UK News

Employment law changes

September 2012

Following consultation earlier in the year the Government has now announced further consultation on proposed changes to some aspects of employment law.

The Announcement

We have previously reported on proposed changes to employment law being considered by the Government. Some of these were contained in the report commissioned from venture capitalist Adrian Beecroft while others came from Vince Cable, the Trade Minister. One has already been implemented – from April 6 the qualifying period for bringing an unfair dismissal claim increased from one to two years’ service.

Mr Cable has now announced further consultation on three specific proposals.

Cap on Unfair Dismissal Awards

Carrying on with the theme that the current regime is a barrier to business taking on people, the cap on compensation for unfair dismissal is to be changed. This is currently set at £72,300 which represents inflationary increases from the initial level set in 1971. The proposal is to change it to the lower of national median earnings – currently £25,882 – or the individual’s annual net salary.

Settlement Agreements

The proposal here is to remove some of the current requirements for compromise agreements to make it easier for employers and employees to enter into binding termination agreements. ACAS is to be asked to draft a Code of Practice to provide best practice guidance.

Streamlining Employment Tribunal rules

This follows the review by Mr Justice Underhill earlier in the year (see 'proposed new employment tribunal rules' – to add link to previous article) and the proposals include:

  • Better case management including increased powers to Tribunals to strike out claims.
  • Measures to improve and speed up recovery of awards.
  • Earlier use of alternative dispute resolution – there is already a requirement to lodge employment claims with ACAS in the first instance set out in the Enterprise and Regulatory Reform Bill going through Parliament. This new change would promote a means by which parties can engage in mediation or conciliation before a claim is formally lodged.

Other proposals

Equally significant is the announcement that the Government will not be taking forward the proposal in the Beecroft report to introduce a compensated no-fault dismissal process for smaller business. ACAS is however to be asked to review and simplify its Code on Discipline and Grievance.

The Government has also published the results of its 2012 'call for evidence' from key stakeholders on the effectiveness of TUPE and it has said it will consider and disseminate its proposed policies 'in due course'.


Although these proposals are still subject to consultation and so fall short of definite changes, it gives an indication of likely legislative change. Whether they will achieve the stated aim of increasing employer willingness to engage new staff remains to be seen. The changes to Tribunal rules are generally to be welcomed, however, as these have been a source of difficulty and confusion for some time.

We will report further on future developments.


Government announcement

Consultation papers

For further information or to discuss the issues raised, please contact David Widdowson,or Emma Clark on +44 (0)20 3051 5711.