Employment Relations Minister Jo Swinson confirmed that the Government is planning to cap unfair dismissal awards to one year's salary.
Swinson said "We are committed to finding ways to support both employers and employees when a working relationship breaks down. The measures I have announced today will do just that. Employment Tribunals are costly for everyone, in terms of money but also time and stress. We need to tackle unrealistic expectations about the levels of compensation awards, especially when only one in 350 people who make a claim for unfair dismissal receive an award of more than their own salary, and the average award is less than £5,000."
Swinson also confirmed that the total cap of £72,400 which is due to come into force this month (a rise on the current limit of £72,300) will still apply.
Neil Carberry, Director of Employment at The Confederation of British Industry supported the move. He said "The current cap on unfair dismissal payouts is many times higher than the average sums awarded, giving workers unrealistic and inflated expectations of what a claim is worth. It's right that the new cap is linked more explicitly to an employee's earnings. This will give businesses clarity about the potential costs and will scrap the perverse incentive for workers not to settle in the hope of getting a higher award."
He added that delays were also causing major problems for employers. He said "Delays in the current Tribunal system are the single biggest confidence killer for firms wanting to grow. No one wants disputes to end in Tribunals, particularly small businesses, so the system needs to promote early settlement more actively."
If you are an employer with questions about employment issues, Jackie Lake is able to offer clear advice tailored to your organisation's needs. Call her on 01603 723704 in the first instance. Alternatively, if you are an employee with questions about your rights in the workplace, for example about unfair dismissal, we can offer a confidential discussion about your case and whether you are realistically in a position to take it further.
For more information on Employment issues please follow this link to the Employment page.