Wednesday, 21 November 2012

Payout plans welcomed

Plans to reduce the compensation payouts that workers can claim for unfair dismissal have been warmly welcomed by our employment law specialist.

John Mehtam leads our employment team and said the proposals from Business Secretary Vince Cable should be a real help particularly to smaller companies.

"The proposals suggest the limit on compensation would be a maximum of 12 months' salary, and Mr Cable also wants to bring in settlement agreements. These new agreements would mean staff would agree to leave without being able to take their employer to a tribunal, but they would get a pay-off in return.

"This is great news for businesses in the small and growth sectors, as reducing the burden on smaller employers is always a welcome suggestion," said John.

"And settlement agreements would be a very positive move as they would bring a less confrontational approach to resolving any dispute."

John said restricting the possible payout through a tribunal to one year's salary was also a bold move.

"It means each compensation payout would be assessed according to the employee's individual finance package - so this removes the misleading incentive for employees to claim in the unrealistic hope of securing tens of thousands of pounds in compensation."

He also said that 12 months represented a very reasonable period for the employee to have secured suitable alternative employment.

"I think the settlement agreements are an excellent idea as currently dismissals often involve accusations of fault, liability and guilt.

"But by introducing the settlement agreement, which would provide the employee with a reference too, both the employer and employee can draw a line under the working relationship and move on.

"This is a very sensible solution and a welcome alternative to an employment tribunal which can be costly and time-consuming.

"These new proposals, combined with the change in the rules that employees must have completed two years' service before they can claim unfair dismissal, are certainly turning the tide in favour of the employer, which in the current climate is a very promising move."