the consultation paper.  

In relation to the unfair dismissal compensation limit, the government has announced that it will introduce a 12 months’ pay cap on the award but that the overall cap (which increased on 1 February 2013 to £74,200 from £72,300) will remain. As the median award for unfair dismissal is £4,560 and median annual earnings is £25,882 the vast majority of claimants are unlikely to be affected by the new cap. Indeed, one of the government’s objectives in changing the limit is to manage employees’ expectations of what they might be awarded by the Employment Tribunal and to encourage settlement of claims. The change is likely to come into force in the summer.

The government wants to increase the use of settlement agreements by enabling the parties to hold pre-termination negotiations which would not then be admissible in any subsequent unfair dismissal proceedings. ACAS will be producing a draft Code of Practice for consultation shortly and optional, template settlement letters will be included in the Code. A template settlement agreement will be issued alongside separate ACAS guidance, which, with the Code, are expected to be in force in the summer. Interestingly, the government has decided not to introduce a guideline tariff for the settlement sums but the guidance will include some points for the parties to consider when negotiating.

But that’s not all, there have been other significant announcements recently:

  • The government has issued a new consultation paper on proposed changes to the TUPE Regulations and the consultation period ends on 11 April 2013. The most significant proposal is the repeal of the "service provision changes" but also proposed is removal of the obligation to provide employee liability information and a proposal that a change of location constitutes "changes in the workforce".
  • The government is also consulting on the proposals for early conciliation and the consultation period ends on 15 February 2013. It is proposed that, before commencing Employment Tribunal proceedings, an individual will be required to contact ACAS and to provide them with "prescribed information" and to follow a pre-claim conciliation procedure. 
  • Finally, the government has published its response to the Independent Sickness Absence Review (see e bulletin no 54). Some of the changes include revised "fit note" guidance for GPs and the setting up of a health and work assessment and advisory service funded by the government.