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New proposals to streamline employment law will boost business


BIS Department for Business Innovation and Skills - Expert Author

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14 September 2012  - BIS

New steps to give firms more flexibility and confidence in managing their workforce and to reduce employment law red tape, were announced today by Business Secretary Vince Cable. They are most likely to benefit small businesses.

Today’s package comes in response to calls from business to simplify and speed up the process of ending the employment relationship when it breaks down, for the benefit of both employers and employees.

The Government has given details of:

  • its support for settlement agreements to help end employment relationships in a fair and consensual way. A consultation on how best to make this work in practice starts today and Acas has agreed to provide a new code of practice
  • how it might reduce the cap on compensation for unfair dismissal claims
  • proposals to streamline employment tribunals by making it easier for judges to dismiss weak cases
  • responses to its call for evidence on the TUPE rules, when staff transfer to a new employer. Government has heard that businesses want this to be more efficient, and will consult on specific proposals before the end of the year, and
  • recommendations on how to improve guidance for small businesses on the Acas code of practice on discipline and grievance.

The Government also responded formally to the call for evidence on proposals for compensated no fault dismissal for micro-firms. Based on the evidence presented by business the Government will not be taking forward the proposal.nofollow

The UK has a lightly regulated, flexible labour market that the OECD considers to be amongst the best in the world, behind only USA and Canada. The recent World Economic Forum Global Competitiveness Report cited the flexibility of the UK’s labour market as one of the main reasons for its improvement in the global rankings to 8th from 10th.

But the Government has committed to look at ways to make it more responsive to businesses through a parliament long review of employment law, in conjunction with the Red Tape Challenge on employment law, with the aim of clearing away unnecessary and complex regulation that has damaged flexibility, created perverse incentives, increased business risk and unnecessary administration.

Business Secretary Vince Cable said:

"We have been looking across the range of employment laws with a view to making it easier for firms to hire staff while protecting basic labour rights.

“Our starting point is that Britain already has very flexible labour markets. That is why well over one million new private sector jobs have been created in the last two years, even when the economy has been flatlining.

“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."

The Government is already delivering significant reforms of employment law, including extending the period for eligibility for unfair dismissal from one to two years, encouraging more effective ways to resolve disputes and thereby reduce the number of employment tribunals, creating a universally portable Criminal Records Bureau (CRB) check and removing the default retirement age. The Government has considered, or is already taking forward, 80 per cent of proposals from Adrian Beecroft’s report on employment law, published earlier this year.

Notes 1. The Coalition Government started a systematic review of employment law in 2010. This Employment Law Review (ELR) is now half way through its work and aims to provide clarity, certainty and give businesses the confidence to manage their workforce effectively. The Review sits alongside the Employment Law-related Red Tape Challenge to reduce regulatory burdens on business.

2. The package of employment reforms announced today includes:

  • settlement agreements consultation starting today that will set out how the process will work in practice. The consultation provides a template letter and guidance on how employers and employees would reach agreement. Acas has also agreed to provide a new code of practice for settlement agreements.
  • unfair dismissal claims consultation that will also start today and will look at the potential for reducing the compensation cap, currently at Ł72,300. The two proposals are a cap of up to 12 months pay and a new, reduced, upper limit.
  • further streamlining of employment tribunals, following on from Justice Underhill’s review, with a consultation starting today including proposals on how judges could dismiss weak cases more easily and reduce the number of preliminary hearings;
  • a summary of responses to the call for evidence on changes to TUPE with a commitment to consult on issues, raised by business, by the end of the year; and
  • a formal response to the call for evidence on proposals for compensated no fault dismissal for micro-firms and the Acas code on discipline and grievance. Based on the evidence presented by business the Government will not be taking forward the proposal on no fault dismissal, but will work with Acas to make the guidance to their code more accessible, especially for small businesses.

3. BIS published the report commissioned from Adrian Beecroft in May this year, alongside an analysis of the report’s recommendations and whether they are currently being considered or taken forward by government. The report and analysis can be found here:

4. In line with the introduction of employment tribunal fees next year, the Government will extend the current HM Courts & Tribunals Service system to protect access to justice for those who cannot afford to pay the fee. Given the concerns raised by business respondents to the employment tribunal fees consultation the Government will undertake a review of remissions as part of a wider review required for the introduction of Universal Credit. The review will aim to produce a single remissions system for courts and tribunals which is simpler to use, more cost efficient and better targeted those who can afford to pay fees do so, while continuing to provide access to the courts and tribunal system to those who cannot.

5. The Red Tape Challenge was launched by the Prime Minister in April 2011 and is systematically examining some 6,500 substantive regulations that the Government inherited with the aim of scrapping or significantly reducing as many of them as possible. It gives business and the public the chance to have their say, by theme, on the regulations that affect their everyday lives. It has also asked the public what red tape holds back Disruptive Business Models and Civil Society Organisations. The Government announced on 10 September 2012 that at least 3,000 of the regulations examined will be scrapped or reduced. More information on Red Tape Challenge is at

6. The Government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

• To create the most competitive tax system in the G20

• To make the UK the best place in Europe to start, finance and grow a business

• To encourage investment and exports as a route to a more balanced economy

• To create a more educated workforce that is the most flexible in Europe.

Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.

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Article Published/Sorted/Amended on Scopulus 2012-09-17 09:30:37 in Employee Articles

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