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One year salary cap on unfair dismissal claims at tribunals announced

Date: (21 January 2013)    |    

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The Employment relations minister Jo Swinson has announced a package of measures aimed at reducing the number of workplace disputes that end up at employment tribunal.

A twelve month salary cap on unfair dismissal compensation awarded by employment tribunals has been unveiled under the plans.

New guidance on settlement agreements which were known earlier as compromise agreements has also been announced in a bid to reduce the number of workplace disputes that end up at tribunals.

Going to employment tribunals is a costly affair for everyone not just in terms of money but for the loss of time and added stress said Swinson.

He said there was a need to tackle the unrealistic expectation levels of compensation that was being awarded as the success rate of claims in unfair dismissal was only one in 350 people who had received an award of more than their own salary and the average award was less than £5,000. Tribunals should be the last resort for taking up grievance to and not the first port of call he added.

But though payouts for successful claimants would be capped at one year’s salary which comes to an average of £26,500 in the UK still the overall limit for such types of award would be unchanged at £72,300.

While the plan was welcomed by the industry the TUC said that it was discouraging to the genuine claimants and would let bad employers off the hook.

The new proposals have followed after there has been an increase in the length of service to bring an unfair dismissal claim from one year to two years and the forthcoming introduction of fees for claimants to lodge a case.

Employment law lawyers and legal experts have predicted that the compensation cap coupled with the new system could reduce the number of tribunal claims.

The government has also said that there would be model letters which would encourage the use of new settlement agreements, alongside a statutory code of practice which would include an explanation of improper behaviour. However set tariff guidance would not be available to actual financial settlements.

It has also been decided that Acas will have a greater role in mediating workplace disputes at an earlier stage – particularly with smaller employers – something which was welcomed by the CIPD.

We support the government’s intention to make it easier for small employers to enter into settlement agreements, (compromise agreements) and to give all employers more confidence to embark on the conversations needed to initiate such agreements,” said Mike Emmott, employee relations adviser at the CIPD.

A consultation on Transfer of undertakings or TUPE has also been announced seeking views on its proposals to change the terms on which Tupe transfer would arise from the outsourcing of work. Though the plan has been to reduce bureaucracy faced by employers the reforms would deviate from the very spirit of Tupe says Employment law solicitor from a leading law firm.